- Does the proposed preliminary budget that the chief administrative officer (CAO) has to give to city council under RCW 35.33.135 and RCW 35A.33.135 have to be balanced?
We don't think so, although some city councilmembers might argue otherwise (and some CAOs wouldn't want to give the council something that wasn't balanced). If the city is strictly following the dates in the budget calendar, the CAO does not have time to balance the budget between the time he or she gets the proposed preliminary budget from the clerk (the first business day in October) and the first Monday in October when the proposed preliminary budget is to go to the council. As a practical matter, the CAO will have to give the council what he or she gets from the clerk. What the CAO would get from the clerk would most likely be revenue estimates and department requests, not a balanced budget document. The balancing gets done during the remainder of October and the preliminary budget is filed with the clerk no later than November 1. Note that cities can always start the budget process earlier than the dates given in the budget calendar.
For more information on these statutes, see the material we have excerpted from Budget Suggestions for 1996.
- Can you charge the public for copies of the preliminary budget? The final budget?
The statutes dealing with budgets are not clear on this issue. For cities, RCW 35.33.055, RCW 35.34.080, RCW 35A.33.052, and RCW 35A.34.080 provide, in part:
The clerk shall provide a sufficient number of copies of such preliminary budget and budget message to meet the reasonable demands of the taxpayers . . .
And, RCW 35.33.061 and RCW 35A.33.060 require the clerk to publish a notice stating that a copy of the preliminary budget "will be furnished to any taxpayer who will call at the clerk's office therefor . . ." RCW 35.34.100 and RCW 35A.34.100, dealing with biennial budgets, have similar language that states that a copies of the preliminary budget will be made "available" to taxpayers at the clerk's office.
For counties, RCW 36.40.060 states, in part:
The county legislative authority shall then publish a notice stating that it has completed and placed on file its preliminary budget for the county for the ensuing fiscal year, a copy of which will be furnished any citizen who will call at its office for it . . .
None of the above statutes specify that a city or county may or may not charge taxpayers for copies of the preliminary budget. While it is a reasonable interpretation of these statutes that they imply that copies should be provided at no charge, it is also reasonable to argue that, while cities and counties must make copies available at no charge for the public to review, the statutes must be more specific to require them to provide, free of charge, documents that they otherwise would have the authority to charge for. Particularly in larger cities, it would be impractical from a financial standpoint to make an unlimited number of copies of what is typically a large document available for the taking at no charge. MRSC recommends that cities and counties adopt a policy as to how they handle this issue.
As to the final budget, there are no statutes that address providing copies to the public. So, cities and counties may provide copies under the same rules that they provide copies of other public records. They can charge 15 cents a page (see RCW 42.17.300), if they have to copy it, or the price of printing it, whichever is less.
- Do cities and counties need to have public hearings on the preliminary budget?
We believe that cities must have such hearings. RCW 35.33.057, RCW 35.34.090(2), RCW 35A.33.055, and RCW 35A.34.090(2) all provide:
Prior to the final hearing on the budget, the legislative body or a committee thereof shall schedule hearings on the budget or parts thereof, and may require the presence of department heads to give information regarding estimates and programs.
Because the statutes themselves make no reference to notice, it is likely that less cumbersome notice requirements are necessary for the preliminary budget hearings than for the final budget hearing. (Recall that for the latter, the statutes require that the clerk publish a notice of the final hearing during each of the first two weeks of November.) RCW 35.22.288, RCW 35.23.221, RCW 35.27.300, and RCW 35A.12.160 require the council to "establish a procedure for notifying the public of upcoming hearings."
If a city council holds workshops at which citizens may comment and ask questions, it is likely that these workshops would satisfy the hearings requirement for the preliminary budget.
There is no such statutory requirement for counties. Only a final hearing on the budget is required. RCW 36.40.060, RCW 36.40.070, RCW 36.40.071. As a practical matter, citizens can listen to the commissioners deliberate budget matters during their meetings and, in most cases, contribute comments. This is not a hearing, but input is provided.
- Do we need to have a hearing on revenue sources and possible property tax increases for the budget?
Yes. In 1995, language was added to RCW 84.55.120 that provided that a all taxing districts must hold a hearing on revenues and discuss any property tax increase. This hearing must be held even if your taxing district does not plan to increase property taxes.
If the only proposed increase in tax revenue will come from new construction and increases in state-assessed utility revenue, this increase should be discussed at the hearing.
- What procedures do we need to follow if we are planning to increase our property taxes?
In addition to holding a hearing to discuss this increase, all taxing districts must pass a separate ordinance or resolution authorizing the increase in both dollars and percentage. RCW 84.55.120. This provision was added by the passage of Referendum 47 in 1997. You can write your own or download a form from the Department of Revenue Web site www.dor.wa.gov. Type 64 0101 in the search window in the upper right corner. There is a space between the "0" and "1".
- What is the maximum amount that a city or county may increase its property tax levy without a vote of the people?
Here are the "rules" since the passage of Initiative 747.
In taxing districts with a population of under 10,000, the legislative body may, by a simple majority, vote to increase its levy by a maximum of one percent of the highest levy of the past three years (note WAC 458-19-065 says since 1986 and that is the date that the assessors use) plus the revenue resulting from new construction, increases in assessed value due to construction of electric generation wind turbine facilities classified as personal property, and improvements to property, and any increase in the assessed value of state-assessed property. If the taxing district has a population of 10,000 or more, it can only increase its levy by an amount equal to the increase in the implicit price deflator (IPD) from the prior July or one percent, whichever is less, plus new construction and state-assessed utility revenue. This can be done with a simple majority vote. RCW 84.55.010.
However, if a majority plus one of the city or county council finds "substantial need," it can increase its levy by an amount up to one percent, assuming that its maximum statutory rate is not reached. The vote of two of three county commissioners is needed, plus a finding of substantial need. RCW 84.55.0101. Of course, since the increase in the IPD is likely to be greater than one percent, this provision is not as useful as it was before the passage of Initiative 747.
- What is the definition of "substantial need?"
None is given in the statutes. Presumably, determination of substantial need will be unique for each jurisdiction.
- Where do we get information on the implicit price deflator (IPD)?
During the year, MRSC makes "forecasts" of the implicit price deflator on the Finance page, using data from the Survey of Current Business, which is published by the Bureau of Economic Analysis. http://www.mrsc.org/Subjects/Finance/ipdcht.aspx The July IPD, which may affect allowable property tax levy increases in ch. 84.55 RCW, is published in the September issue. We post this information on our Focus page when it is available, around the middle of September.
- What are the consequences of not adopting the budget by December 31?
