Fiscal Note Summary — 5494 SB, Freight Railroad Infra. (Multiple Agency)

Summary

Multiple Agency Fiscal Note Summary for bill number 5494 SB, titled Freight railroad infra., followed by individual fiscal notes. The summary lists the Department of Revenue with estimated cash receipts shown as (358,000) for 2023-25, and a local government line shown as (97,020) for 2023-25. It lists total estimated operating expenditures of 840,400 for 2023-25 for the Joint Legislative Audit and Review Committee and the Department of Revenue. A local government fiscal note lists amounts by fiscal year for counties, cities, and special purpose districts.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

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Multiple Agency Fiscal Note Summary
Bill Number: 5494 SB Title: Freight railroad infra.

Estimated Cash Receipts
Agency Name 2023-25 2025-27 2027-29
GF-State NGF-Outlook Total GF-State NGF-Outlook Total GF-State NGF-Outlook Total
Department of (358,000) (358,000) (358,000) (819,000) (819,000) (819,000) (873,000) (873,000) (873,000)
Revenue

Total $ (358,000) (358,000) (358,000) (819,000) (819,000) (819,000) (873,000) (873,000) (873,000)

Agency Name 2023-25 2025-27 2027-29
GF- State Total GF- State Total GF- State Total
Local Gov. Courts
Loc School dist-SPI
Local Gov. Other (97,020) (221,760) (237,600)
Local Gov. Total (97,020) (221,760) (237,600)

Estimated Operating Expenditures
Agency Name 2023-25 2025-27 2027-29
FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total
Joint Legislative .1 26,700 26,700 26,700 .0 13,400 13,400 13,400 .0 13,400 13,400 13,400
Audit and Review
Committee
Department of 2.0 813,700 813,700 813,700 .6 115,200 115,200 115,200 .6 115,200 115,200 115,200
Revenue

Total $ 2.1 840,400 840,400 840,400 0.6 128,600 128,600 128,600 0.6 128,600 128,600 128,600

Agency Name 2023-25 2025-27 2027-29
FTEs GF-State Total FTEs GF-State Total FTEs GF-State Total
Local Gov. Courts
Loc School dist-SPI
Local Gov. Other Non-zero but indeterminate cost and/or savings. Please see discussion.

Local Gov. Total

Estimated Capital Budget Expenditures
Agency Name 2023-25 2025-27 2027-29
FTEs Bonds Total FTEs Bonds Total FTEs Bonds Total
Joint Legislative Audit .0 0 0 .0 0 0 .0 0 0
and Review Committee
Department of Revenue .0 0 0 .0 0 0 .0 0 0

Total $ 0.0 0 0 0.0 0 0 0.0 0 0

FNPID 66202
:
FNS029 Multi Agency rollup
Agency Name 2023-25 2025-27 2027-29
FTEs GF-State Total FTEs GF-State Total FTEs GF-State Total
Local Gov. Courts
Loc School dist-SPI
Local Gov. Other Non-zero but indeterminate cost and/or savings. Please see discussion.

Local Gov. Total

Estimated Capital Budget Breakout

Prepared by: Cheri Keller, OFM Phone: Date Published:
(360) 584-2207 Final

FNPID 66202
:
FNS029 Multi Agency rollup
Individual State Agency Fiscal Note

Bill Number: 5494 SB Title: Freight railroad infra. Agency: 014-Joint Legislative Audit
and Review Committee

Part I: Estimates
No Fiscal Impact

Estimated Cash Receipts to:

NONE

Estimated Operating Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.1 0.0 0.1 0.0 0.0
Account
General Fund-State 001-1 20,000 6,700 26,700 13,400 13,400
Total $ 20,000 6,700 26,700 13,400 13,400

Estimated Capital Budget Impact:

NONE

The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.

Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
form Parts I-V.
X If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).

Capital budget impact, complete Part IV.

Requires new rule making, complete Part V.

Legislative Contact: Alia Kennedy Phone: 360-786-7405 Date: 01/26/2023
Agency Preparation: Zack Freeman Phone: 360-786-5179 Date: 01/27/2023
Agency Approval: Eric Thomas Phone: 360 786-5182 Date: 01/27/2023
OFM Review: Gaius Horton Phone: (360) 819-3112 Date: 01/30/2023

Form FN (Rev 1/00) 180,548.00 Request # 27-1
FNS063 Individual State Agency Fiscal Note 1 Bill # 5494 SB
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.

