Clallam looks to work with cities in gaining from sales tax law

Commissioners mull best use of House Bill 1406

PORT ANGELES — Clallam County commissioners are reaching out to Port Angeles, Sequim and Forks city officials to discuss leveraging the benefits of House Bill 1406, which gives governments access to sales tax revenues to address pressing needs for affordable housing.

Under HB 1406, governments can obtain a maximum of 0.0146 percent of their local state sales and use taxes for affordable housing investments (tinyurl.com/PDN-Bill1406).

But there’s a hitch.

In setting up the new law, state lawmakers also make them compete for the maximum obtainable funding by taxing their own property owners and consumers for a larger share of the sales-tax pie, commissioners Mark Ozias, Bill Peach and Randy Johnson learned Monday at a work session.

The county and cities must set “qualifying local taxes” on their residents for the maximum tax-credit rate, Deputy Prosecuting Attorney David Alvarez explained to them in a work-session presentation.

The taxes could take the form of a sales and use tax for housing and related services, a sales tax for chemical dependency and mental health funding, and affordable housing levies imposed under two different state laws.

If they do not impose a qualifying measure, the governments would receive a single-share rate of 0.0073 percent of sales tax revenues.

“The bill sets up what amounts to a race between cities in a particular county and the county, which governs the unincorporated portions of that same county,” Alvarez said in a memo to the board.

He noted to the commissioners how frequently he sees media reports that touch on the need for affordable housing and “how much homelessness is in the paper.”

County Chief Financial Officer Mark Lane said after the meeting that he did not yet know the maximum amount of funds that would be available for affordable housing under HB 1406.

The most that a county or city can receive is 0.0146 of the sales tax generated within that city or county.

If Port Angeles, Sequim or Forks opt in first and the county second, the maximum percentage is available to the cities, Alvarez said.

If the county opts in first and the city has no qualifying tax, the county and city split the 0.0146 percent 50-50.

Cities and counties have until Jan. 28 to pass a resolution of intent to opt in to the program. They must pass a final resolution by July 28, 2020.

The funds can be used only to house residents who fall under 60 percent of the median annual income, or $28,800 as measured according to the U.S. Census Bureau’s 2013-17 median income, in 2017 dollars, of $48,000.

The legislation was co-sponsored by 24th District state Reps. Mike Chapman, D-Port Angeles, and Steve Tharinger, D-Port Townsend, and was signed into law in May.

Port Angeles City Council member Mike French said during a council meeting in early July that the city should “take a hard look” at asking voters to approve a maximum one-tenth of 1 percent sales tax under HB 1406.

The tax would raise about $320,000 per year for affordable housing and generate an additional $55,000 from the 0.0146-percent match, French estimated at the meeting.

The county would receive a smaller amount depending on the cities that opt in to the program, picking up sales tax revenues generated in the unincorporated areas no matter what the cities do.

Ozias said Monday the county has the “discretionary decision” to opt in first or wait for the cities to make their move.

“That’s going to be the biggest decision for us, and we have to figure how to converse with the other cities so we can come up with a plan that makes the most sense for our region, for our county,” Ozias said.

He said he saw potential in the county also using its Opportunity Fund to add revenues to a county HB 1406 initiative.

The Opportunity Fund is a portion of state sales tax that supports infrastructure projects in economically-distressed rural counties such as Clallam.

HB 1406’s tax credit will be in place for 20 years.

“If this revenue stream is not enough to get what we want to do, it’s likely we would want to look at the Opportunity Fund as a source of revenue to bring to bear on this type of a project,” Ozias said in an interview after the meeting.

Interim county Administrator Rich Sill was directed at the work session to reach out to Port Angeles, Sequim and Forks officials to determine their intentions on taking advantage of the new sales tax law.

It is important that the county and cities “see how we can get the best benefit amongst all of us,” Johnson said toward the end of the discussion.

“How we pool our resources is kind of important.”

Peach also saw value in the cities and county acting together as they proceed.

“We should try to share that message, that our intent is to collaborate,” Peach said.

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Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 55650, or at [email protected].

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