The proposed Capital City District is a tool to help revitalize downtown Olympia without raising any local or state taxes.  Olympia is a company town.  Unfortunately, that company (state government) doesn’t pay property or B&O taxes.

How would the Capital City District work?  Within the district, one cent of the sales tax currently collected by the state would be retained by the city to be spent on revitalizing downtown by making public investments to attract private capital to redevelop downtown.   

What would be the boundaries of the district?  The City Council and ultimately the Legislature, will decide on the boundaries.  OLY 2012 is suggesting that the District extend from the southern edge of the State Capital Campus to the tip of the Port peninsula and from Eastside Street to West Bay Drive.   This is the area frequented by Legislators and visitors to the State Capital.

How much money will this proposal generate?  Once the City decides on some preliminary boundaries, the State Department of Revenue can provide information on sales tax revenues.   The district is intended to capture ongoing sales tax revenue as well larger lump sums generated by public and private construction projects.  In the early years, the ongoing sales tax revenue will be relatively modest, so it will be important to focus on investments that will increase the base of ongoing revenue.   In other words, the City needs to spend money to make money. 

Why shouldn’t this proposal apply to all of Olympia?  The state faces its own fiscal challenges.   A highly targeted proposal keeps the fiscal impact on the state relatively affordable.  It also highlights the special relationship between the state and its Capital City.

What will the city buy with the money?  As we’ve noted above, in the early years it will be crucial to spend money on measures designed to spur private investment in downtown.   Increased private investment will improve the tax base for property, sales and B&O taxes.  It will increase the amount of revenue produced by the Capital City District.   In Oly 2012’s discussions with stakeholders several barriers to investment have been identified.  These include:

• The lack of parking garages.
• The city’s limited capacity to facilitate economic development projects.
• Limited consulting architect and design resources to integrate new construction and redevelopment into the city’s historic core and existing business community with a minimum of disruption.
• Limited ability to replicate the fast track permitting used for the Cherry Street project.  
• Environmental clean up, structured parking and infrastructure costs that drive up the cost of construction downtown.

These issues are the beginnings of a list for the Council to consider as it devises its investment strategy. 

Does the Capital City District preclude the City from receiving other state funding?  No.  The district is intended to address the special challenges faced by the City.  As with any other city in the state it would be eligible for grants and other funding.

Can these funds be bonded?  Typically good fund sources for bonding are ongoing, regular revenues.  As noted above, in the early years the ongoing revenue stream is likely to be relatively modest.  As the district’s level of private economic activity grows, the city’s revenue from the special district revenue and regular revenues within the district will grow, providing an excellent opportunity for funding public infrastructure projects with bonds. 

What is the impact of including the Port in the district?  Including the Port property in the district does not cost the Port anything.  It allows the downtown as a whole to benefit from sales tax generated from construction and other business activity in the Port area.

Can the Capital City district be used to purchase the isthmus and convert it to a park?  In the short run, the District needs to concentrate on the mantra “ spend money to make money”.   Over the years the City has invested in a number of publicly owned downtown amenities.  The results show that these public investments by themselves have not been sufficient spur the development of housing and a more diverse economy.   In the long run, when the tax base is improved, the City should have capacity to include park, cultural and low cost housing projects in its priorities for Capital City District funding.  Oly 2012 urges the city Council to look at the needs of Downtown as a whole in setting its priorities.  This would argue for a number of affordable projects rather than one “big bang” project that would generate no ongoing property, B&O or sales tax revenue.

What does the City need to do to establish the district?  Creating the District will require action by the Legislature.  The first step in the process is for the City to authorize the effort needed to draft the legislation and all the necessary supporting technical and lobbying work.