Lease of Unused Highway Land or Air Space.

The Washington State Department of Transportation (WSDOT) may rent or lease any lands, improvements, or air space above or below lands held for highway purposes that are not needed at the time of rental or lease.  

The rental or lease:

1. must be on terms and conditions determined by the WSDOT;
2. is subject to zoning requirements that apply;
3. includes lands used or to be used for limited access and conventional highways if they are not needed for the period of rental or lease; and
4. in the case of bus shelters provided by a local transit authority that include commercial advertising, the WSDOT may charge the transit authority only for commercial space.

 
All funds paid to the state for rental or lease of WSDOT lands, improvements, or air space must be deposited in the WSDOT's Advance Right-of-Way Revolving Fund, except for funds that are subject to federal aid reimbursement and funds received from the rental of capital facility properties, which must be deposited in the Motor Vehicle Fund.

The WSDOT's Right of Way Manual, which describes agency policy for real estate transactions, requires that economic rent be paid for all leases, except in the following cases:

• A tenant of an acquired improvement receives the same rental rate in effect at the time of acquisition for 90 days.
• Property is leased for a highway purpose or when economic rent can be justifiably offset by benefits to the motoring public that equal rent value.
• A minimum rate is established when economic rent is less than WSDOT's costs to perform management activities through the term of the lease.

Limited Property Lease Authorization.

In 2022 the WSDOT was authorized to establish a limited project for community purposes to address past impacts to historically marginalized populations within impacted local communities resulting from the construction of Interstate 90 (I-90) and the United States Route 395 (US 395) North Spokane Corridor project. 

The WSDOT was authorized to lease property eligible for lease, which includes the property that was purchased as part of the I-90 Corridor project and the US 395 North Spokane Corridor, to a community-based non-profit corporation or to the Department of Commerce, to be used for the following community purposes:

• housing and ancillary improvements;
• parks;
• community revitalization projects;
• enhanced public spaces, such as trails and public plazas; and
• projects that provide enhanced economic development in the impacted community.

The lease for this limited project was authorized to be for less than economic rent, and to require the lessee to maintain the premises as part of the consideration provided to the WSDOT by the lessee. 

Federal Aid Highways and Federal Restrictions.

Under federal regulation, current fair market value must be charged for the use or disposal of property a state acquires with federal aid highway funding, subject to certain exceptions.  When a grantee shows that an exception to the fair market value requirement is in the overall public interest based on social, environmental, or economic benefits, and a method is provided for ensuring that the public will receive the benefit used to justify the less than fair market value disposal, an exception may be granted.  

Exceptions to the requirement for charging fair market value must be submitted in writing to the Federal Highway Administration.

Transfer or Lease of State or Local Agency Property.

Any state, municipality, or political subdivision with authority to dispose of surplus property may transfer or lease property to any public, private, or non-governmental body on any terms, including as a no-cost transfer, if the property is to be used for affordable housing and related facilities for households at or below 80 percent of the local median income, adjusted for household size.  Such a transfer must include a requirement that the property will be used for a designated public benefit, as well as remedies if the property is not used for the designated purpose.  Government entities using the authority to dispose of public property must enact rules to do so.

Community Purpose Lease Agreement.

For the purpose of determining adequate consideration for a lease of lands, improvements, or air space not needed at the time of rental or lease, the WSDOT may incorporate identified social, environmental, or economic benefits to be provided by a lessee that is a public agency, special purpose district, or community-based non-profit organization as a component of the consideration to be provided by the lessee when use of the property is for a community purpose.  Use of this methodology is at the WSDOT's discretion.

Community purposes is defined as providing one or more of the following public benefit purposes:  (1) housing, housing assistance, and related services; (2) shelter programs; (3) parks; (4) enhanced public spaces; (5) public recreation; or (6) public transportation uses.

