How the state can invest in local growth

How the state can invest in local growth
Local governments are looking for new ways to make development possible within their jurisdictions. One proposal calls for the state deferring its share of the sales tax within an area, with the promise of new revenue if development occurs. Photo: City of Kenmore

Before business growth or new developments can occur in a city, port or county, the conditions on the ground have to be right. To facilitate that needed development, local governments can turn to a variety of options including public-private partnerships, exemptions from land use requirements and state financing programs.

In addition to ongoing transportation infrastructure investments, some local and regional officials say the legislature can also help them make areas viable for development by deferring their share of tax revenue. One potential location to implement that kind of plan is Lakepointe, a proposed mixed-use development in the city of Kenmore. The site has been looked at since 1989 but faces challenges due to soil conditions.

At a Oct. 22 work session of the House Local Government Committee, City Manager Rob Karlinsey told panel members that while the development would boost local and regional tax revenue, “this project is not going to get off the ground without some sort of public assistance.”

Kenmore is proposing a “landfill recovery zone” around the site that would allow the city to collect the state’s share of new sales tax, particularly construction tax revenue from the development.

Karlinsey added that ultimately the state would benefit the most, because it would eventually receive new revenue in the form of the property tax, real estate excise and sales tax that the site currently isn’t generating.

A similar comment was made earlier in the work session by David Duvall, legislative and external affairs liaison for the state Department of Revenue.

A relatively new city incorporated in 1998, Kenmore has previously used collaboration with private stakeholders to help attract new business. Its downtown core was created after the city obtained 10 acres and then sold it to developers with certain conditions attached.

“We actually feel like we have a downtown now or the makings of a downtown,” Karlinsey said. “It’s a work in progress, but we’re definitely excited about what’s come of this land assembly tool we were able to use.”

The city also used a pilot project eliminating parking space requirements and local impact fees to help create “brew row,” a series of microbreweries along the Burke-Gilman Trail.

The city’s latest proposal is similar to the Gig Harbor Hospital Benefit Zone, currently the only one of its kind in Washington. The benefit zone falls under a variety of tax increment financing (TIF) programs available for some jurisdictions to encourage either infrastructure expansion or job growth. The legislature’s initial version of TIF was the 1982 Community Development Refinancing Act, but it was struck down by the State Supreme Court in 1995 in Spokane v. Leonard. In 2001, the legislature approved the Community Revitalization Financing allowing certain cities to set up TIFs that invest new tax revenue in the area that generates it.

Another tool used by local governments are grants from the Community Economic Revitalization Board (CERB). Several years ago, the Port of Sunnyside received a $1 million CERB grant to pay for greater infrastructure capacity that led to Darigold investing $22 million in its Sunnyside plant. Last year, the port obtained a $700,000 CERB grant to modify a building that houses the Varietal Brewing Company.

CERB’s investments have also helped to expand rural broadband access throughout the state. The Port of Skagit received a $1 million loan/grant combination to $500,000 loan and $500,000 grant to pay for its Skagit Community Fiber Optic Backbone consisting of six segments and 22 miles of fiber optic cable, connecting the towns of Hamilton and Concrete. The project boosted internet speed from 25 to 100 megabits per second. Advocates have emphasized the need for broadband in rural areas to aid further economic development.

Another public-private option is a public facility district, which has local governments expand infrastructure to allow for private development on the condition that the employer invest in public amenities. One of the two existing districts are between the city of Redmond and Microsoft that had the software company build a bike lane.

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