The bill creates several new tax preferences to incentivize investments in Washington’s regional and short line freight rail
infrastructure.

Eligibility
The bill defines eligible taxpayers as follows:
• Any Class II and Class III railroads, as classified by the Surface Transportation Board (STB), as in effect January 1,
2023.
• Any railroad owned by a port, city, or county in Washington.
• Any owner or lessee of rail siding, industrial spur, or industry track located on or adjacent to a class II or class III railroad
in Washington.

STB railroad classifications are based on the carrier’s annual operating revenues. STB’s latest classifications from 2021 are
as follows:
• Class I > $943.9M
• $943.9M > Class II > $42.4M
• Class III < $42.4M

Eligible taxpayers, therefore, must have annual operating revenues of less than $943.9 million.

Section 3 creates a new non-refundable B&O tax credit equal to:
a) 50% of the qualified short line railroad maintenance expenditures. The credit may not exceed $5,000 multiplied by the
number of miles of railroad track owned or leased in the state by the eligible taxpayer at the close of the year.
b) 100% of the new rail development expenditures. Credit for new rail expenditures may not exceed $2 million for each
new rail development project.
c) 100% of the qualified railroad modernization and rehabilitation expenditures.

Expenditures not used to earn a credit on one fiscal year may be carried forward for no more than five years.
New credits may not be issued after June 30, 2034.

Section 4 provides a B&O tax credit to any owner or operator of a Class I railroad that transfers materials removed from
use on the main railroad line to be installed on tracks used by an eligible taxpayer (i.e., Class II or Class III railroads). A
company that recycles railroad materials and transfers them to an eligible taxpayer may also claim this credit. Eligible
materials include but are not limited to railroad rail, ties, tie plates, joint bars, fasters, switches, and ballast. The credit is
equal to the fair market value of the donated materials used for track maintenance, expansion, or modernization.

Sections 5 & 6 create sales and use tax exemptions on materials required for railroad track maintenance sold to eligible
taxpayers.

Sections 7 and 8 extend the same credits and criteria provided in Sections 3 and 4 to eligible railroads subject to the public
utility tax (PUT).

Section 9 is the tax preference performance statement.
• The tax preferences in HB 1371 are intended to promote economic development throughout Washington.
• The Legislature’s specific public policy objective is to encourage and expand economic development by incentivizing
investment in Washington’s railroad infrastructure.
• The Legislature intends to extend the expiration date of the tax preferences if a review finds that the freight rail system in
Freight railroad infra. 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 180,548.00 Request # 27-1
FNS063 Individual State Agency Fiscal Note 2 Bill # 5494 SB
the state has been maintained or improved.

When conducting its review JLARC should consider the following measures:
• Total miles capable of transporting 286,000-pound railcars.
• The number of miles of track rehabilitated to 90-pound rail or greater.
• The number of ties replaced.
• The amount of ballast replaced.
• The number of bridges returned from out of service or able to operate heavier loaded equipment.
• The number of switches installed.
• Any related safety benefits of addressing at-grade crossings.
• The number of rail cars from increased economic activity.
• Any improvement in federal railroad administration track classification designation up to and including class II track and
the ability to operate at greater speeds.
• The amount of steel or ties deemed obsolete by a class I railroad, as defined in section 2 of this act, that are reused by a
class II or class III railroad, as defined in section 5 of this act, within Washington.
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate, the
detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived. Explanation
of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.

II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.

JLARC staff would work with the Department of Revenue and the Washington State Department of Transportation
immediately after passage of the bill to ensure project contacts are established and data necessary for JLARC staff’s
future evaluation needs are identified and collected.

JLARC staff would likely review this preference in 2032, beginning work in 2031, outside of the range of this fiscal note.
Costs associated with the review are therefore not included in this fiscal note, which reflects only the costs associated with
establishing data collection and other work to prepare for the future review of the preference.