Your jurisdiction is likely to get an audit finding.
State law requires that cities adopt a budget in its final form and content "prior to the beginning of the fiscal year" or "fiscal biennium." RCW 35.33.075, RCW 35.34.120, RCW 35A.33.075, RCW 35A.34.120. There is no similar language in the county budget statutes, but RCW 36.40.071 states that the final budget hearing must begin no later than the first Monday in December and RCW 36.40.070 provides that the hearing last no more than five days, after which the budget is adopted. In practice, the State Auditor's Office is happy if it is passed by December 31.
If no budget is passed before the fiscal year or biennium begins, the city or county will, legally, be unable to make any expenditures at all. Practically, essential police and fire department functions, at least, would need to be provided and the city or county would be spending illegally. We advise cities and counties to pass something. The budget can be amended in the coming year.
- When are budget amendments required and by what vote must they be passed?
Cities
Budget amendments are required for cities only when the appropriation level in a fund is being changed. The statutes give four different examples.
- RCW 35.33.081, RCW 35.34.140, RCW 35A.33.140, and RCW 35A.34.140 discuss "nondebatable"emergencies, such as natural disasters and wars, and say that the council may approve expendituresincident to these events with the vote of a majority of the entire council plus one, without notice ora hearing.
- RCW 35.33.091, RCW 35.34.150, RCW 35A.33.090, and RCW 35A.34.150 all deal with "emergencies" of a lesser sort. The city finds it needs or wants to make some expenditures that were not foreseen at the time the budget was adopted. Because this will require increasing the appropriation level in one or more funds, an amendment is needed. The statutes stipulate that the budget-amending ordinance must be introduced five days before being voted on, that citizens must be heard, and that the vote be by a majority of the entire council plus one.
- RCW 35.33.121(4), RCW 35.34.200(1)(d), RCW 35A.33.120(4), and RCW 35A.34.200(1)(d) discuss the situation where a city receives more revenue during the year than anticipated in thebudget. If the city council chooses, it may spend the money during the year. However, since theappropriation level in a fund is being changed, a budget amendment is required. Only a simple majority vote is needed, presumably because spending unanticipated revenue requires less scrutiny than, for example, spending reserves under RCW 35.33.091, RCW 35.34.150, RCW 35A.33.090, or RCW 35A.34.150.
Note that a city need not pass a budget amendment to recognize unanticipated revenue unless it wishes to spend it during the current year. If "ignored," it will simply "drop down" into ending fund balance and will be available for appropriation in the next year.
- If a council wishes to decrease the appropriation levels in any fund during the year, it may do so by a vote of a majority of the entire council plus one. It is not completely clear why this level of approval is required, but since a council sometimes reduces the appropriation level in one fund and transfers it to another fund, perhaps the legislature thought this higher level of approval to be necessary. See final paragraph in RCW 35.33.121 and RCW 35A.33.120; and RCW 35.34.200(3) and RCW 35A.34.200(3).
RCW 35.33.121(5) and RCW 35.34.200(2) address the situation where the appropriation level in the fund is not changed. They state:
Transfers between individual appropriations within any one fund may be made during the current fiscal year by order of the city's or town's chief administrative officer subject to such regulations, if any, as may be imposed by the city or town legislative body. Notwithstanding the provisions of RCW 43.09.210 or of any statute to the contrary, transfers, as herein authorized, may be made within the same fund regardless of the various offices, departments or divisions of the city or town which may be affected.
There is similar language in RCW 35A.33.120(5) and RCW 35A.34.200(2). Except when restricted from doing so by the council, the chief administrative officer may make transfers within a fund without a budget amendment.
Counties
Counties have similar language. RCW 36.40.180 discusses nondebatable emergencies, such disasters and threats to public health. A unanimous vote of the commissioners present at the meeting is required, and no public notice or hearing is necessary. "Emergencies," such as those described in item 2 for cities above, are addressed in RCW 36.40.140. The commissioners must adopt a resolution, stating how much money is required to meet the emergency. The resolution must be published with a notice of a public hearing to be held not less than one week after the publication.
Unique to counties is a procedure set out in RCW 36.40.150 - .170 by which any taxpayer may petition the superior court to review the order issued under RCW 36.40.140 stating the emergency and authorizing the expenditure. The filing of such petition will suspend the order until the court determines it propriety.
RCW 36.40.100 somewhat parallels the city statutes listed in item 3 above, but limits any increase in appropriations to revenues from unanticipated federal or state funds. The commissioners must provide notice for two consecutive weeks prior to the meeting at which the supplemental appropriation will be adopted. The statute provides for this same procedure for transfers or revisions within departments. There is no explicit discussion of transfers between departments. We believe that those fall under the emergency provisions of RCW 36.40.140. Finally, there is no county statute that discusses what must be done when an appropriation level in a fund is decreased. Presumably the board or council passes a resolution to that effect with a simple majority.
- Do cities and counties need to have a public hearing to amend the budget?
It may be good public policy, but there is no statutory requirement for cities to have hearing. Counties, however, do need a public hearing for all "emergency" amendments made under RCW 36.40.140.
- May a city use hotel-motel tax funds to pay for the operation of a museum that is owned and managed by a private historical society?
The limitation on using hotel-motel tax revenues for acquiring and/or operating tourism-related facilities is guided by the following definition, as amended in 2007:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
“Tourism-related facility” means: real or tangible personal property with a usable life of three or more years, or constructed with volunteer labor that is: (a)(i) Owned by a public entity; (ii) owned by a nonprofit organization described under section 501(c)(3) of the federal internal revenue code of 1986, as amended; or (iii) owned by a nonprofit organization described under section 501(c)(6) of the federal internal revenue code of 1986, as amended, a business organization, destination marketing organization, main street organization, lodging association, or chamber of commerce and (b) used to support tourism, performing arts, or to accommodate tourist activities.
Prior to the 2007 legislation, hotel-motel tax funds could be used, as interpreted by the attorney general’s office, only for facilities in which the city had an ownership interest. Now they can also be used to fund facilities owned by certain nonprofit organizations, as stated above. As with the amendment to the definition of tourism promotion, the amendment to this definition to add facilities owned by certain nonprofit organizations expires on June 30, 2013.
- If a hotel has part of the building leased out long-term, is the charge for these rooms exempt from the hotel-motel tax?
Yes. The hotel-motel tax (and the sales tax also) only applies to stays of less than one month. RCW 67.28.180 and RCW 82.04.050(2)(f). If, in addition to the basic two percent tax, a city or county levies a "special tax" under RCW 67.28.181(1) it will, of course, not receive these funds either for long-term stays.
