Following a ruling last year by the U.S. Supreme Court upholding an injunction against Washington state, lawmakers are looking for money to fund hundreds of fish barrier removal projects that must be completed by 2030. However, also in play are thousands of culverts located on city and county roads often located downstream from private lands and salmon habitat, where repair work has already been done.
One proposal via HB 1228 is to restructure the state’s 1.28 percent real estate excise tax (REET) into a graduated rate, as well as to impose a new vehicle weight fee schedule. However, the bill was compared unfavorably to similar bills at an April 5 public hearing of the House Transportation Committee. Along with real estate industry members and local government advocates, forestry groups said the way the bill is written would have their members pay the tab when they have already invested millions fixing culverts on their own properties.
A provision in the proposed House 2019-21 operating budget is a graduated REET like that found in HB 1228. However, the House budget’s REET exempts forestland.
If enacted, the bill is estimated to generate roughly $1.6 billion through the 2025 fiscal year. Nearly 17 percent of REET revenue would have to go into the Motor Vehicle Fund.
John Ehrenreich is the director of forest taxation and economics at the Washington Forest Protection Association. At the April 5 public hearing, he told committee members that to keep their businesses sustainable they maintain tree stands of varying ages. However, sometimes to preserve that balance, they buy or sell timberland. Under HB 1228, those sales would be subject to the tax.
“There is no question that it’s important to get this done,” Ehrenreich said.
The fish barrier removal efforts by the forestry community were acknowledged by HB 1228’s sponsor Deputy Majority Whip Mike Chapman (D-24), who sponsored it at the request of the state Office of Financial Management (OFM). He added that despite this work, habitat opened up to salmon often remain inaccessible due to existing barriers in city, county and state culverts. “I for one would ask this committee to partner with private landowners, who have invested so heavily. Those are good projects.”
Regardless of what revenue stream is ultimately used, Chapman said the work on state culverts should be done in a way that also eliminates city and county fish barriers. “It doesn’t make a lot of sense for the state to do something if the local government can’t also open up passage.”
That attitude is also reflected in a separate proposal allowing public-private partnerships to fund a competitive grant program. HB 2022 sponsored by Rep. Kelly Chambers (R-25) cleared the House Capital Budget Committee on Feb. 25 and has been referred to the Rules Committee for review.
However, others testifying at the April 5 public hearing on HB 1228 reiterated arguments previously made against the REET proposed in HB 2156 which, along with a capital gains income tax, would be used to fund education. Greg Hanon with the Commercial Real Estate Development Association said because of the REET’s graduated structure, any change within a small number of high-value property sales could dramatically affect revenue stability.
Another difference from HB 2156 is that HB 1228 does not provide an exemption for undeveloped land. Steve Gano with the Building Industry Association of Washington told committee members that this could cause a “pyramiding effect” in which REET is paid multiple times on the same property as it goes through various stages of development, being put on the market and sold. He added that avoiding this pyramiding will help other efforts to improve housing affordability.
Jane Wall with the Washington State Association of Counties provided neutral testimony on the bill, but did express concern that the revenue could be diverted for other uses.
No further action is scheduled for HB 1228.