This tax preference review may require additional resources. The audit will be conducted and presented to JLARC
consistent with the processes used for other tax preference reviews. Based on all tax preference legislation that is passed,
JLARC may subsequently determine that it can absorb the costs for this proposed bill in its base budget, if the workload of
other enacted tax preference legislation does not exceed current staffing. JLARC will assess all of the tax preference
reviews mandated in the 2023 legislative session.

This audit will require an estimated 2 audit months.

JLARC Audit Months: JLARC calculates its staff resources in "Audit Months" to estimate the time and effort to undertake
and complete its studies. An "Audit Month" reflects a JLARC analyst’s time for a month, together with related
administrative, support, and goods/services costs. JLARC’s anticipated 2021-23 costs are calculated at approximately
$22,100 per audit month.

Part III: Expenditure Detail
III. A - Operating Budget Expenditures
Account Account Title Type FY 2024 FY 2025 2023-25 2025-27 2027-29
001-1 General Fund State 20,000 6,700 26,700 13,400 13,400
Total $ 20,000 6,700 26,700 13,400 13,400

Freight railroad infra. 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 180,548.00 Request # 27-1
FNS063 Individual State Agency Fiscal Note 3 Bill # 5494 SB
III. B - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.1 0.1
A-Salaries and Wages 12,900 4,300 17,200 8,600 8,600
B-Employee Benefits 4,100 1,400 5,500 2,800 2,800
C-Professional Service Contracts
E-Goods and Other Services 2,700 900 3,600 1,800 1,800
G-Travel 300 100 400 200 200
J-Capital Outlays
M-Inter Agency/Fund Transfers
N-Grants, Benefits & Client Services
P-Debt Service
S-Interagency Reimbursements
T-Intra-Agency Reimbursements
9-
Total $ 20,000 6,700 26,700 13,400 13,400

III. C - Operating FTE Detail: List FTEs by classification and corresponding annual compensation. Totals need to agree with total FTEs in
Part I and Part IIIA

Job Classification Salary FY 2024 FY 2025 2023-25 2025-27 2027-29
Research Analyst 126,694 0.1 0.1
Support staff 89,671
Total FTEs 0.1 0.1 0.0

III. D - Expenditures By Program (optional)
NONE

Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE

IV. B - Expenditures by Object Or Purpose
NONE

IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE

IV. D - Capital FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part IVB.

NONE

Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.

Freight railroad infra. 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 180,548.00 Request # 27-1
FNS063 Individual State Agency Fiscal Note 4 Bill # 5494 SB
Department of Revenue Fiscal Note

Bill Number: 5494 SB Title: Freight railroad infra. Agency: 140-Department of Revenue

Part I: Estimates
No Fiscal Impact

Estimated Cash Receipts to:
Account FY 2024 FY 2025 2023-25 2025-27 2027-29
GF-STATE-State (218,000) (218,000) (500,000) (535,000)
01 - Taxes 01 - Retail Sales Tax
GF-STATE-State (52,000) (52,000) (121,000) (131,000)
01 - Taxes 05 - Bus and Occup Tax
GF-STATE-State (88,000) (88,000) (198,000) (207,000)
01 - Taxes 35 - Public Utilities Tax
Total $ (358,000) (358,000) (819,000) (873,000)

Estimated Expenditures from:

FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 2.7 1.2 2.0 0.6 0.6
Account
GF-STATE-State 001-1 689,100 124,600 813,700 115,200 115,200
Total $ 689,100 124,600 813,700 115,200 115,200

Estimated Capital Budget Impact:
NONE

Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
X
form Parts I-V.
If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).

Capital budget impact, complete Part IV.

X Requires new rule making, complete Part V.

Legislative Contact: Alia Kennedy Phone:
360-786-7405 Date: 01/26/2023
Agency Preparation: Beth Leech Phone:
360-534-1513 Date: 01/31/2023
Agency Approval: Valerie Torres Phone:
360-534-1521 Date: 01/31/2023
OFM Review: Cheri Keller Phone:
(360) 584-2207 Date: 01/31/2023

Request # 5494-1-1
Form FN (Rev 1/00) 181,186.00 1 Bill # 5494 SB
FNS062 Department of Revenue Fiscal Note
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.