- May lodging (hotel-motel) tax revenues may be used to build a public restroom in city park used by tourists?
Yes. Lodging tax revenues may be used for construction and/or maintenance of public restrooms that would be used by tourists. The relevant statute regarding the purposes for which lodging tax revenues may be spent is RCW 67.28.1815, which states as follows:
All revenue from taxes imposed under this chapter shall be credited to a special fund in the treasury of the municipality imposing such tax and used solely for the purpose of paying all or any part of the cost of tourism promotion, acquisition of tourism-related facilities, or operation of tourism-related facilities.
"Acquisition" is defined in RCW 67.28.080(1) to include "construction," and a "tourism-related facility" is defined in RCW 67.28.080(7) to mean:
[R]eal or tangible personal property with a usable life of three or more years, or constructed with volunteer labor, and used to support tourism, performing arts, or to accommodate tourist activities.
It is our opinion that a public restroom in an area used by tourists accommodates tourist activities, for obvious reasons.
The lodging tax statutes prior to 1997 contained a specific provision (the former RCW 67.28.210) for use of these tax revenues by cities with a population under 5,000 for public restroom facilities for the use of visitors. The major overhaul of the lodging tax statutes in 1997, which repealed this provision, actually acted to expand the authority of cities to use lodging tax revenues for this use by employing the statutory language discussed above.
In summary, revenues from the city's lodging tax may be used, in our opinion, for construction of the public restroom in question. Nevertheless, we would recommend seeking the concurrence of the state auditor's office in advance of use of these funds for the purpose in question.
- May local jurisdictions allow lodging tax recipients to use funding for personnel costs?
Yes, the definitions of “tourism promotion” and “tourism-related facility” in RCW 67.28.180 were amended in 2007 to allow local jurisdictions to use lodging tax revenues for the operation of tourism promotion agencies and of special events and festivals designed to attract tourists. Rather strict reporting requirements have been put in place, however. See RCW 67.28.1816.
- Can a city or county spend hotel-motel tax funds to pay for police and public works overtime in conjunction with a festival?
Yes, the new 2007 amendments to chapter 67.28 RCW allow hotel-motel (lodging) tax revenues to be spent on operating festivals. These expenditures for police and public works overtime would fall in that category. There are new reporting requirements, however.
- May the city pay for dinner for councilmembers and planning commission members at a working dinner held within the city?
Yes, this likely is permissible so long as official city business is being conducted during the dinner. It is not required that travel occur before city officials can be reimbursed for meal expenses in all cases.
This is the conclusion in a memo from the Office of the Attorney General, dated May 14, 1987, from James Pharris, to Lee Reaves, Chief Examiner, Office of the State Auditor entitled "Eating and Drinking at Public Expense." As far as we are aware, this is still the position of the Office of the Attorney General.
- May the city or county offer a prize of $100 for the best motto for the city? May a city or county award cash prizes to employees as incentives?
Yes, if the legislative body establishes the amount of the prize, and it is reasonable in view of the goal of the contest. It is not a gift of funds because the city receives value for the rights to the motto, logo, or other product of the contest.
Yes, if such a policy is established by the legislative body. The policy should include a description of the basis on which the city will make the awards, the process by which such awards will be made, and a description of the type of award to which the employee will be entitled.
Note that these payments are considered wages for income tax purposes and are subject to withholding and deductions for social security and Medicare.
- May a city hire a private auditor?
Yes, but it might not prove to be cost effective. RCW 43.09.230 specifies that the annual reports shall be certified by the Office of the State Auditor. Also, RCW 43.09.260 gives the Office of the State Auditor the power to examine all the financial affairs of every public office and officer. Therefore, even if a private auditor has examined the city's financial records and declared them satisfactory, the state examiner has the right to do a full-scale audit and charge the city the full amount for the audit services.
- May a city pay for placement of large flower pots along the sidewalks of a private shopping center?
A city has the authority to beautify the public sidewalks in the commercial district of the city. However, although the beautification purpose is the same, city funds may not be used to enhance the appearance of the private shopping center. The shopping center is responsible for doing its own beautification. Note that hotel-motel tax money may not be used for beautification.
- May a city or county spend municipal funds on Christmas cards?
MRSC's legal staff has generally taken the position that it is probably not an appropriate use of public funds, and that such an expenditure might be questioned by the State Auditor. Spending public funds for this purpose would probably be a violation of Article I, Section 11 of the Washington State Constitution, which provides that public money shall not be appropriated or applied for any religious worship or the support of any religious establishment. Sending Christmas cards is not a proper municipal function and does not accomplish an appropriate municipal purpose.
- May a city or county expend funds to determine why the voters voted as they did in recently rejecting a city property tax levy or other tax increase?
Yes. This would be a proper expenditure of unrestricted general fund revenues.
The proposed expenditure does not violate RCW 42.17.130, which prohibits the use of the "facilities" (including funds) of a public office or agency to support or oppose a ballot proposition, because the ballot proposition in question (the property tax levy) has already been voted upon. Also, the proposed expenditure is neutral as to that proposition.
We are not aware of any other law or constitutional provision the proposed expenditure would violate. It has a proper municipal purpose - to determine why the voters voted as they did, presumably so that the city or county can determine what kind of a property tax levy the voters may in the future be willing to support. It goes without saying that a city or county may expend its funds to decide whether to place a levy before the voters and what that levy should ask for. This proposed expenditure would help the city or county make that decision.
- May cities spend money on hosting and gifts related to sister city visits?
No, this would be an unconstitutional gift of public funds. Although article 8, section 8 of the state constitution permits port districts to do promotional hosting, there is no similar authority for cities. Consequently, a city’s provision of meals, gifts, and the like to private individuals under a sister city program would violate article 8, section 7 of the state constitution, which prohibits cities from making a gift of public funds. An August 30, 1999 Attorney General Memorandum (No. 13), from Mary Jo Diaz, Asst. Attorney General, to Karen Stromme, King County Audit Manager addresses this issue in more detail.
Also, note that not only is a city prohibited from spending its funds on such activities directly, they also cannot do so indirectly by donating moneys to a private organization that is hosting a sister city.
- Can a county take credit cards for fees, and is it legal to then pay a credit card fee to the bank?
