Multiple Agency Fiscal Note Summary — 1163 S HB, Leasehold Tax/Arenas
Summary
A Multiple Agency Fiscal Note Summary for 1163 S HB, titled Leasehold tax/arenas, marked Final 02/06/23, with the Department of Revenue at 0.1 FTE and $14,100 in operating expenditures. The narrative says the substitute version changes the seating capacity from 4,000 to 2,000 and that the proposal creates a leasehold excise tax exemption for the public or entertainment areas of an arena with a seating capacity of more than 2,000 located on city-owned land. It states the combined state and local rate for the tax is 12.84% of the rent paid, of which the state general fund receives 6.84%.
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“Multiple Agency Fiscal Note Summary — 1163 S HB, Leasehold Tax/Arenas.”
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Multiple Agency Fiscal Note Summary
Bill Number: 1163 S HB Title: Leasehold tax/arenas
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 (2,400,000) (2,400,000) (2,400,000) (3,000,000) (3,000,000) (3,000,000) (3,100,000) (3,100,000) (3,100,000)
Revenue
Total $ (2,400,000) (2,400,000) (2,400,000) (3,000,000) (3,000,000) (3,000,000) (3,100,000) (3,100,000) (3,100,000)
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 (2,200,000) (2,600,000) (2,800,000)
Local Gov. Total (2,200,000) (2,600,000) (2,800,000)
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
Department of .1 14,100 14,100 14,100 .0 0 0 0 .0 0 0 0
Revenue
Total $ 0.1 14,100 14,100 14,100 0.0 0 0 0 0.0 0 0 0
Estimated Capital Budget Expenditures
Agency Name 2023-25 2025-27 2027-29
FTEs Bonds Total FTEs Bonds Total FTEs Bonds Total
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
Estimated Capital Budget Breakout
Prepared by: Cheri Keller, OFM Phone: Date Published:
(360) 584-2207 Final 2/ 6/2023
FNPID 66472
:
FNS029 Multi Agency rollup
Department of Revenue Fiscal Note
Bill Number: 1163 S HB Title: Leasehold tax/arenas 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 (900,000) (1,500,000) (2,400,000) (3,000,000) (3,100,000)
01 - Taxes 59 - Leasehold Excise Tax
Total $ (900,000) (1,500,000) (2,400,000) (3,000,000) (3,100,000)
Estimated Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.2 0.1
Account
GF-STATE-State 001-1 14,100 14,100
Total $ 14,100 14,100
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
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: Tracey Taylor Phone:
360-786-7152 Date: 01/26/2023
Agency Preparation: Frank Wilson Phone:
360-534-1527 Date: 02/05/2023
Agency Approval: Valerie Torres Phone:
360-534-1521 Date: 02/05/2023
OFM Review: Cheri Keller Phone:
(360) 584-2207 Date: 02/06/2023
Request # 1163-3-1
Form FN (Rev 1/00) 182,029.00 1 Bill # 1163 S HB
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.
Note: This fiscal note reflects language in SHB 1163, 2023 Legislative Session.
COMPARISON OF THE SUBSTITUTE BILL WITH THE ORIGINAL:
The substitute version changes the seating capacity from 4,000 to 2,000. Also adds to qualifying criteria to include an arena
that is a multipurpose sports and entertainment facility, redeveloped to attract a professional ice hockey franchise.
CURRENT LAW:
Leasehold excise tax (LET) is paid by a private entity that leases/uses public property. This includes leases of
government-owned property exempt from property taxes. The combined state and local rate for LET is 12.84% of the rent
paid for the property. The state general fund receives 6.84% and the remaining 6% goes to local governments.
PROPOSAL:
This proposal creates an exemption from LET for all leasehold interests in the “public or entertainment areas” of any arena
if the arena:
- Has a seating capacity of more than 2,000;
- Is located in a city with a population of over 100,000;
- Is located on city-owned land;
- Is a multi-purpose sports and entertainment facility redeveloped to attract a professional ice hockey franchise; and
- Private entities were responsible for 100% of the funds used for construction improvements to the arena not reimbursed by
the public owner.
“Public or entertainment areas” have the same meaning as in current law for certain existing amphitheater or arenas, except
that it also includes office areas used predominantly by the lessee.
Section 1 and section 2 share the same language creating the LET exemption, as a result of different expiration dates in
current statute.
The new LET exemption does not apply to leasehold interests arising on or after October 1, 2033.