CURRENT LAW:
Railroads pay public utility (PU) tax as public service businesses that engage in transportation in lieu of the business and
occupation (B&O) tax. Railroads also pay retail sales and use tax to purchase materials required for track maintenance.

PROPOSAL:

BUSINESS AND OCCUPATION TAX EXEMPTION (section 2):
B&O tax does not apply to the value of products, or the gross receipts of sales, derived by class I railroads for materials
required for railroad track maintenance.

This section expires June 30, 2034.

BUSINESS AND OCCUPATION TAX CREDIT FOR SHORT LINE RAILROADS (section 3):
This section provides a B&O tax credit to qualified short line railroads for qualified expenditures made by an eligible
taxpayer. Expenditures not used to earn a credit in one fiscal year may be carried forward for five additional years.

Qualified expenditures may be used to generate a credit for the following amounts:
- Maintenance not to exceed $5,000 times the number of miles of railroad track owned or leased in the state. The credit
allowed for this type of expenditure is 50%.
- New rail development not to exceed $2 million for each new project per taxpayer. The credit allowed for this type of
expenditure is 100%.
- Modernization and rehabilitation to upgrade rail, switches, tracks, and bridges. The credit allowed for this type of
expenditure is 100%.

The B&O tax credit may be transferred to any person subject to B&O tax. Unused credits could subsequently be
transferred to any person subject to B&O tax. No new credits may be issued after June 30, 2034, except those carried
forward from prior years.

An eligible taxpayer is any railroad subject to B&O tax and classified by the United States surface transportation board as a
class II or class III railroad, any railroad owned by a Port, City, or County in the state, or any owner or lessee of rail siding
located on or adjacent to a class II or class III railroad in the state.

This section expires June 30, 2039.

BUSINESS AND OCCUPATION TAX CREDIT FOR RAILROAD OWNERS OR OPERATORS (section 4):
This section provides a B&O tax credit for an owner or operator of a class I railroad or the owner of a company who
recycles railroad materials. The credit is equal to the fair market value of railroad equipment or materials:
- That are part of the rail infrastructure the class I railroad owner or operator removed from use on the main railroad line
and has installed on tracks used by class II or III railroads, or
- That the recycler transfers to an eligible taxpayer to install on tracks used by the class II or III railroads.

Request # 5494-1-1
Form FN (Rev 1/00) 181,186.00 2 Bill # 5494 SB
FNS062 Department of Revenue Fiscal Note
This section expires June 30, 2039.

RETAIL SALES AND USE TAX EXEMPTION (sections 5 and 6):
These sections exempt the sales of materials required for track maintenance to owners and operators of class II or class II
railroads, any railroad owned by a Port, City, or County in the state, or any owner or lessee of rail siding, industrial spur, or
industry track located on or adjacent to the railroad from retail sales and use tax.

Materials required for track maintenance are defined as rails, ties, fasteners, switches, ballast, subgrade, roadbed, bridges,
industrial leads, sidings, signs, safety barriers, crossing signals and gates, and track.

These sections expire June 30, 2034.

PUBLIC UTILITY TAX CREDIT FOR SHORT LINE RAILROADS (section 7):
This section provides a PU tax credit to qualified short line railroads for qualified expenditures made by an eligible taxpayer.
Expenditures not used to earn a credit in one fiscal year may be carried forward for five additional years.

The PU tax credit may be transferred to any person subject to PU tax. Unused credits could subsequently be transferred to
any person subject to PU tax. No new credits may be issued after June 30, 2034, except those carried forward from prior
years.

An eligible taxpayer is any railroad subject to PU tax and classified by the United States surface transportation board as a
class II or class III railroad, any railroad owned by a Port, City, or County in the state, or any owner or lessee of rail siding
located on or adjacent to a class II or class III railroad in the state.

This section expires June 30, 2039.

PUBLIC UTILITY TAX CREDIT FOR RAILROAD OWNERS OR OPERATORS (section 8):
This section provides a PU tax credit for an owner or operator of a class I railroad or the owner of a company who recycles
railroad materials. The credit is equal to the fair market value of railroad equipment or materials:
- That are part of the rail infrastructure the class I railroad owner or operator removed from use on the main railroad line
and has installed on tracks used by class II or III railroads, or
- That the recycler transfers to an eligible taxpayer to be installed on tracks used by the Class II or III railroads.

