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House Finance hears bill tightening rules for local tax-increment financing
Summary
Staff and the prime sponsor described substitute HB 2,451 as a negotiated update to the state's tax-increment financing (TIF) law that adds conditions on which parcels may be included in increment areas, requires expanded project analyses and impact mitigation, and preserves prior TIFs established before June 2, 2026.
House Finance Committee members heard briefing and testimony on substitute House Bill 2,451 on Feb. 6, 2026, a measure that would add procedural and substantive conditions to local tax-increment financing (TIF) designations.
Elizabeth Friend, staff to the Local Government Committee, told the committee the bill would bar an ordinance from including areas inside a proposed increment area that already have the public improvements required by private development unless the local government demonstrates the listed public improvements are necessary for private projects currently under construction or with permit applications. The bill also sets an earlier termination of an increment area either 25 years after first tax-allocation revenue collection or when tax-allocation revenues reach a maximum amount identified in the authorizing ordinance.
Friend said the bill strengthens project-analysis requirements, mandating a statement of objectives, a prioritized list of public improvements showing each improvement's nexus to encouraging private development, estimated funding sources reasonably expected to be completed within seven years, and consultation with any impacted taxing districts that must receive estimates of revenue impacts.
Under the proposal, if a project analysis shows an increment area would impact at least 20% of a taxing district's assessed value, the local government must negotiate a mitigation plan with affected public hospital districts, fire protection districts or regional fire service authorities; if parties cannot agree, they must proceed to arbitration. The bill allows mediation as an earlier step in disputes and requires written notice to taxing districts at least 180 days before submitting the project analysis.
Representative Divina Duer, the bill's prime sponsor, described HB 2,451 as a "trailer" to earlier TIF legislation and said the measure reflects extensive negotiated changes, including explicitly adding public-safety facilities to the definition of public improvements and an MFE-related fix that exempts cities that created TIFs before June 2026.
Supporters at the public hearing included the Association of Washington Cities, the Port of Seattle and the Washington Fire Chiefs Association. Candice Bock (Association of Washington Cities) and John Flanagan (Port of Seattle) urged the committee to advance the bill, citing negotiated hold-harmless language and collaboration provisions that would provide mitigation tools to disproportionately impacted taxing jurisdictions. Dylan Doty of the Washington Fire Chiefs Association said the bill improves early engagement and provides arbitration as a last-resort backstop to protect fire and public-safety services.
A preliminary fiscal note presented by staff attributed no net impact to state revenue but estimated roughly $100,000 in expenditures in fiscal year 2027 and about $75,000 in the next biennium for manual updates, training and an increased number of county levy audits.
The committee concluded the public hearing and accepted the briefing; no formal action on HB 2,451 was recorded in the transcript for this meeting.
The committee will next consider technical amendments and further stakeholder comments as the bill moves through the process.