Where the purpose of the lease is related to housing or shelter programs, the WSDOT may not undertake a lease of property that incorporate community purpose benefits in the determination of adequate consideration if the lease is of property on the right of way of a state highway or would place infrastructure or the traveling public in jeopardy, 

The WSDOT must consider the following factors in its evaluation of a potential lease agreement under this methodology:

• the extent to which the community purpose will benefit overburdened communities and vulnerable populations;
• the benefit of the community purpose to a broad number of members of the public;
• the likelihood that the property has practical and economically feasibly uses for which the WSDOT could otherwise obtain economic rent during the lease period; and
• the lessee's qualifications to perform the community purpose and to fulfill the terms of the lease agreement.

Lease Terms.

Adequate consideration is defined as consideration that is comprised of:

1. the performance of activities that fulfill the community purposes designated in the lease agreement;
2. maintenance and securing of the premises to be provided under the lease agreement; and
3. if the WSDOT determines that the consideration provided by the above elements is insufficient consideration for use of the property, the WSDOT may require additional monetary or non-monetary consideration.

A lease agreement must include:

• a requirement that the use of the premises must be limited to the designated community purposes;
• remedies that apply if the lessee of the property fails to use it for the designated community purposes or ceases to use it for these purposes;
• evidence of commercial or self-insurance at levels deemed appropriate by the WSDOT; and
• evidence of appropriate indemnification.

Administrative Costs.

If the WSDOT finds all or a portion of costs associated with the leasing process to be undertaken for community purpose projects cannot reasonably be assumed by the lessee, the WSDOT may use funds specifically appropriated for this purpose for these costs.  If funds specifically appropriated for this purpose are unavailable, the WSDOT must include a budget request to the Legislature during the next legislative session for the funds to be appropriated.

Legislative Reporting Requirement.

The WSDOT is required to provide an annual report to the Transportation Committees of the Legislature by December 1 of each year detailing the active community purpose lease agreements authorized, including the community purposes being served and a summary of relevant lease terms.

(In support) This bill incorporates guardrails on the use of WSDOT land for community purposes, including establishing sideboards and a rigorous process for the WSDOT to determine adequate consideration for the leasing of property.  The bill is about putting property to use in beneficial ways that otherwise would not be used.  Where the WSDOT does not have the resources to maintain a property, there is a benefit to the WSDOT in having a lessee maintain it.  Property can be used for housing, shelters, improved public transit service, and to rehabilitate land intended to be a park.

The bill would enable the WSDOT to lease a once beautiful park in downtown Tacoma, Pugnetti Park, to another government agency that could maintain and secure the park.  In recent years, the park has been neglected and uncared for.  Trees have been cut down or left to die.  It is an eyesore and Parks Tacoma receives complaints about the park.  The WSDOT is not in the park business.  The Washington State History Museum located nearby, and run by the Washington State Historical Society, has expressed an interest in restoring and maintaining the park.  The bill would enable this to occur.

Given the housing crisis, developing lease agreements is critical.  This bill provides for a process for the WSDOT to use in developing these agreements.  The bill would enable WSDOT to offer an affordable lease for housing.  This would allow for the removal of unsafe recreational vehicles and the availability housing for those residing in them.

Tacoma Public Schools would like to operate two large WSDOT parcels as a joint vehicle maintenance facility with Parks Tacoma and the City of Tacoma.  This could allow schools to move buses to the parcel and create additional parking spaces for schools.

(Opposed) None.

(Other) Current law establishes a methodology for leasing WSDOT property.  While the aim of this bill is commendable, it does not establish a method for estimating the value of public benefits.  Estimating these benefits requires making a leap of faith about them.  How can a value be placed on pallet home villages or recreational lots?  The bill needs tighter guardrails to prevent misuse or abuse.

(In support) Representative Jake Fey, prime sponsor; Jerry Pugnetti; Betsy Wilkerson, Spokane City Council President; Charlie Brown, Tacoma Public Schools; Hunter George, Parks Tacoma; Jon Grant, Low Income Housing Institute; and Jennifer Saunders, Washington State Historical Society.