Request # 5494-1-1
Form FN (Rev 1/00) 181,186.00 3 Bill # 5494 SB
FNS062 Department of Revenue Fiscal Note
years.

This section expires June 30, 2039.

EFFECTIVE DATE:
This bill takes effect on January 1, 2024; however, due to the extensive programming required to create multiple tax credits,
a credit application process, and two deductions, the department is unable to implement the bill until July 1, 2024.
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate,
the detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived.
Explanation of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.

ASSUMPTIONS:
- Class II and III railroads spend approximately 29% of revenue to maintain their infrastructure.
- Labor is 50% of the cost of maintenance, reconstruction, or replacement of railroad infrastructure.
- There are 12 Class III railroads that may qualify for the credits and exemptions in this proposal.
- The impacts from sections 2, 4, and 8 are confidential and not included in the table above, as they impact fewer than three
taxpayers. However, the negative revenue impact from these sections is substantial.
- Public utility tax growth mirrors the growth rate in the Economic and Revenue Forecast Council (ERFC) November 2022
forecast.
- Business and occupation tax growth mirrors the growth rate in the ERFC November 2022 forecast.
- Sales tax growth mirrors the growth rate in the ERFC November 2022 forecast.
- The average local sales tax rate is 2.92%.
- This estimate assumes a July 1, 2024, implementation date, impacting eleven months of cash collections in fiscal year
2025.

DATA SOURCES:
- U.S. Surface Transportation Board
- TrainWeb.com
- American Society of Civil Engineers, Infrastructure Report Card
- U.S. Department of Transportation, Federal Railroad Administration
- Department of Transportation, Washington State Rail Plan 2019-2040
- Economic and Revenue Forecast Council, November 2022 forecast
- Department of Revenue, excise tax returns

REVENUE ESTIMATES
This bill decreases state revenues by an estimated $358,000 in the 11 months of impacted collections in fiscal year 2025, and
by $403,000 in fiscal year 2026, the first full year of impacted collections.

This bill also decreases local revenues by an estimated $98,000 in the 11 months of impacted collections in fiscal year 2025,
and by $110,000 in fiscal year 2026, the first full year of impacted collections.

TOTAL REVENUE IMPACT:

State Government (cash basis, $000):
FY 2024 - $ 0
FY 2025 - ($ 358)
FY 2026 - ($ 403)
FY 2027 - ($ 416)
FY 2028 - ($ 429)

Request # 5494-1-1
Form FN (Rev 1/00) 181,186.00 4 Bill # 5494 SB
FNS062 Department of Revenue Fiscal Note
FY 2029 - ($ 444)

Local Government, if applicable (cash basis, $000):
FY 2024 - $ 0
FY 2025 - ($ 98)
FY 2026 - ($ 110)
FY 2027 - ($ 114)
FY 2028 - ($ 118)
FY 2029 - ($ 122)
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.

ASSUMPTIONS:
- This bill affects approximately 20 taxpayers.
- The annual tax performance report is not required. The tax preference performance statement (section 9) of this bill lists
the purpose as a general purpose (82.32.808(2)(f)).
- Implementation date is July 1, 2024.

FIRST YEAR COSTS:
The department will incur total costs of $689,100 in fiscal year 2024. These costs include:

Labor Costs – Time and effort equate to 2.7 FTEs.
- Adopt one new administrative rule.
- Set up, program and test computer systems for multiple new credits. This includes a new credit ID and associated
return processing and system indicator codes, a new e-file worksheet, and modifications to reports and data files.
- Gathering requirements, implementation meetings, documentation, and testing of system changes due to new credit.
- Assist taxpayers with reporting questions and respond to inquiries via email, web message, and paper correspondence.
- Create a Special Notice and identify publications and information the department may need to create or update on the
department’s website.

Object Costs - $363,000.
- Computer system changes, including contract programming.

SECOND YEAR COSTS:
The department will incur total costs of $124,600 in fiscal year 2025. These costs include:

Labor Costs – Time and effort equate to 1.23 FTEs.
- Adopt one new administrative rule.
- Continued computer system testing, monitoring, and maintenance.
- Process returns verify credits taken and all associated work items, including issuing assessments for return errors and
underpayments.