Yes, a county may accept credit cards in payment of fees, and, yes, a county may pay credit card fees to the issuing bank, although it may also pass those costs onto the person paying the fee. RCW 36.29.190 states as follows:
County treasurers are authorized to accept credit cards, charge cards, debit cards, smart cards, stored value cards, federal wire, and automatic clearinghouse system transactions, or other electronic communication, for any payment of any kind including, but not limited to, taxes, fines, interest, penalties, special assessments, fees, rates, charges, or moneys due counties. A payer desiring to pay by a credit card, charge card, debit card, smart card, stored value card, federal wire, automatic clearinghouse system, or other electronic communication shall bear the cost of processing the transaction in an amount determined by the treasurer, unless the county legislative authority or the legislative authority of a district where the county treasurer serves as ex officio treasurer finds that it is in the best interests of the county or district to not charge transaction processing costs for all payment transactions made for a specific category of nontax payments received by the county treasurer, including, but not limited to, fines, interest not associated with taxes, penalties not associated with taxes, special assessments, fees, rates, and charges. The treasurer's cost determination shall be based upon costs incurred by the treasurer and may not, in any event, exceed the additional direct costs incurred by the county to accept the specific form of payment utilized by the payer.
Here is an example from Snohomish County of a county deciding to absorb some of those transaction costs: Snohomish County Ordinance No. 02-004.
[See also RCW 36.23.100 - Electronic payment of court fees and other financial obligations - Authorized.]
- May the county waive the filing charges for another governmental entity?
In our opinion, the county cannot do this because of the restriction in RCW 43.09.210, which in relevant part states:
All service rendered by, or property transferred from, one department, public improvement, undertaking, institution, or public service industry to another, shall be paid for at its true and full value by the department, public improvement, undertaking, institution, or public service industry receiving the same, and no department, public improvement, undertaking, institution, or public service industry shall benefit in any financial manner whatever by an appropriation or fund made for the support of another.
This statutory language was discussed and interpreted in AGO 1997 No. 5:
From its context, RCW 43.09.210 might be read as affecting only transfers and transactions within a government (such as the transfer of a tractor from a city's street department to its park department). However, the Supreme Court decided, in State v. Grays Harbor County, 98 Wn.2d 606, 656 P.2d 1084 (1983), that this section also applies to transactions between two different governments. In the Grays Harbor County case, the Court found that, in the absence of some other statute providing otherwise, RCW 43.09.210 required the state to pay the same fees for filing documents with the county auditor that other parties were required to pay, because otherwise the county would, in effect, subsidize state government by providing 'free' services. Thus, RCW 43.09.210 provides a 'background' or 'default' rule that governments pay full value for transfers of property or services, except where the Legislature has otherwise provided.
That opinion later describes the "central purposes" of this statute as "making governments fully accountable for their property and assuring that the resources allocated by law to one government are not used to subsidize the activities of a different government."
- Is there a statutory provision that imposes a fee if a local government is late making a payment on a contract?
Yes. RCW 39.76.010 provides that every state agency and unit of local government must pay interest at a rate of one percent a month on amounts due on written contracts for public works, personal services, goods and services, equipment, and travel whenever the state agency or local government fails to make timely payment. The statute then defines what constitutes timely payment.
There are some exceptions outlined in RCW 39.76.020, such as for intergovernmental contracts.
- Is the sole owner of a business subject to prevailing wage laws?
No. WAC 296-127-026 exempts the owner of a sole proprietorship from the prevailing wage requirements of Ch. 39.12 RCW. These companies are not, however, exempt from the remaining requirements of the statute, including the filing of Intent and Affidavit forms. See L&I's publication on Prevailing Wage Law, at 14.
- Local Preference - May a county or city grant a preference for bids submitted by local vendors or contractors?
A county or city may not grant a local preference for bidders unless there is specific authorization in state law for granting the preference. There is only one preference authorized in state law in relation to the bid law. RCW 39.30.040 was enacted in 1985 and provides that whenever a city or county is required to make purchases from the lowest responsible bidder, it can take into consideration tax revenue it would receive from purchasing the supplies from a source located within the jurisdiction. Tax revenues that may be considered include sales taxes and business and occupation taxes. This preference only applies to purchases of supplies, materials, and equipment, not public works contracts.
- Are there any procedural requirements for a bid protest?
RCW 39.04.105 provides that, if a municipality receives a bid protest, it may not execute a contract for the project with anyone other than the protesting bidder without first providing at least two full business days' written notice of its intent to execute a contract for the project; provided that the protesting bidder submits notice in writing of its protest no later than two full business days following bid opening. Saturdays, Sundays, and legal holidays are not counted.
Beyond that, there are no statutory requirements. If a city or county does not have any procedure regarding bid protests, it should allow a bidder to protest the award to the appropriate official or body, who can then make a determination whether the protest is valid.
If the city or county rejects the protest, the objecting bidder, to preserve the protest, will have to bring suit for injunctive relief in superior court before the city or county and the low bidder sign the contract. BBG Group, LLC v. City of Monroe, 96 Wn. App. 517, 521 (1999).
- Is it legal to piggyback onto a bid from a municipality from another state?
Yes, a city or county of this state may enter into an interlocal agreement with "any political subdivision of another state," which would include a municipality. See definition of "public agency" in RCW 39.34.020. Piggybacking, which is a form of interlocal agreement, with a municipality of another state would be permissible as long as the municipality in the other state has complied with the requirements of RCW 39.34.030(5)(b).
- May a city contract with a county for resurfacing work on city streets without calling for bids?
Yes. RCW 35.77.020 authorizes a city to contract with the county for repair of city streets on such terms and conditions as may be mutually agreed upon. However, under RCW 35.77.030, such work performed by a county on city streets that exceeds $10,000 must be done by contract, except in cases of emergency or unless after advertisement and solicitation of bids it appears that bids are unobtainable or that the lowest bid exceeds the amount for which such construction can be done by means other than contract.
Also, RCW 47.24.050 provides that a city council may authorize the county to perform any construction, repair, or maintenance needed for city streets. The city's payment for the work is to be based on the actual cost, and the payment received by the county is to be deposited in the county road fund.
- May a city or county reform a defective low bid when the bid contains an error (bid would be low bid regardless of error)?
No. The choices available to the city or county are:
- Allow the bidder to escape performance under the defective bid by withdrawing the bid. The city or county would then award the contract to the next lowest bidder. (If the city or county was contacted immediately, the error was apparent, and there is no detriment to the city or county, the bidder would not be liable to the city or county);
- If the bidder is willing to proceed with his bid regardless of the error (or if the bidder takes action inconsistent with withdrawal of the bid), the city or county may award its contract to the low bidder; or
- Reject all bids.
The city or county may not now reform the bid, by correcting the error and allowing the corrected bid to be considered along with the other bids. Courts will generally refuse to reform a bid or contract, as to do so would be contrary to the general concept of competitive bidding.
