WashingtonHB 24512025-2026 Regular SessionHouseWALLET

Concerning local tax increment financing.

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Bill Overview

Analyzed Economic Effects

8 provisions identified: 2 benefits, 1 costs, 5 mixed.

Affected districts gain binding financing negotiations

For areas taking effect after June 1, 2026, affected taxing districts can require negotiations by identifying an impact within 30 days of receiving the analysis. Triggers include at least 50 added homes, impact to at least 10% of district assessed value, forecast service demands or property tax losses, or more than 20% of district value in financing areas. Without agreement, mediation must begin within 30 days after the notice and consultation period ends. If mediation remains unresolved after 30 days, binding arbitration must proceed within 90 days after that period ends. Agreements can reduce or pause tax allocation revenues, but cannot let a district opt out or leave the area.

More public review of local financing

Beginning June 2, 2026, governments must rank improvements and explain their development purpose, costs, funding, completion dates, capital plans, and partner investments. Analyses must identify improvements expected within seven years and assess all taxing districts' revenue effects over the area's life, with district consultation and needed mitigation. Districts receive written notice at least 180 days before submission to the State Treasurer, plus an offer to consult within 30 days. Affected governments and districts receive the analysis when the Treasurer does; the Treasurer must review and comment within 90 days. Before approval, governments must hold at least two project-only hearings, no earlier than 90 days after submission. Hearings cover the area, improvements, and detailed district revenue estimates; notices must appear at least two weeks ahead in a legal newspaper, the government website, and all government social media sites.

Local governments must repay county costs

Beginning June 2, 2026, governments creating financing areas must reimburse the county assessor and treasurer. Repayment covers actual staff and software costs directly tied to starting and running the areas. Reimbursement is required rather than optional, and the law sets no dollar amount.

Local financing caps allow limited expansion

Beginning June 2, 2026, the usual assessed-value cap is $200 million or 20% of the sponsoring government's assessed value, whichever is less. The dollar cap rises annually with the consumer price index starting June 1, 2027. A fiscal year 2026 exception allows combined area values above $200 million, capped at $500 million, in a city with more than 150,000 but fewer than 170,000 residents, in a county with more than 1.5 million residents. Areas must connect to Interstate 405, and transportation improvements must better connect neighborhoods within and next to them; ordinances must pass by June 30, 2026. Each participating taxing district must approve full or partial participation by majority vote; districts that do not approve are excluded from revenue allocation.

Local projects face construction and repayment deadlines

Beginning June 2, 2026, local ordinances must set a deadline to start public improvement construction within five years. Local governments must allow extensions of up to two years for good cause. Financing areas must end no later than 25 years after the first year tax allocation revenues are collected. They must end sooner when improvement debts backed by those revenues are no longer outstanding.

More project funding and developer repayment

Beginning June 2, 2026, eligible project costs include interlocal agreements, revenue sharing, district mitigation, and related administrative and feasibility work before ordinance adoption. Eligible improvements include fire, life, and public safety facilities and equipment. Government-owned facilities can be moved, renovated, or built without the former written-permission requirement. Private developers can build public improvements and receive repayment under agreements with local governments. Tax allocation revenues fund and can secure those repayments, committing revenue to developer reimbursement; the law sets no payment amount or schedule.

New limits on local development areas

Beginning June 2, 2026, each local government can have at most two active tax increment financing areas, with no overlapping land. Governments must show that public improvements are needed for private development and raise assessed property values beyond otherwise expected growth. Land already served by needed improvements, or with construction underway, an active construction application or permit, or project-level environmental review, is generally excluded. Governments can include that land only by showing the proposed improvements are needed for the private development. The law does not change areas already in effect on June 2, 2026.

School and emergency tax revenues protected

Beginning June 2, 2026, excess school district property taxes and emergency medical service levy receipts stay outside tax increment revenue allocations. This keeps those revenues out of project financing, leaving less money available for those projects. After voters approve a regular property tax levy increase, the district's allocation base rises the following year. The adjustment equals the added levy rate multiplied by the district's total assessed value that year. It lasts while voter authorization remains active and is recalculated when authorization expires; it does not change the approved tax rate.

Sponsors & Cosponsors

Sponsor

Davina Duerr
Democratic • House

Cosponsors

April Berg
Democratic • House
Lisa Parshley
Democratic • House

Roll Call Votes

All Roll Calls

Yes: 141 • No: 2

Senate vote • 3/5/2026

3rd Reading & Final Passage

Yes: 48 • No: 1

House vote • 2/13/2026