The Snoqualmie City Council passed a resolution of intent to later adopt legislation authorizing a sales and use tax in order to receive state revenue to be used for affordable and supportive housing needs. The resolution of intent itself does not create a new tax.
A future qualifying tax would be credited against state tax collected in Snoqualmie and would not result in more taxes being collected in Snoqualmie but would provide for additional revenues to address housing needs in Snoqualmie.
The decision, during a Dec. 9 meeting, will allow the city to later receive a share of state sales tax revenue to use for affordable housing and other community supportive programs.
It is the first step cities need to take in order to receive their share of state tax revenue for affordable housing since the state Legislature passed HB 1406 in 2019. HB 1406 encourages cities and counties to invest in affordable housing by providing a share of the state sales tax revenue to participating local governments as an incentive. The state sales tax credit will be available for 20 years.
The second step is the city must choose whether to adopt legislation to authorize a qualifying local tax by July 28, 2020.
Whether the city will adopt a tax and how they will receive and use funds will all be decided at a later time. The city needed to declare the intent, showing its interest, to meet the deadline and be able to receive funds later.
Councilmember James Mayhew explained that the intent is to later consider imposing a sales and use tax that would be credited against an already existing state sales and use tax for a zero net change in tax.
“That procedural step would then allow us to use that sales tax that we’ve enacted which the state will give us a credit against so citizens are not paying an additional amount,” he said. “We could then take the proceeds of that and use for certain affordable housing type topics.”
There would be a period of about six months during which council would have to decide what they actually want to do with that money and whether to actually impose the tax, Mayhew said.
“We can ultimately decide not to do that,” Mayhew said. “But if we do not meet the deadline for declaring our intent then we would not be able to move forward.”
“No final action is being taken on whether we would or would not impose this tax and what we would do with the proceeds,” he added. “This is just saying that there’s enough interest and that we do think we’re going to look at this pretty seriously.”
Depending on how the city chooses to proceed, it could be looking at receiving $25,000 annually for 20 years. Or, the city could receive as much as $50,000 each year.
The total funds each city can receive is based on the amount of taxable retail sales collected in the 2019 fiscal year in that area. HB 1406 outlines that there are two increments for the amount of sales tax credit available to local governments.
The first increment is 0.0073 percent of the amount of taxable retail sales within a jurisdiction. The second increment is an additional 0.0073 percent, for a total 0.0146 percent of the taxable retail sales within a jurisdiction.
The specific increment of revenue available for any jurisdiction is based on three factors: Whether that city has decided to participate in the program, whether that city has already adopted a voter approved qualifying local tax by July 30, 2020, and whether the county has decided to participate in the program.
King County already is set to receive millions of dollars in funds after the county council passed a pair of ordinances in August. If cities like Snoqualmie do not adopt resolutions of intent followed by the proper legislation, King County would instead receive that portion of the shared tax revenue as well, and the city would have decreased control over how those sales tax dollars collected in Snoqualmie are spent.
The motion passed 6 to 1, with Councilmember Peggy Shepard dissenting. Shepard said she would rather give the full amount to King County for them to use.
Other councilmembers expressed wanting to put those dollars to use for affordable housing and other qualifying specific needs in the city of Snoqualmie, such as shelter services and renter assistance programs.