Loading...
Ordinance No. 2021-25 Relating to Affordable Housing Sales Tax Increase - Approved 091421Page 1 of 4 ORDINANCE NO. 2021-25 AN ORDINANCE of the City of Bainbridge Island, Washington, imposing an additional sales and use tax of one-tenth of one percent for housing and related service. WHEREAS, the City’s Comprehensive Plan contains a Housing Element that establishes goals for encouraging the availability of affordable housing; and WHEREAS, RCW 82.14.530 authorizes the imposition of an additional sales and use tax of one-tenth of one percent to be used for funding affordable housing and mental and behavioral health-related facilities; and WHEREAS, under HB 1590, passed by the state legislature as Chapter 222, Laws of 2020, counties were given the exclusive right to impose the tax until September 30, 2020 and cities were given the right to impose the tax thereafter as long as the county had not already done so; and WHEREAS, Kitsap County did not impose the additional sales and use tax by September 30, 2020, and has not imposed the tax as of the date of passage of this ordinance; and WHEREAS, the City Council has determined that the sales and use tax should be imposed and that the proceeds will be used for those purposes authorized by RCW 82.14.530, including constructing affordable housing, constructing mental and behavioral health-related facilities, and funding the operations and maintenance costs of new units of affordable housing and facilities where housing-related programs are provided, or newly constructed evaluation and treatment centers; NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF BAINBRIDGE ISLAND, WASHINGTON, DOES ORDAIN, AS FOLLOWS: Section 1. A new Chapter 3.62 of the Bainbridge Island Municipal Code entitled, “Additional Sales and Use Tax for Housing and Related Services,” imposing a one-tenth of one percent sales and use tax, as authorized by RCW 82.14.530, is added as follows: ADDITIONAL SALES AND USE TAX FOR HOUSING AND RELATED SERVICES Section 2. A new Section 3.62.010 of the Bainbridge Island Municipal Code is hereby added as follows: 3.62.010 Additional Sales and Use Tax Imposed. There is hereby imposed an additional sales and use tax, separate and apart from any other sales and use tax imposed by the City, upon every taxable event occurring in the City, for housing and related services as authorized by RCW 82.14.530. Page 2 of 4 “Taxable event” means any retail sale, or any use, upon which a state tax is imposed pursuant to chapter RCW 82.08 or 82.12, as they now exist or may hereafter be amended. However, the term does not include a retail sale taxable pursuant to RCW 82.08.150, as now or hereafter amended. Section 3. A new Section 3.62.020 of the Bainbridge Island Municipal Code is hereby added as follows: 3.62.020 Additional Sales and Use Tax Rate. The rate of the sales and use tax imposed by this chapter shall be one-tenth of one percent of the selling price, in the case of a sales tax, or the value of the article used, in the case of a use tax. Section 4. A new Section 3.62.030 of the Bainbridge Island Municipal Code is hereby added as follows: 3.62.030 Persons subject to tax. The tax shall be imposed upon and collected from those persons from whom the state sales tax or use tax is collected pursuant to RCW 82.08 and 82.12. Section 5. A new Section 3.62.040 of the Bainbridge Island Municipal Code is hereby added as follows: 3.62.040 Use of proceeds of tax. Moneys collected from the tax shall be used solely for those housing and related services authorized by RCW 82.14.530, as the same now exists or as hereafter amended. Section 6. A new Section 3.62.050 of the Bainbridge Island Municipal Code is hereby added as follows: 3.62.050 Credit against County tax. As provided in RCW 82.14.530, if Kitsap County subsequently imposes a sales and use tax for housing and related services as authorized by such statute, the County shall provide a credit against its tax for the full amount of the tax imposed by the City. Section 7. A new Section 3.62.060 of the Bainbridge Island Municipal Code is hereby added as follows: 3.62.060 Administration and Collection. The administration and collection of the tax imposed by this chapter shall be in accordance with the provisions codified at RCW 82.14.050 and RCW 82.14.530. Page 3 of 4 Section 8. A new Section 3.62.070 of the Bainbridge Island Municipal Code is hereby added as follows: 3.62.070 Penalty. Any seller who fails or refuses to collect the tax as required with the intent to violate the provisions of this chapter or to gain some advantage or benefit, either direct or indirect, and any buyer who refuses to pay any tax due under this chapter shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined no more than $500.00 or imprisoned for not more than six months, or by both such fine and imprisonment. Section 9. Severability. Should any section, paragraph, sentence, clause, or phrase of this ordinance, or its application to any person or circumstance, be declared