HomeMy WebLinkAboutCAP 2014-10-28 Item 2B - Resolution - Public Hearing Date on Residential Targeted Area for Multi-Family Property Tax Exemption ProgramCity of Tukwila
Jim Haggerton, Mayor
INFORMATIONAL MEMORANDUM
TO: Mayor Haggerton
Community Affairs and Parks Committee
FROM: Economic Development Administrator
DATE: October 22, 2014
SUBJECT: Resolution of Intent to Designate Residential Targeted Area
ISSUE
The Council is being asked to approve a resolution of intent to designate a portion of the
Southcenter District as a "residential targeted area" for purposes of a multi - family property tax
exemption program and to set a time and place for a public hearing.
BACKGROUND
State law (RCW 84.14) allows cities to exempt qualified multi - family housing from property taxes
within certain "residential targeted areas" as designated by the cities as an incentive to
encourage residential development and redevelopment.
The state law requires jurisdictions considering a tax exemption program hold a public hearing
prior to adopting the program. The law intends for jurisdictions to approve a resolution of
intention to designate the residential targeted area that states the time and place of the public
hearing. Staff has prepared a proposed resolution that states the public hearing on the
designation at the City Council's Committee of the Whole meeting on November 24, 2014 with
consideration for adoption at the Council's Regular meeting on December 1, 2014.
DISCUSSION
The multi - family property tax exemption can be an effective tool for encouraging residential
development in urban centers. In 2007 the State law changed and Tukwila became eligible to
adopt this program. In 2014 the City adopted the Southcenter Plan which describes the City's
vision for the Southcenter area and states the City's intent to "stimulate pioneering residential...
development within walking distance of the Southcenter (bus) transit center and..." Also in
2014 the developers of the planned Washington Place residential and hotel project requested
the City approve a property tax exemption for the residential portion of their project.
Although the multi - family property tax exemption program may be useful in various locations in
Tukwila, at this time staff is recommending we start with only one area. In the future the City
can consider whether to expand the area. It makes sense to start small and then grow because
it is easier to grant these exemption rights than take them away. The recommended area would
be the portion of the Transit Oriented Development District (TOD District) that is west of the
Green River. This area includes the property requested by Washington Place. A map
identifying this proposed area is attached.
This staff report is not intended to answer all the Council and public questions related to a multi-
family property tax exemption program. It is simply for adopting the resolution of intention to set
the time and place of the public hearing. Staff plans to bring a more complete report with a
proposed ordinance to the Community Affairs and Parks Committee meeting on November 12,
2014.
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INFORMATIONAL MEMO
Page 2
FINANCIAL IMPACT
Since this item simply sets the public hearing, it does not have a financial impact to the City. If
the Council approves a multi - family property tax exemption program, there could be a financial
impact to the City, depending on a variety of assumptions.
BUDGET IMPACT
This specific item does not have a budget impact.
RECOMMENDATION
The Council is being asked to approve the resolution and consider this item at the November 3,
2014 Regular Meeting.
ATTACHMENTS
Draft resolution with attachment
Puget Sound Regional Council article on Multi- family Tax Exemption
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DRAFT
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF TUKWILA, WASHINGTON, STATING THE
CITY'S INTENT TO DESIGNATE A RESIDENTIAL
TARGETED AREA FOR THE PURPOSE OF
ESTABLISHING A MULTI - FAMILY PROPERTY TAX
EXEMPTION PROGRAM, AND SETTING THE TIME
FOR A PUBLIC HEARING TO CONSIDER THE
DESIGNATION OF THE AREA.
WHEREAS, Chapter 84.14 of the Revised Code of Washington provides for exemption
from ad valorem property taxation for eligible improvements associated with qualified
multiple -unit housing; and
WHEREAS, on November 3, 2014 the Tukwila City Council discussed a proposal to
establish a tax exemption program pursuant to RCW Chapter 84.14 and desires to consider
adopting the program; and
WHEREAS, in order to establish a tax exemption program, the City must designate one
or more residential targeted areas within which qualified projects may apply for tax
exemption; and
WHEREAS, RCW Section 84.14.040 (2) states that a governing authority may adopt a
resolution of intention to designate an area described in the resolution; and
WHEREAS, in accord with RCW Section 84.14.040 (2) the resolution must state the
time and place of a hearing to be held by the governing authority to consider the
designation of the area;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY RESOLVES AS FOLLOWS:
Section 1. The City of Tukwila intends to designate that portion of the Tukwila Urban
Center Transit Oriented Development Neighborhood (TUC -TOD) that lies west of the Green
River and as shown on Exhibit A as a residential targeted area for the purposes of
establishing a multi - family property tax exemption program per RCW Chapter 84.14.