The new tax preference performance provisions do not apply to the proposal.
EFFECTIVE DATE:
Section 1 takes effect October 1, 2023, which addresses current provisions in effect until January 1, 2034.
This exemption and the changes in this bill become permanent. While Section 1 of the bill expires January 1, 2034, Section 2
takes effect January 1, 2034, and does not expire.
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:
- This LET exemption applies only to the Climate Pledge Arena.
- Climate Pledge Arena meets the private entity funding the construction improvements not reimbursed by the public
requirement.
- These estimates use LET collections data from Quarter 4, 2021 to Quarter 3, 2022.
Request # 1163-3-1
Form FN (Rev 1/00) 182,029.00 2 Bill # 1163 S HB
FNS062 Department of Revenue Fiscal Note
- Growth mimics the Economic and Revenue Forecast Council's forecast for LET.
DATA SOURCES:
- Department of Revenue, leasehold excise tax data
- Economic and Revenue Forecast Council, November 2022 forecast
REVENUE ESTIMATES:
This bill decreases state revenues by an estimated $0.9 million in the eight months of impacted collections in fiscal year
2024, and by $1.5 million in fiscal year 2025, the first full year of impacted collections. This bill also decreases local
revenues by an estimated $0.9 million in the eight months of impacted collections in fiscal year 2024, and by $1.3 million in
fiscal year 2025, the first full year of impacted collections.
TOTAL REVENUE IMPACT:
State Government (cash basis, $000):
FY 2024 - ($ 900)
FY 2025 - ($ 1,500)
FY 2026 - ($ 1,500)
FY 2027 - ($ 1,500)
FY 2028 - ($ 1,500)
FY 2029 - ($ 1,600)
Local Government, if applicable (cash basis, $000):
FY 2024 - ($ 900)
FY 2025 - ($ 1,300)
FY 2026 - ($ 1,300)
FY 2027 - ($ 1,300)
FY 2028 - ($ 1,400)
FY 2029 - ($ 1,400)
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 estimate affects one taxpayer.
FIRST YEAR COSTS:
The department will incur total costs of $14,100 in fiscal year 2024. These costs include:
Labor Costs - Time and effort equate to 0.17 FTE.
- Amend one administrative rule.
- Research, educate, and assist taxpayers with reporting requirements.
SECOND YEAR COSTS:
The department will not incur costs in fiscal year 2025.
ONGOING COSTS:
There are no ongoing costs.
Request # 1163-3-1
Form FN (Rev 1/00) 182,029.00 3 Bill # 1163 S HB
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 0.2 0.1
A-Salaries and Wages 8,600 8,600
B-Employee Benefits 2,800 2,800
E-Goods and Other Services 1,800 1,800
J-Capital Outlays 900 900
Total $ $14,100 $14,100
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
EXCISE TAX EX 3 61,632 0.1 0.1
MGMT ANALYST4 73,260 0.0 0.0
TAX POLICY SP 2 75,120 0.0 0.0
TAX POLICY SP 3 85,020 0.0 0.0
TAX POLICY SP 4 91,524 0.0 0.0
WMS BAND 3 107,685 0.0 0.0
Total FTEs 0.2 0.1
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 expedited process to amend WAC 458-29A-400, titled:
"Leasehold excise tax-Exemptions." Persons affected by this rulemaking would include certain arenas and stadiums.
Request # 1163-3-1
Form FN (Rev 1/00) 182,029.00 4 Bill # 1163 S HB
FNS062 Department of Revenue Fiscal Note
LOCAL GOVERNMENT FISCAL NOTE
Department of Commerce
Bill Number: 1163 S HB Title: Leasehold tax/arenas
Part I: Jurisdiction-Location, type or status of political subdivision defines range of fiscal impacts.
Legislation Impacts:
X Cities: revenue decrease
X Counties: revenue decrease
X Special Districts: revenue decrease
X Specific jurisdictions only: City of Seattle, King County, Port of Seattle, Sound Transit, Seattle School District, Seattle Park District
Variance occurs due to:
Part II: Estimates
No fiscal impacts.