However, if the bid solicitation used the WSDOT Standard Specifications for Road, Bridge, and Municipal Construction, Sec. 1-03.1 of that document provides that the contracting agency will check the bids for correctness of extensions of the prices per unit and the total price; it provides:
If a discrepancy exists between the price per unit and the extended amount of any bid item, the price per unit will control. The total of extensions, corrected where necessary, will be used by the Contracting Agency for award purposes and to fix the amount of the contract bond.
- May a city or county enter into a contract for a public works project with a contractor who is not licensed with the state?
No. RCW 39.06.010 prohibits a city or county from executing a contract with a contractor who is not registered or licensed as required by the laws of the state.. This is true regardless of whether the contract is required to be let after a call for public bids or not.
- Must cities and counties pay their public contract bills within a certain time period to avoid paying interest on the unpaid bill?
Yes. RCW 39.76.011(1) states that interest is due on unpaid public contracts at a rate of one percent a month if not paid within 30 days. This applies to counties, cities, and towns for all types of contracts, including personal services, goods and services, public works, travel, etc.
- May a city or county ask for the hourly rate for engineering firms in their announcement for a job?
No. The city or county must request statements of qualifications from engineering firms pursuant to Ch. 39.80 RCW. However, the city or county may not consider price or cost in determining which firm is the most highly qualified. Price and cost may be considered only after the most qualified firm has been selected, at which time negotiations may take place over price. Therefore, asking for the hourly rate before the most qualified firm has been selected is not allowed.
- What is the required advertising period for a public works construction project for cities?
RCW 35.23.352(1) requires cities other than first class cities to publish a notice calling for sealed bids for the project in their official newspaper or a newspaper of general circulation most likely to bring responsive bids at least 13 days prior to the last date upon which bids will be received .
First class cities have no required advertising period under state statutes. Their own municipal codes will govern their advertising procedures.
- Do bid requirements apply to contracts for services?
As a result of 1994 legislation, competitive bidding for contracts for services is no longer required for counties and cities, though first class cities and code cities over 20,000 population had not been required previously to do so. However, when contracting for architectural and engineering services, the procedures in chapter 39.80 RCW must be followed.
- What should be in the advertisement for a city public works project?
The advertisement in the newspaper should include, as a minimum, the following items:
1. Title of project.
2. Nature and scope of the work to be performed. Materials and equipment to be furnished.
3. Statement of mandatory contractor criteria and notice of any supplemental criteria under RCW 39.04.350.
4. Where contract documents (plans and specifications) may be reviewed and/or obtained, including the URL of any electronic posting.
5. Cost, if any, to obtain a set of contract documents, or instructions for downloading or printing electronic documents.
6. The time after which bids will not be received.
7. The place, date, and time set for opening of the sealed bids.
8. Requirements for an accompanying bid bond.
9. Statement that the city retains the right to reject any and all bids and to waive minor irregularities in the bidding process.
- Must the bid opening for a public works project be public?
The bidding statutes do not specifically require that bid openings be public. However, many cities have ordinances that require all bid openings be public, and most bid packets contain information sheets stating that bids will be opened at a certain time and place. Opening bids in public helps assure all parties that the procedures are fair.
- Must cities and counties require public works contract bidders to submit the names of subcontractors for a public works contract on which they are bidding?
Yes, but only for certain contracts. RCW 39.30.060 requires that bid invitations for contracts estimated to cost more than $1,000,000 require the names of the subcontractors with whom the bidder, if awarded the contract, will subcontract for performance of the work of: HVAC (heating, ventilation, and air conditioning); plumbing as described in chapter 18.106 RCW; and electrical as described in chapter 19.28 RCW. Or, the contractor may name itself for this work.. The contractor must submit these names as part of the bid or within one hour of the published bid submittal time. Failure of a bidder to comply renders the bid nonresponsive.
- Who has the authority to negotiate a contract on behalf of the city, the council or the mayor?
There is no statute that clearly defines who has contract negotiation authority. Since a city council has the ultimate authority to approve city contracts, the council also has the power to deal with the details of contracts. Though many councils frequently authorize the mayor/city manager/administrator to conduct contract negotiations, there is no statute that prohibits a council from taking over that role.
- Must the bid specifications for a public works project state that prevailing wages must be paid and that a performance bond be provided if the bid is awarded?
Under RCW 39.12.030, bid specifications for all public works projects must state the prevailing wage that is to be paid to workers. There is no similar statutory requirement of notification of the requirement that a performance bond be provided on the project. However, as a practical matter, that should also be stated in the bid specifications.
- If the lowest bidder on a project on the small works roster withdraws his bid, may a city or county use the next lowest bidder?
Yes, this does not violate the bid law in any way. It is not necessary to start over soliciting bids if there is another available bidder. The city or county may contact the next low bidder and award the contract. The city or county should document that the low bidder withdrew voluntarily.
For more on this topic, see our "Purchasing and Bidding" page.
- If a city receives bids for a public works project but none are responsive, may the city proceed to negotiate with a contractor without a further call for bids?
Yes. RCW 35.23.352(1), which applies to all cities other than first class cities and to towns, provides in part as follows:
If no bid is received on the first call the council or commission may readvertise and make a second call, or may enter into a contract without any further call or may purchase the supplies, material or equipment and perform the work or improvement by day labor.
The issue here is whether receiving bids that are not responsive is equivalent to receiving no bids. According to AGO 1977 No. 18, it is equivalent. Footnote 1 to that opinion states in relation to the above language in RCW 35.23.352: "It goes without saying, we think, that a bid which, by its terms, is not responsive to the call is, in reality, no bid at all."
The statutes governing first class cities does not address this issue; those cities may follow the approach of this statute.
- Does a city have the right to reject all bids?
Yes. Usually, the bid specifications indicate that the city reserves the right to reject any and all bids. Also, RCW 35.23.352 (which applies to cities other than first class cities and to towns) indicates that the city council has the right to award the contract to the lowest responsible bidder, or to reject any and all bids. This would alson be an option for first class cities.
- If all the bids come in over the amount that the city or county has budgeted for a project, does that make the bids nonresponsive so that the city or county can negotiate with the bidders?
No. A bid that is over the amount estimated for the project is not a nonresponsive bid. A responsive bid is defined as one which meets the material terms of the invitation for bids in all material respects when judged on its face. But, price is not one of the specifications in a call for bids and so the fact that the bids are higher than the city or county estimated does not make the bids nonresponsive.
- Is a performance bond required when a city is undertaking a public works project in an emergency situation where it is avoiding competitive bidding procedures?