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Section 2. A public hearing to consider the designation of a portion of Tukwila's
Southcenter District as a residential targeted area will be held at a Committee of the Whole
meeting of the City Council on November 24, 2014. The meeting will be held at 7:00 p.m. in
the Council Chambers at 6200 Southcenter Boulevard, Tukwila, Washington.
PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at
a Regular Meeting thereof this day of , 2014.
ATTEST /AUTHENTICATED:
Christy O'Flaherty, MMC, City Clerk De'Sean Quinn, Council President
APPROVED AS TO FORM BY:
Filed with the City Clerk:
Passed by the City Council:
Resolution Number:
Rachel Turpin, City Attorney
Attachment: Exhibit A - Multi - Family Property Tax Exemption Residential Targeted Area
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Exhibit A
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Multi - Family Property Tax Exemption
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Puget Sound Regional Council
Housing Innovations
program
Featured Tool: Multifamily Tax Exemption*
A state law (RCW 84.14) helps cities attract residential development. Cities may exempt multifamily housing from
property taxes in urban centers with insufficient residential opportunities. The city defines a residential target area
or areas within an urban center; approved project sites are exempt from ad valorem property taxation on the
residential improvement value for a period of eight or 12 years. The 12 -year exemption requires a minimum level
of affordable housing to be included in the development (at least 20% of the units or 100% if the building is solely
owner - occupied). The eight -year exemption leaves the public benefit requirement —in both type and size —to the
jurisdiction's discretion. The eight -year exemption carries no affordable housing requirement. Cities must pass an
enabling ordinance to enact the MFTE and to allow applications for the exemption.
What issue does a multifamily tax exemption address?
This tool encourages multifamily development and redevelopment in
compact mixed -use districts (urban centers) where housing and affordable
housing options are deficient. Through the multifamily tax exemption, a
jurisdiction can incentivize dense and diverse housing options in urban
centers lacking in housing choices or affordable units. MFTE can also apply
to rehabilitating existing properties and redeveloping vacant or underused
properties.
Where is the multifamily tax exemption most applicable?
Cities planning under the Growth Management Act (RCW 36.70a) that have
designated urban centers with a deficiency of housing opportunities are
eligible to implement this tool. In King, Pierce, Snohomish and Kitsap
counties, cities must have at least 5,000 in population. Cities must
designate eligible areas that contain urban centers. Urban centers —in the
context of the MFTE - enabling legislation —have a particular meaning:
"...a compact identifiable district where urban residents may obtain a
variety of products and services. An urban center must contain:
(a) Several existing or previous, or both, business establishments
that may include but are not limited to shops, offices, banks,
restaurants, governmental agencies;
(b) Adequate public facilities including streets, sidewalks, lighting,
transit, domestic water, and sanitary sewer systems; and
(c) A mixture of uses and activities that may include housing,
recreation, and cultural activities in association with either
commercial or office, or both, use." (RCW 84.14.010)
Based on the state law, designated districts are commercial or business districts with some mix of uses. Such areas
may exist in downtowns, commercial corridors, or other intensively developed neighborhoods. Examples of
designated districts throughout the central Puget Sound region are listed in the model policies, regulations and
other information section below.
Tool Profile
Focus Areas
• Urban Centers
• Transit Oriented Development
• Expensive Housing Markets
Housing Types
• Multifamily
• Ownership
• Rental
• Market Rate
• Subsidized
Affordability Level
• 80 to 120% AMI
• Less than 80% AMI
Goal
• Affordability
. Tool considered very effective for producing
units at less than 80% AMI.