Expenditures represent one-time costs:
Legislation provides local option:
Key variables cannot be estimated with certainty at this time:
Estimated revenue impacts to:
Jurisdiction FY 2024 FY 2025 2023-25 2025-27 2027-29
City (400,000) (577,778) (977,778) (1,155,556) (1,244,444)
County (200,000) (288,889) (488,889) (577,778) (622,222)
Special District (300,000) (433,333) (733,333) (866,666) (933,334)
TOTAL $ (900,000) (1,300,000) (2,200,000) (2,600,000) (2,800,000)
GRAND TOTAL $ (7,600,000)
Estimated expenditure impacts to:
None
Part III: Preparation and Approval
Fiscal Note Analyst: Angie Hong Phone: 360-725-5041 Date: 02/02/2023
Leg. Committee Contact: Tracey Taylor Phone: 360-786-7152 Date: 01/26/2023
Agency Approval: Allan Johnson Phone: 360-725-5033 Date: 02/02/2023
OFM Review: Cheri Keller Phone: (360) 584-2207 Date: 02/02/2023
Page 1 of 3 Bill Number: 1163 S HB
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.
CHANGES TO THIS BILL VERSION
This bill version adds an additional characterization of an eligible facility: the arena is a multipurpose sports and
entertainment facility that was redeveloped to attract a professional ice hockey franchise. This version also removes the
requirement of the taxpayer claiming exemption to file a tax performance report. These changes do not alter the impact
analysis for local governments. Special district impacts have been incorporated into the previous revenue analysis.
SUMMARY OF CURRENT BILL VERSION
This bill creates a leasehold excise tax exemption for all leasehold interests for a certain arena. The Dept. of Revenue
fiscal note assumes this arena is the Climate Pledge Arena.
This bill clarifies that “Public or entertainment areas” has the same meaning as in current law for certain existing
amphitheater or arenas, and includes office areas used predominantly by the lessee.
This substitute bill adds an additional characterization of an eligible facility: the arena is a multipurpose sports and
entertainment facility that was redeveloped to attract a professional ice hockey franchise.
This substitute bill removes the requirement of the taxpayer claiming exemption to file a tax performance report.
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.
This bill will not impact local government expenses.
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.
CHANGES TO THIS BILL VERSION
This bill version does not alter the impact analysis for local governments. Due to additional information becoming available,
special district impacts have been incorporated into the previous revenue analysis.
SUMMARY OF CURRENT BILL REVENUE IMPACTS
According to the Dept. of Revenue fiscal note, this bill decreases local revenues by an estimated $0.9 million in the eight
months of impacted collections in fiscal year 2024, and by $1.3 million in fiscal year 2025, the first full year of impacted
collections. The local leasehold tax rate is 6%.
According to the Municipal Research Services Center’s Revenue Guide, the maximum county rate that can be levied
against the state is 6%. The maximum city rate that can be credited against the county is 4%. Assuming that the City of
Seattle and King County levy the maximum rates possible, Seattle will bear 2/3 of the loss and King County will bear 1/3
of the loss in revenue. It is assumed that the four special districts (Port of Seattle, Sound Transit, Seattle School District,
Seattle Park District) that experience a revenue loss are distributed approximately 1/3 of the amounts due to the county
and city.
Local Government loss Seattle loss King County loss Special District loss
FY 2024 - ($ 900,000) = ($ 600,000) ($ 300,000)
minus 1/3 for SPs: ($ 400,000) ($ 200,000) $ (300,000)
FY 2025 - ($ 1,300,000) = ($ 866,667) ($ 433,333)
Page 2 of 3 Bill Number: 1163 S HB
FNS060 Local Government Fiscal Note
minus 1/3 for SPs: ($ 577,778) ($ 288,889) $ (433,333)
FY 2026 - ($ 1,300,000) = ($ 866,667) ($ 433,333)
minus 1/3 for SPs: ($ 577,778) ($ 288,889) $ (433,333)
FY 2027 - ($ 1,300,000) = ($ 866,667) ($ 433,333)
minus 1/3 for SPs: ($ 577,778) ($ 288,889) $ (433,333)
FY 2028 - ($ 1,400,000) = ($ 933,333) ($ 466,667)
minus 1/3 for SPs: ($ 622,222) ($ 311,111) $ (466,667)
FY 2029 - ($ 1,400,000) = ($ 933,333) ($ 466,667)
minus 1/3 for SPs: ($ 622,222) ($ 311,111) $ (466,667)
SOURCES
Association of Washington Cities
Municipal Research Services Center Revenue Guide
Dept. of Revenue Fiscal Note Draft
Page 3 of 3 Bill Number: 1163 S HB
FNS060 Local Government Fiscal Note
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