unconstitutional or otherwise invalid for any reason, or should any portion of this ordinance be preempted by state or federal law or regulation, such decision or preemption shall not affect the validity of the remaining portions of this ordinance or its application to other persons or circumstances. Section 10. Effective Date. This ordinance shall take effect and be in force five (5) days after its passage, approval, and publication as provided by law, provided, that the additional sales and use tax authorized by this section shall be collected on taxable events occurring on and after January 1, 2022, or the soonest date thereafter on which the Washington State Department of Revenue is in a position to collect the tax and remit the same to City of Bainbridge Island. The Finance Director is directed to work with the department of revenue to begin collection of the tax on the soonest possible date. PASSED by the City Council this 14th day of September, 2021. APPROVED by the Mayor this 14th day of September, 2021. Rasham Nassar, Mayor ATTEST/AUTHENTICATE: Page 4 of 4 FILED WITH THE CITY CLERK: August 20, 2021 PASSED BY THE CITY COUNCIL: September 14, 2021 PUBLISHED: September 17, 2021 EFFECTIVE DATE: September 22, 2021 ORDINANCE NUMBER: 2021-25 FINANCE AND ADMINISTRATIVE SERVICES DEPARTMENT MEMORANDUM 1 | P a g e August 19, 2021 Blair King, City Manager DeWayne Pitts, Director of Finance and Administrative Services Sales Tax Increment for Affordable Housing Summary This memorandum provides background information about the ability of a city to pass, by council action with a simple majority vote via ordinance, an increase to the sales tax levied within city limits by one- tenth of one percent (.001) for the dedicated purpose of affordable housing. Staff currently estimates that if the City of Bainbridge Island implemented this tax, it could generate roughly $450,000 annually in new revenue to be used for certain eligible purposes related to affordable housing. However, if Kitsap County imposes a county-wide affordable housing sales tax prior to the city, the city may not impose its own increase to the sales tax. Background In 2015, RCW 82.14.530 authorized the imposition of an additional sales and use tax of one-tenth of one percent to be used for funding affordable housing. In 2019, SHB1406 allowed cities a tax credit for similar affordable housing needs. The City of Bainbridge passed an ordinance in 2019 to receive the sales tax credit and in 2020 we received more than $34,000. In 2020, HB 1590 gave counties across the State of Washington the exclusive right to impose the county-wide tax until September 30, 2020, and cities were given the right to impose the tax thereafter if the county had not already done so. Kitsap County (County) did not impose the additional sales tax by September 30, 2020 but appears to be moving forward with enacting the sales tax in the near future. The County still retains the authority to pass such legislation, but no longer has the exclusive right to enact such a tax. However, if a city has already imposed an affordable housing sales tax and the county imposes the same sales tax at a later date, the county must credit the full amount back to the city. In other words, the county will not receive any of the affordable housing sales tax revenues for any city that has already imposed an affordable housing sales tax. Eligible uses and qualifications: Last year the legislature changed eligible uses of the revenue generated by this incremental sales tax. At least 60% of the revenue must be used for constructing affordable housing, constructing mental and behavioral health-related facilities, or funding the operations and maintenance costs of new units of affordable housing and facilities where housing-related programs are provided. The remaining funds Pitts Dedicated Sales Tax for Affordable Housing August 10, 2021 2 | P a g e must be used for the operation, delivery, or evaluation of mental and behavioral health treatment programs and services or housing-related services. No more than 10% of the revenue may be used to supplant existing local funds. The affordable housing and facilities may only be provided to people within specified population groups whose income is 60% or less of the county median income. The median household income in Kitsap County is approximately $80,000 per year which means the eligibility for meeting this criterion is approximately $48,000. Revenue Estimate The rate of one-tenth of one percent is the same as the Sales Tax for Criminal Justice which the City currently has in place; this can be used as an estimate of potential revenue if the City were to increase sales tax for affordable housing. In 2020 the City received approximately $450,000 in Criminal Justice sales tax revenue; year to date through June of 2021 the City has collected roughly $253,000. If the City were to pass an ordinance to collect one-tenth of one percent Sales Tax for Affordable Housing the amounts are expected to be similar.