Tax increment financing “TIF” is a revenue tool provided to cities, counties and port districts “TIF Entities” under chapter 39.114 RCW. When a TIF Entity wants to use tax increment financing, the TIF Entity creates an area with specific defined boundaries that is called a Tax Increment Area “TIA.” Once a TIA is created, the assessed value within the TIA is frozen and the fire district or RFA is limited to collecting tax revenues based on the frozen assessed value for up to 25 years. During this period the fire district or RFA is required to serve the developments generated in the TIA without the corresponding receipt of tax revenues generated by the developments.  The regular tax revenues (including EMS taxes) generated in the TIA on the increases in the assessed value of the TIA are transferred from the fire district or RFA to the TIF Entity.

Unfortunately, TIAs can be formed without the consent of a fire district or RFA and are not subject to the approval of any third party. Additionally, multiple TIAs can be created within a single fire district or RFA thereby increasing the negative impacts on revenues.  Under current law, the only tool that fire districts or RFAs have to influence the TIF process is to document and pursue mitigation of the impacts that TIA based developments will have on your service levels.

This article provides suggestions for the steps you can take now to be as prepared as possible to mitigate the impacts of a TIA within your fire district or RFA. If you are faced with the formation of a TIA, retaining appropriate legal counsel is advised.

Step One – Planning. The most important step a fire district or RFA can take to prepare itself to address the formation of a TIA is to establish performance standards and a capital facilities plan that can be used to document and predict the impacts that development within a TIA will have on your levels of service. While it is recognized that many fire districts and RFAs do not have the resources or personnel to fully engage in this type of planning, it must be understood that absent this type of planning you will be at a serious disadvantage in the TIF process.

Step Two- Engaging in the Process. Whether or not you have adopted performance standards or capital facilities plans, it is equally important that you engage and actively participate in the TIA formation process, as this is a narrow window of opportunity. If you need to challenge a TIF in the courts, participation in the process is critical to the potential success of a judicial challenge.

The first step is to establish clear paths of communication with the TIF Entities located within your fire district or RFA. Let them know that you will oppose any TIA that does not adequately mitigate the impacts on your fire district or RFA. If you have adopted service levels, capital facilities plans, etc., provide them with copies of those documents as soon as you are notified that they intend to create a TIA.  Once a TIA has been proposed, you will need to be proactive in pursuing mitigation (see Step 3) under the following timelines:

The TIF Entity proposing the TIA must provide written notice to your governing board a minimum of 90 days before submitting its project analysis to the State Treasurer’s office (RCW 39.114.040(1)). The TIF Entity’s project analysis must address the mitigation discussed under step 3, so it is critical that the District clearly communicate to the TIF Entity your position and documentation regarding service level impacts and mitigation early in this 90 day notice period. This may be difficult as the TIF Entity may give you notice prior to having developed a formal plan.

If the TIF Entity fails to adequately mitigate your service level impacts you should be prepared to formally object to the project analysis at the time it is submitted to the Treasurer. While the State Treasurer does not have any authority to stop a TIA based on the project analysis, documenting your objections is necessary in the event that you choose to challenge a TIA in the courts.

Any TIF Entity pursuing a TIA is also required to hold two public briefings after the 90 day review period allotted to the State Treasurer.  If the TIF Entity has not adequately addressed your need for mitigation, you should be prepared to submit comment and oppose the formation of the TIA at both public hearings particularly if you want the option of challenging the formation of the TIA on procedural grounds.

Once the TIA is formed, you have 30 days in which to file a legal challenge based on the absence of mitigation or to challenge based on any procedural errors made by the City.

Step Three – Negotiating Mitigation. A TIF Entity proposing a TIA is required to conduct: “[a]n assessment of any impacts on … [t]he local fire service … and emergency medical services….”  The assessment “must include any necessary mitigation to the local fire service, …  and emergency medical services…”(39.114.020(2)). 

If you can demonstrate, through formally adopted performance standards or capital facilities plans, that the proposed TIA will “increase in the level of service directly related to the increased development” then the TIF Entity “must enter into negotiations for a mitigation plan … to address level of service issues in the increment area.”  By triggering this mandatory mitigation process your fire district or RFA can negotiate on a more even playing field. The mandatory mitigation places the TIF Entity in the position of having to address the service level impacts by agreement or face a mandatory arbitration process if an agreement cannot be reached.

Even if you do not have adopted performance standards or capital facilities plans that allow you to trigger mandatory mitigation, you can still pursue mitigation at each step in the process as described above and if necessary, object to or challenge the TIA process.

Hopefully this brief overview provides you with an understanding that the best defense against a TIA is having planning in place that lets you predict the service level impacts of the proposed development within a TIA. While projecting the impacts of future growth and development is never straightforward, if you have the planning in place, you will be better able to support your requests for mitigation.

 

By Attorney Brian Snure Published in the 4Q Fireline 2024.