Unless it is an "extreme emergency" (e.g., fire, earthquake, flood) that falls under the provisions of Ch. 38.52 RCW, a performance bond is probably still required. The requirement of a performance bond in RCW 39.08.010 is separate from competitive bidding requirements in RCW 35.23.352 or RCW 35.22.620. The exemption from competitive bidding requirements in RCW 39.04.280(1)(e) in the event of an emergency does not address performance bonds. However, for extreme emergencies, RCW 38.52.070(2) provides:
Each political subdivision is authorized to exercise the powers vested under this section in the light of the exigencies of an extreme emergency situation without regard to time-consuming procedures and formalities prescribed by law (excepting mandatory constitutional requirements), including, but not limited to, budget law limitations, requirements of competitive bidding and publication of notices, provisions pertaining to the performance of public work . . . .
The emphasized language probably includes the requirement of a performance bond under RCW 39.08.010.
Nevertheless, as a practical matter, even if it does not rise to the level of an emergency situation addressed by chapter 38.52 RCW, a situation may call for such immediate action that a city would find it prudent to forgo the requirement of a performance bond if procuring it would cause a delay that would result in further damage or costs that the city would not wish to incur. The ultimate consequence of failing to require a performance bond is potential liability for the contractor's debts with respect to the project (e.g., payments to workers and suppliers). RCW 39.08.015. A city may be willing to incur that risk rather than delay a project in the event of an emergency. Also, it may well be the case that, if a city avoids requiring performance bonds even in the event of an extreme emergency that would qualify under the provisions of chapter 38.52 RCW, it still may be subject to potential liability under RCW 39.08.015. So, it would appear that common sense and an assessment of relative risks should govern the decision in an emergency situation whether or not to require a performance bond.
- May a city or county comply with affirmative action plan requirements in federal contracts without violating Initiative 200?
Affirmative action was effectively abolished in Washington State by Initiative 200 (codified as RCW 49.60.400), passed by the voters in 1998. This statute contains the following exemption:
This section does not prohibit action that must be taken to establish or maintain eligibility for any federal program, if ineligibility would result in a loss of federal funds to the state.
There are no court cases that have addressed this exemption. However, the state attorney general's office has analyzed this exemption in an "Issue Paper" on Initiative 200, stating:
Section 1(6) [RCW 49.60.400(6)] provides that the Initiative "does not prohibit action that must be taken to establish or maintain eligibility for any federal program, if ineligibility would result in a loss of federal funds to the state." Federal agencies often require states to have "affirmative action" programs, but most allow discretion in how to operate those programs. Rather than specifying requirements, the federal law will call for state agencies to submit, as part of a funding request, a proposal describing how the state would meet the general "affirmative action" program requirements. The federal agency then approves or disapproves the program. On rare occasion, federal law will vary the nature of requirements depending on whether a certain component is prohibited by state law. Thus, the interaction of federal law and Initiative 200 could be somewhat complex for agencies who must submit proposals which will satisfy federal funding requirements without overstepping any limits imposed by Initiative 200. The Initiative imposes two conditions to actions "excused" under this subsection: (a) the action "must be taken" to establish or maintain eligibility for a federal program, and (b) ineligibility would result in a loss of federal funds. The limits of this exception to the Initiative's "no-preference" rule, then, depend on whether federal funds would be lost if the state agency's practice were changed. In some cases, the agency's current practices are part of a contract with a federal agency, presumably subject to enforcement under contract principles. In other cases, federal law may provide the federal government with various enforcement mechanisms, including loss of federal funds. Thus, there may be arguments about the likelihood of loss of federal funds with regard to various programs. The Initiative also raises questions as to whether state agencies should look strictly to the letter of federal law in deciding what action "must be taken," or might also assess such factors as a federal agency's administrative interpretations of the law and the likelihood of impacts on federal funding. There may be occasions in which no federal statute explicitly requires "affirmative action" but where the administering federal agency contends that affirmative action measures are required. In such a case, the state agency must determine whether to look to the agency's policies or strictly to the letter of federal law.
So, if an affirmative action plan is required of a city or county through a federal program to establish or maintain eligibility for that program and eligibility for the program is necessary for the receipt of federal funds, then establishing such a plan would not violate Initiative 200 (RCW 49.60.400). The city or county needs to find out if and where (and probably under what authority) an affirmative action plan is required by a federal program in which it is participating.
- What restrictions, procedures, etc. apply when a port wants to acquire real property?
The only restrictions that apply to a port acquiring real property are that the port should not, based on article 8, § 7 of the state constitution, pay more than the property is worth, and should not purchase the property by mortgage or contract lasting more than 20 years. The latter restriction is based on the general grant to port districts of authority to purchase property in RCW 53.08.090, which provides in part as follows:
A port district may acquire by purchase, for cash or on deferred payments for a period not exceeding twenty years, or by condemnation, or both, all lands, property, property rights, leases, or easements necessary for its purposes . . . .
- Is a purchase by a city or county of real property through the condemnation process subject to the real estate excise tax?
No. RCW 82.45.010(3)(g) specifically exempts transfers of property through condemnation proceedings from the definition of "sale" for purposes of the real estate excise tax.
- Is a city or county exempt from the real estate excise tax when purchasing real property?
No. A sale of city or county real property is exempt from the real estate excise tax because such a sale is not included within the definition of "sale "for real estate excise tax purposes. However, in 1993, the legislature eliminated the same exemption for purchases of real property by a city, county, or other governmental entity. Purchases of real property (other than those by condemnation) by a city or county are thus subject to the tax.
- On what is the real estate excise tax based?
The real estate excise tax is levied on all sales of real estate. The amount of the tax is based on the full selling price, including the amount of any liens, mortgages, and other debts given to secure the purchase.
- What cities and counties can levy the second quarter percent of the real estate excise tax (REET2)?
Counties that are required or have chosen to plan under the Growth Management Act (GMA) and the cities located in them. RCW 82.46.035(1).
- Does a city or county need a vote of the people in order to levy the second quarter percent of the real estate excise tax (REET 2)?
It depends. If the city or county is required to plan under the Growth Management Act, then only an affirmative vote of the legislative body is needed to levy this tax. However, if the city is located in a county that has chosen to plan under GMA, this tax may be levied only "if first authorized by a proposition approved by a majority of the voters." RCW 82.46.035(2). Only cities planning under GMA may levy this tax.
- How and when can a city that is planning under the Growth Management Act (GMA) and that has a population of 5,000 or less spend its real estate excise tax revenues?
The receipts from the first quarter percent (REET 1) can be spent on "any capital purpose identified in a capital improvements plan and local capital improvements, including those listed in RCW 35.43.040." RCW 82.46.010(2). RCW 35.43.040 lists projects for which local improvement districts (LIDs) may be formed and includes everything from street projects to parks to sewers to swimming pools. For a complete list, consult the statute.