ONGOING COSTS:
Ongoing costs for the 2026-27 biennium equal $115,200 and include similar activities described in the second-year costs.
Time and effort equate to 0.6 FTEs.

Request # 5494-1-1
Form FN (Rev 1/00) 181,186.00 5 Bill # 5494 SB
FNS062 Department of Revenue Fiscal Note
Part III: Expenditure Detail
III. A - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 2.7 1.2 2.0 0.6 0.6
A-Salaries and Wages 199,600 80,600 280,200 74,000 74,000
B-Employee Benefits 65,800 26,500 92,300 24,400 24,400
C-Professional Service Contracts 363,000 363,000
E-Goods and Other Services 41,200 13,300 54,500 13,000 13,000
G-Travel 400 400
J-Capital Outlays 19,100 4,200 23,300 3,800 3,800
Total $ $689,100 $124,600 $813,700 $115,200 $115,200

III. B - Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part I and Part IIIA.

Job Classification Salary FY 2024 FY 2025 2023-25 2025-27 2027-29
EMS BAND 4 126,619 0.0 0.0
EMS BAND 5 147,919 0.0 0.0
EXCISE TAX EX 3 61,632 0.8 0.8 0.8 0.6 0.6
IT SYS ADM-JOURNEY 92,844 0.5 0.3
MGMT ANALYST4 73,260 1.0 0.3 0.7
MGMT ANALYST5 80,952 0.1 0.1
TAX POLICY SP 2 75,120 0.3 0.0 0.2
TAX POLICY SP 3 85,020 0.1 0.0
TAX POLICY SP 4 91,524 0.0 0.0
WMS BAND 3 107,685 0.0 0.0
Total FTEs 2.7 1.2 2.0 0.6 0.6

III. C - Expenditures By Program (optional)
NONE

Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE

IV. B - Expenditures by Object Or Purpose
NONE

IV. C - Capital Budget Breakout

Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE

Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.

Should this legislation become law, the department will use the standard process to adopt WAC 458-20-NEW, titled: "New
rule on railroad exemptions and credits." Persons affected by this rulemaking would include certain railroads.

Request # 5494-1-1
Form FN (Rev 1/00) 181,186.00 6 Bill # 5494 SB
FNS062 Department of Revenue Fiscal Note
LOCAL GOVERNMENT FISCAL NOTE
Department of Commerce

Bill Number: 5494 SB Title: Freight railroad infra.

Part I: Jurisdiction-Location, type or status of political subdivision defines range of fiscal impacts.
Legislation Impacts:
X Cities: Decreased sales tax, and use tax, and public utility tax revenue. Decreased expenditures for sales and use tax exempt cities,
and utility tax credit - eligible cities.
X Counties: Decreased sales tax, and use tax, and public utility tax revenue. Decreased expenditures for sales and use tax exempt
counties, and utility tax credit - eligible counties.
X Special Districts: Decreased sales tax, and use tax, and public utility tax revenue. Decreased expenditures for sales and use tax exempt
ports, and utility tax credit - eligible ports.
X Specific jurisdictions only: Decreased expenditures for cities, ports, and counties that own railroads
Variance occurs due to:

Part II: Estimates
No fiscal impacts.

Expenditures represent one-time costs:

Legislation provides local option:

X Key variables cannot be estimated with certainty at this time: Current and expected expenditure amounts (of local governments) that
will be eligible for tax credits and tax exemptions.
Estimated revenue impacts to:

Jurisdiction FY 2024 FY 2025 2023-25 2025-27 2027-29
City (28,896) (28,896) (66,047) (70,765)
County (35,520) (35,520) (81,189) (86,988)
Special District (32,604) (32,604) (74,524) (79,847)
TOTAL $ (97,020) (97,020) (221,760) (237,600)
GRAND TOTAL $ (556,380)

Estimated expenditure impacts to:

Non-zero but indeterminate cost and/or savings. Please see discussion.

