This bill amends existing Washington law on local tax increment financing (amending multiple sections including RCW 39.114.010, .020, .030, .040, .050, 39.89.020 and reenacting and amending RCW 84.14.020). It keeps and reshapes the framework for local governments (cities, towns, counties, port districts) to create “increment areas” and use tax allocation revenues to pay public improvement costs, but adds numerous new procedural requirements, limits, and definitions. Key changes include caps on the assessed value of increment areas (a $200 million cap adjusted by the consumer price index beginning June 1, 2027, or 20% of the sponsoring jurisdiction’s assessed value, whichever is less), a one-time 2026 exception allowing larger combined increment areas for a narrowly described city and project if certain approvals occur, a limit of no more than two active increment areas per sponsoring jurisdiction at a time, and a prohibition on overlapping increment areas. The bill imposes detailed ordinance and project-analysis requirements before creating an increment area: ordinances must describe the area and public improvements, state intent to issue obligations and an estimated maximum amount, set a sunset date (no more than 25 years after first tax allocation revenues are collected or when obligations are retired), require construction to begin within five years (with limited two-year extensions for good cause), and include findings that the improvements are necessary to encourage private development and increase assessed value. The legislative body must prepare and distribute a project analysis with specified contents (objectives, parcel list, expected development with and without improvements, prioritized list of public improvements, costs and funding, seven-year bond expectations, assessed-value certification, revenue and job estimates, and impact assessments on housing, taxing districts, schools and businesses). The project analysis must be submitted to impacted taxing districts and the state treasurer (who must review within 90 days). The bill also prescribes notice and hearing requirements, a 180-day pre-submission notice and offer to consult, requirements to publish hearings and post information online, delivery of the adopted ordinance to county officials within 10 days, annual reporting, reimbursement of assessor and treasurer costs, and allows local governments to charge developers fees to cover project-analysis costs. The bill revises apportionment and mitigation procedures: county treasurers must apportion regular property tax receipts from increment-area properties beginning the calendar year after the increment area takes effect; taxing districts receive the portion attributable to the tax allocation base value; certain levies and state school support are excluded from apportionment; the local government designating the increment area may receive tax allocation revenues only up to amounts needed to pay approved public improvements; surplus returns to taxing districts. It establishes required consultations, mitigation negotiations, and binding arbitration or mediation processes and timelines for impacted taxing districts (including special rules when an impacted public hospital or fire district’s assessed value is substantially affected), lists factors arbiters must consider, and specifies that mitigation cannot allow a taxing district to opt out of participation. The bill also reenacts and amends the housing tax exemption statute (RCW 84.14.020) to add and modify multi-year exemption options and affordability covenants, tenant relocation-assistance requirements, and sunset dates for new exemptions and extensions. The act declares that increment areas in place prior to June 2, 2026 are not modified by the act, includes an emergency clause, and takes effect June 2, 2026. Some extracted text is incomplete or contains differing numeric definitions (for example, the excerpts include inconsistent statements about the percentage used for “increment value” and how the “tax allocation base value” is computed); the full bill text would be needed to resolve those inconsistencies and to see any additional procedural or financing details referenced but not included in the provided excerpts.

If enacted, the bill makes it harder for local governments to use tax increment financing by imposing tighter size and time limits, new procedural steps, and stronger protections for other taxing districts. Cities, counties, ports and similar sponsors will generally be limited in how large an increment area can be, may have no more than two active increment areas, must set a 25‑year or earlier sunset, must begin an area on the June 1 after adoption, must meet a five‑year construction start deadline (with limited extensions), and must prepare a detailed project analysis, hold multiple public hearings, notify and consult with affected taxing districts, and submit the analysis to the state treasurer for review. The act takes effect June 2, 2026 and does not change increment areas created before that date. The groups most affected are sponsoring local governments (more upfront analysis, publication, reimbursement to county assessor/treasurer, potential mitigation payments, and possible arbitration outcomes), taxing districts like school, hospital and fire districts (greater ability to negotiate mitigation but also a risk of losing growth-related tax revenue when increment value is redirected), private developers (they may be charged fees to cover project analysis and may build reimbursable public improvements, and housing developers face revised tax‑exemption rules tied to long-term affordability and transit proximity), and county assessors/treasurers and the state treasurer (new review, apportionment, and reimbursement duties). Important implementation details are unclear in the extracted text—notably conflicting excerpts about how much of assessed value becomes the increment and how the tax allocation base is calculated—so exact revenue shifts and calculations would depend on those unresolved definitions and any sections of the bill not included here.