The second quarter percent (REET 2) cannot be spent until the city or county has completed the capital facilities element of its comprehensive plan. This part of the tax has more limited uses. It can only be spent on street projects, water and sewer projects, and parks projects (excluding the acquisition of land). RCW 82.46.035(5).
- When and how can a city or county that is planning under the Growth Management Act (GMA) and that has a population of over 5,000 spend its real estate excise tax revenues?
Revenues from the first quarter percent (REET 1) may be spent only on capital projects in a capital facilities plan element of a comprehensive plan. RCW 82.46.010(2). RCW 82.46.010(6) lists these projects and the list seems to include everything a city or county might ever put in a capital facilities element, including the acquisition of land for parks. Since the projects must be in the capital facilities plan, obviously, the plan must be complete before any REET funds can be spent.
Like REET 1 revenues, those from the second quarter percent of the real estate excise tax (REET 2) cannot be spent until the capital facilities element is finished. Allowable expenditures are street projects, water and sewer projects, and parks projects (excluding the acquisition of land). RCW 82.46.035(5).
- When and how can a city or county (of any size) that is not planning under the Growth Management Act spend its real estate excise tax revenues?
The receipts from the first quarter percent (REET 1) can be spent on "any capital purpose identified in a capital improvements plan and local capital improvements, including those listed in RCW 35.43.040." RCW 82.46.010(2). RCW 35.43.040 lists projects for which local improvement districts (LIDs) may be formed and includes everything from street projects to parks to sewers to swimming pools.
- Can the real estate excise tax be levied even though the city or county is not yet allowed to spend it?
Yes. The tax can be levied and placed in a municipal or county improvements fund until the city or coutny completes the capital facilities element of its comprehensive plan.
- Can cities and counties use real estate excise tax funds for planning?
Cities and counties cannot use these funds for planning in the sense of developing a capital facilities element or a capital improvements plan. However, MRSC has advised that cities and counties can use these funds for design costs, engineering costs, surveys, etc. for specific projects in their capital facilities element or capital improvements plan. Funds from the second quarter percent (REET 2) can only be used in conjunction with street, water, sewer, and parks projects. RCW 82.46.035(5).
- Can real estate excise tax funds be used for maintenance?
Only if it's a major maintenance project in a capital facilities element or capital improvements plan. Sometimes it's hard to tell if a project qualifies. Painting is almost certainly not an accepted use. Putting a new roof on a building would probably be a permitted use. If the project is considered a "public work" for bidding purposes, then REET funds can be used. The second quarter percent (REET 2) can only be used for street, water, sewer, and parks major maintenance because its uses are limited to those kinds of projects.
- May a city or county use real estate excise tax revenues to pay debt service on a councilmanic bond?
Yes, as long as the project is one for which these revenues may be used. For example, revenues from the second quarter percent (REET 2) can only be spent on street, water, sewer, and parks projects. Therefore, these revenues could not be used to pay debt service on a new city hall or county courthouse. Note that if the real estate excise tax receipts fall short of the amount needed to pay debt service, the general fund must make up the difference.
- May a city may use the first one-quarter percent real estate excise tax (REET) revenues to contribute to the improvement of a school district stadium/athletic field that the city would use for certain city recreational activities?
Yes, under certain circumstances. The relevant statute, RCW 82.46.010(2) states as follows:
The legislative authority of any county or any city may impose an excise tax on each sale of real property in the unincorporated areas of the county for the county tax and in the corporate limits of the city for the city tax at a rate not exceeding one-quarter of one percent of the selling price. The revenues from this tax shall be used by any city or county with a population of five thousand or less and any city or county that does not plan under RCW 36.70A.040 for any capital purpose identified in a capital improvements plan and local capital improvements, including those listed in RCW 35.43.040.
After April 30, 1992, revenues generated from the tax imposed under this subsection in counties over five thousand population and cities over five thousand population that are required or choose to plan under RCW 36.70A.040 shall be used solely for financing capital projects specified in a capital facilities plan element of a comprehensive plan and housing relocation assistance under RCW 59.18.440 and 59.18.450.
To comply with the expenditure restrictions in this statute, the stadium/athletic field would need to be in the capital facilities plan element of the city's comprehensive plan. Nothing appears to prohibit a city from including a school stadium/athletic field in their comprehensive plan, either as part of the school district's capital facilities plan element which could be adopted by reference into the city's comprehensive plan or as a specific capital project in the city's capital facilities plan element. In fact this would be necessary if a jurisdiction were to impose impact fees for schools. RCW 82.02.050(4) provides that
Impact fees may be collected and spent only for public facilities defined in RCW 82.02.090 which are addressed by a capital facilities plan element of a comprehensive land use plan adopted pursuant to the provisions of RCW 36.70A.070 or the provisions for comprehensive plan adoption contained in chapter 36.70, 35.63, or 35A.63 RCW.
"Public facilities" includes school facilities. RCW 82.02.090(7). Also, RCW 82.02.050 contemplates that a city or county could include facilities that may be the responsibility of a special district:
If the capital facilities plan of the county, city, or town is complete other than for the inclusion of those elements which are the responsibility of a special district, the county, city, or town may impose impact fees to address those public facility needs for which the county, city, or town is responsible.
If this requirement of inclusion of the facility in the city's capital facilities plan element or in the school district's plan element adopted by reference by the city is met, these REET revenues could be used for this facility if the expenditure has a city purpose. In AGO 1988 No. 19, the attorney general's office addressed whether REET revenues may be used by a county to fund capital improvements on property owned by a city. Although, this opinion addressed by pre-GMA version of RCW 82.46.010, the opinion still applies to the issue presented in this inquiry. That opinion states:
We believe the critical question, under both the relevant statutes and the state constitution, is whether the capital improvement at issue is to be constructed or operated for a county purpose. The statutes do not establish a per se requirement that the improvement itself or the underlying real property be owned by the county. Where neither factor is present, however, it is highly problematical whether the improvement is truly intended to serve a county purpose. Absent any additional facts indicating that such a purpose would be served by the capital improvements referred to in your question, we conclude that the funding of such improvements would not be authorized.
Since the stadium/athletic field would be used for city recreational programs, it would appear that there exists the requisite city purpose.
We recommend that the city and the school district enter into an interlocal agreement that identifies the city's contribution to the improvement of the facility and what the city's use of the facility will be.
- For what purposes can the .09 rural county sales tax authorized in RCW 82.14.370 be used?