Part III: Preparation and Approval
Fiscal Note Analyst: Angie Hong Phone: 360-725-5041 Date: 01/30/2023
Leg. Committee Contact: Alia Kennedy Phone: 360-786-7405 Date: 01/26/2023
Agency Approval: Allan Johnson Phone: 360-725-5033 Date: 01/30/2023
OFM Review: Cheri Keller Phone: (360) 584-2207 Date: 01/31/2023
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FNS060 Local Government Fiscal Note
Part IV: Analysis
A. SUMMARY OF BILL
Description of the bill with an emphasis on how it impacts local government.
Section 5 and 6 adds new chapters to RCW 82.08 RCW [Retail sales tax] and RCW 82.12 [Use tax] to:
1. Create a Retail sales and use tax exemption for track maintenance to:
(a) Owners and operators of class II or class III railroad operators;
(b) Any railroad owned by a port, city, or county in the state of Washington; or
(c) Any owner or lessee of a rail siding, industrial spur, or industry track located on or adjacent to a class II or class III
railroad in the state of Washington,
2. Provide definitions for "Class II or class III railroad," and "Materials required for track maintenance"

Section 5 and 6 expire June 30, 2034.

Section 7 adds a new chapter to RCW 82.16 [Public Utility Tax] to create a public utility tax credit for qualified railroad
expenditures for eligible railroad owners and lessees, which may include ports, cities, and counties. This section expires
June 30, 2039.

NOTE: Although this legislation takes effect on January 1, 2024; the Dept. of Revenue is unable to implement the bill until
July 1, 2024. Therefore a July 1, 2024 - effective date is assumed.
B. SUMMARY OF EXPENDITURE IMPACTS
Expenditure impacts of the legislation on local governments with the expenditure provisions identified by section number and when
appropriate, the detail of expenditures. Delineated between city, county and special district impacts.

As described in section 5-6, this bill will decrease track maintenance expenditures for certain eligible ports, cities, and
counties that own or lease railroads. Information on the current or expected expenses that would be eligible for a retail
sales and use tax exemption was not available and cannot be determined.

Section 7 creates a credit against utility taxes due and is expected to decrease expenditures for certain eligible ports, cities,
and counties that own or lease railroads. Information on the current or expected expenses that would be eligible for a
utility tax credit was not available and cannot be determined.

In addition to eligible ports, cities, and counties, private businesses are expected to benefit from these tax credits and tax
exemptions as well.
C. SUMMARY OF REVENUE IMPACTS
Revenue impacts of the legislation on local governments, with the revenue provisions identified by section number, and when
appropriate, the detail of revenue sources. Delineated between city, county and special district impacts.

According to the Dept. of Revenue, this bill will decrease local revenues by an estimated $98,000 in the 11 months of
impacted collections in fiscal year 2025, and by $110,000 in fiscal year 2026, the first full year of impacted collections.

LOCAL GOVS
FY 2024 - $ 0
FY 2025 - ($ 98,000)
FY 2026 - ($ 110,000)
FY 2027 - ($ 114,000)
FY 2028 - ($ 118,000)
FY 2029 - ($ 122,000)

METHODOLOGY
The distributions in this note for cities, counties, and special districts are based on DOR data for local sales and use tax
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FNS060 Local Government Fiscal Note
distributions from Calendar Year 2021. Mitigation payments and distributions to hospital benefit zones are not factored into
this distribution. The result is a distribution of 36.61 percent to counties, 29.78 percent to cities, and 33.61 percent to
special districts. The one percent DOR administrative fee has also been deducted.

COUNTIES
FY 2024 - ($0)
FY 2025 - ($35,520)
FY 2026 - ($39,870)
FY 2027 - ($41,319)
FY 2028 - ($42,769)
FY 2029 - ($44,219)

CITIES
FY 2024 - ($0)
FY 2025 - ($28,896)
FY 2026 - ($32,434)
FY 2027 - ($33,613)
FY 2028 - ($34,793)
FY 2029 - ($35,972)

SPECIAL PURPOSE DISTRICTS
FY 2024 - ($0)
FY 2025 - ($32,604)
FY 2026 - ($36,597)
FY 2027 - ($37,927)
FY 2028 - ($39,258)
FY 2029 - ($40,589)

SOURCES
Department of Revenue Fiscal Note
Department of Revenue Local Tax Distributions
Association of Washington Cities
Washington State Association of Counties

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FNS060 Local Government Fiscal Note

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