OLYMPIA — Proposed Senate legislation would, if passed, aid the Emerald Coast Opportunity Zone by providing a tax credit to investors.
Senate Bill 5423 would designate rural development and opportunity zone funds and extend tax reductions to certain timber activities.
It would create a tax incentive for Rural and Small Business Investment Companies (RBICs) and Small Business Investment Companies (SMBICs). In this case, the incentive is for investment in specific opportunity zones in Washington state, including those on the Olympic Peninsula.
“This is the way that tax preferences should be written,” said the primary sponsor of the bill, Sen. Guy Palumbo, D-Maltby.
“This one has such strong sideboards and accountability that it theoretically shouldn’t cost the state anything.”
The bill is co-sponsored by Sen. Kevin Van De Wege, a Democrat from Sequim.
The Emerald Coast Opportunity Zone encompasses 14 opportunity zones in Clallam and Jefferson counties including five tribes, according to Julie Knott of the Clallam County Economic Development Corporation. Also, she said, the bill’s qualified area is less than 100 persons per square mile and Clallam County has a population density of 41.1 people per square mile.
“The bill discusses businesses activities that qualify under this house bill, including timber activities, offering a reduced rate on specific timber industry activities such as sales of standing timber and selling timber and wood products at wholesale,” Knott said.
“The funds are required to focus on small businesses that need capital to expand or change the way they do business. This type of capital may not usually be available due to existing laws changing or market changes,” or other factors, she added.
Private investment companies could apply to join these funds that would provide capital for businesses in qualifying areas.
Knott said that it is important “to know that an opportunity zone investment incentive needs to be stacked with other incentives and different sources of capital to make a project pencil out.
“SB 5423 is important to bring strength to an investment in an opportunity zone.”
Palumbo reworked the bill from what he proposed last year, noting it won’t cost the state any money.
The bill briefly discusses timber activities, offering a reduced tax rate on certain timber industry activities like sales of standing timber and selling certain timber and wood product at wholesale.
Rural and small business investment companies can apply to invest money in the funds created by SB 5423 utilizing a tax credit.
The investors must certify that the businesses they invest in will bring in the same or more tax revenue than the tax credit they are awarded.
If the business fails to do so, the investor is required to pay the difference.
The fund operations are outlined in detail in the bill.
Director of Government Affairs for the business association, Mike Ennis, testified in support of the bill.
“Washington’s rural areas have struggled to keep pace in many key economic measures like unemployment, job growth, labor force trends, medium wages, and home prices when compared to the urban centers around the state,” Ennis said.
Andy Mesojednik, vice president of commercial banking at Bank of the Pacific, testified in support of the bill.
“We do have money to lend for a lot of our established customers. However, some of these customers when it comes time to do a major expansion or change in the way they do business because of either existing laws changing or the market changes they need to come up with capitol that we may not be able to provide to them through a standard regular everyday process,” Mesojednik said.
That’s where SB 5423 would help, according to Mesojednik, to “get money on the streets so that we can get people employed.”
Leah Leach, Peninsula Daily News executive editor, contributed to this story.