RCW 82.14.370 allows a rural county to levy a sales and use tax of not more 0.09 percent. This tax is not an additional tax. A portion of the 6.5 percent state sales and use tax is paid to the eligible counties.
Section 3(a) states:
Moneys collected under this section shall only be used to finance public facilities serving economic development purposes in rural counties and finance personnel in economic development offices. The public facility must be listed as an item in the officially adopted county overall economic development plan, or the economic development section of the county's comprehensive plan, or the comprehensive plan of a city or town located within the county for those counties planning under RCW 36.70A.040. For those counties that do not have an adopted overall economic development plan and do not plan under the growth management act, the public facility must be listed in the county's capital facilities plan or the capital facilities plan of a city or town located within the county.
Public facilities" are defined in (3)(c)(i) as: "Public facilities" means bridges, roads, domestic and industrial water facilities, sanitary sewer facilities, earth stabilization, storm sewer facilities, railroad, electricity, natural gas, buildings, structures, telecommunications infrastructure, transportation infrastructure, or commercial infrastructure, and port facilities in the state of Washington.
There are also reporting requirements in (3)(b):
Each county collecting money under this section shall report, as follows, to the office of the state auditor, within one hundred fifty days after the close of each fiscal year: (i) A list of new projects begun during the fiscal year, showing that the county has used the funds for those projects consistent with the goals of chapter 130, Laws of 2004 and the requirements of (a) of this subsection; and (ii) expenditures during the fiscal year on projects begun in a previous year. Any projects financed prior to June 10, 2004, from the proceeds of obligations to which the tax imposed under subsection (1) of this section has been pledged shall not be deemed to be new projects under this subsection. No new projects funded with money collected under this section may be for justice system facilities.
Note that in the past a number of counties have spent the money for capital projects that have no economic development purpose, such as a court house and the auditor does check to see how these funds are being spent.
- Is labor on street project subject to sales tax?
No. Although the retail sales tax is imposed upon each retail sale in this state (RCW 82.08.020(1)), the terms "sale" and "sale at retail" and "retail sale" exclude the charge made for labor and services rendered in respect to the building, repairing, or improving of any street, place, road, highway, easement, right-of-way, mass public trans-portation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state and which is to be used primarily for foot or vehicular traffic.
- What is the streamlined sales tax project?
This is a national effort by a coalition of states to make sales and use taxes simpler and more uniform. It took effect in Washington state on July 1, 2008 allowing collection of sales and use taxes on remote sales (such as the Internet).
It affects local jurisdictions very differently depending on the composition of taxable activity within their jurisdiction. Some cities gained additional revenue others lost revenue and some were relatively unaffected.
For more information, see AWC's Streamlined Sales Tax Web page.
- Must sales tax be paid on construction of pathways in a park project?
Yes. RCW 82.04.050(8) provides an exemption from the sales tax for labor and services used for a sidewalk or pedestrian path within a street right-of-way. Pathways within a park are not exempt from sales tax.
- Request for clarification regarding a city or county's responsibility for paying sales or use tax on items purchased over the Internet, especially given the so-called "Internet Tax Freedom Act."
By law, consumers who purchase a product out-of-state, that is taxable in Washington, are required to pay a use tax to DOR in an amount equal to the difference between the amount of the sales tax they actually paid in the other state and the amount they would have paid if they had purchased that item in their home town. (Never mind that the product may not have been available in their home town).
As we all know, consumers do not do this (except in the case of vehicles, where they have to pay the use tax to get a license). Most local governments are aware, however, that even though their citizens do not, their city or town must pay a use tax on items purchased in stores in Idaho (where the sales tax is six percent) and in Oregon (where there is no sales tax). They also must pay use taxes on mail order sales from out-of-state. It may well be their awareness was a result of a DOR audit.
Ignorance (or confusion) reigns, however, on Internet purchases. In 1998, Congress passed the Internet Taxation Freedom Act, which put a moratorium on new taxes on Internet activity. Note the word "new." This moratorium does not apply to existing sales taxes because they are not "new." It does apply to taxes on Internet access (the monthly fee users pay to companies like America Online to connect to the Internet), band width and "bit" taxes. Even though individuals are not remitting use taxes on Internet purchases, local governments must. If your city or county does not remit them, you will owe back taxes and interest if your failure to pay is discovered in an audit.
- What taxes does the city pay in connection with swimming pools?
The examples in WAC 458-20-189(9) are helpful on swimming pools and other recreation activities.
First, is the pool a governmental or an enterprise activity? An enterprise activity is one where user fees cover more than 50 percent of the direct and indirect costs as defined in WAC 458-20-183(2)(d) and (h).
If it is a governmental activity, the only tax due is sales tax on admission fees. Physical fitness classes (here, it would be water exercise classes) are considered a "retail sale" (RCW 82.04.050(3)(g)), but municipalities' physical fitness classes are exempt from the sales tax. RCW 82.08.0291.
If it is an enterprise activity, all revenue is subject to the B&O tax. Retailing B&O must be paid on all revenue except lessons. That includes the exercise class. Lessons are considered a service and so B&O tax must be remitted at the service rate. WAC 458-20-189(4)(a)(v). Sales tax must be collected on admissions.
- Can the rural county sales tax in RCW 82.14.370 be applied to infrastructure planning such as a capital facilities plan (CFP) update?
These funds cannot be used for general infrastructure planning. RCW 82.14.370(3)(a) states that the funds must be used for public facilities that are listed in your economic development plan:
(3)(a) Moneys collected under this section shall only be used to finance public facilities serving economic development purposes in rural counties and finance personnel in economic development offices. The public facility must be listed as an item in the officially adopted county overall economic development plan, or the economic development section of the county's comprehensive plan, or the comprehensive plan of a city or town located within the county for those counties planning under RCW 36.70A.040. For those counties that do not have an adopted overall economic development plan and do not plan under the growth management act, the public facility must be listed in the county's capital facilities plan or the capital facilities plan of a city or town located within the county.
The types of public facilities are spelled out in RCW 82.14.370(3)(c):
(i) "Public facilities" means bridges, roads, domestic and industrial water facilities, sanitary sewer facilities, earth stabilization, storm sewer facilities, railroad, electricity, natural gas, buildings, structures, telecommunications infrastructure, transportation infrastructure, or commercial infrastructure, and port facilities in the state of Washington.
The planning asked about here does not qualify as a public facility under the above definition. Of course, once you have decided on a project, you are going to have "planning" costs for that project in terms of design costs, engineering costs, surveys, etc., and these funds may be spent on those costs.
We have opined that the uses of real estate excise tax receipts are similarly limited. They cannot be used to pay for developing a comprehensive plan or CFP.