The bill amends several sections of the Revised Code of Washington (RCW) concerning local tax increment financing, specifically addressing the creation and management of increment areas. Key changes include the introduction of a definition for "consumer price index" and the establishment of annual adjustments to assessed valuation limits for increment areas based on this index starting June 1, 2027. Local governments are restricted to creating only two active increment areas at a time and must meet stricter conditions for designating these areas, including requirements for public improvement costs and their necessity for private development. Additionally, local governments are required to conduct a project analysis before designating an increment area, assessing impacts on affordable housing and local businesses, and negotiating mitigation plans with affected public hospital or fire protection districts.

The bill also outlines new procedures for local governments in designating increment areas, emphasizing negotiation and arbitration processes with impacted taxing districts. For increment areas effective after June 1, 2026, local governments must initiate negotiations within 30 days of receiving a project analysis under certain conditions. If an agreement cannot be reached, mediation and arbitration processes are mandated. Furthermore, the bill introduces requirements for annual reports on the status of increment areas, reimbursement for assessors and treasurers, and clarifies property tax exemptions for new housing construction, including tenant relocation assistance for properties receiving exemptions. The act is set to take effect on June 2, 2026, and is deemed necessary for the immediate preservation of public peace, health, or safety.

Statutes affected:
Original bill: 39.114.010, 39.114.020, 39.114.030, 39.114.040, 39.114.050
Substitute bill: 39.114.010, 39.114.020, 39.114.030, 39.114.040, 39.114.050, 39.89.020
Second substitute: 39.114.010, 39.114.020, 39.114.030, 39.114.040, 39.114.050, 39.89.020
Engrossed second substitute: 39.114.010, 39.114.020, 39.114.030, 39.114.040, 39.114.050, 39.89.020
Bill as passed Legislature: 39.114.010, 39.114.020, 39.114.030, 39.114.040, 39.114.050, 39.89.020
Session law: 39.114.010, 39.114.020, 39.114.030, 39.114.040, 39.114.050, 39.89.020