Case Studies
• Burien Multifamily Tax Exemption
• Lynnwood Multifamily Tax
Exemption
• Tacoma Multifamily Tax Exemption
MFTEs have been effective in producing multifamily units in the region's larger cities. Since its inception, the MFTE
law has been expanded to include smaller cities. The effectiveness of this tool in larger jurisdictions could make it
an attractive tool for smaller and moderate -sized cities that meet the population threshold.
Multifamily tax exemptions can encourage relatively dense attached flats or townhomes, in mixed -use projects or
residential complexes, which means this tool is particularly useful in urban centers and transit - oriented
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developments. Dense development is also economically efficient in expensive housing markets, and can reduce
housing costs.
What do I need to know about using or developing a multifamily tax exemption?
The MFTE implementation process is guided by state law in RCW 84.14. In general, the process includes preparing
a resolution of intent to adopt a designated area, holding a public hearing and adopting and implementing
standards and guidelines to be utilized in considering applications for the MFTE. Among other criteria, the
designated area must lack "sufficient available, desirable, and convenient residential housing, including affordable
housing, to meet the needs of the public who would be likely to live in the urban center, if the affordable,
desirable, attractive, and livable places to live were available" (RCW 84.14.040). A property owner applying for an
MFTE must meet the criteria (per RCW 84.14.030) summarized here:
• The new or rehabilitated multiple -unit housing must be located in city- designated residential target areas
within the urban center.
• The project must meet local government requirements for height, density, public benefit features, number
and size of proposed development, parking, income limits for occupancy, limits on rents or sale prices, and
other adopted requirements.
• At least 50% of the space in the new, converted or rehabilitated multiple -unit housing must be for permanent
residential occupancy. Existing occupied multifamily developments must also provide a minimum of four
additional multifamily units.
• New construction multifamily housing and rehabilitation improvements must be completed within three years
from approval.
• The applicant must enter into a contract with the city containing terms and conditions satisfactory to the local
government.
The exemption is recorded with the County Assessor. Developments that violate the terms of the exemption are
required to pay back the exempted tax amounts, plus interest, and a penalty fee.
Cities considering the program need to weigh the temporary (8 -12 years) loss of tax revenue against the potential
attraction of new investment to targeted areas. MFTE projects could be catalysts for other private investment if
they help prove an area is desirable. Pairing the MFTE with other tools that affect density and cost reductions may
help the city achieve higher density and affordable housing in designated mixed -use and commercial areas. These
tools include:
Featured Tools:
• Density Bonuses
• Transit Oriented Development Overlays
• Parking Reductions
Other Tools:
• Mixed -Use Development
• No Maximum Densities
• Planned Action EIS (see in particular the SEPA residential and mixed -use exemption option)
Creating a Multifamily Tax Exemption Program
A typical planning process (gathering information, conducting public outreach and considering ordinances),
together with the specific requirements of state law, will guide the development of an MFTE program:
Determine Residential Target Areas. Cities will need to consider the state law's "urban center" definition which
addresses existing commercial businesses, mixed uses and infrastructure.
Analysis. To support the urban center and residential target area designations, a jurisdiction should map or collect
data on current uses, services and capital facilities. The data and analysis should demonstrate that the area lacks
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sufficient residential housing, including affordable housing. Estimating the tax revenue and other cost - benefit
implications of the MFTE program can help to determine whether the program would help achieve housing goals.
For example, prior to adopting an MFTE ordinance, the City of Lynnwood prepared an analysis of tax revenue that
would be foregone should the ordinance be adopted. In terms of other cost - benefits, jurisdictions can calculate the
short -term construction and sales tax revenues and employment gains that stem from the development. (See case
studies below.)
Conduct Public Outreach. The MFTE statute suggests that a jurisdiction considering an MFTE program issue a
resolution of intention to designate an urban center and residential target area(s). The resolution should also
identify the time and place of a hearing. Cities must hold a public hearing on the proposed MFTE ordinance and
follow notification schedules listed in the statute. While crafting the ordinance, cities will also want to involve
stakeholders, including developers of multifamily and condominium housing, affordable housing developers and
advocacy groups, and major land owners and businesses in the residential target areas. See Citizen Education and
Outreach for strategies to involve the public and stakeholders.
Determine Standards. The state affords jurisdictions wide latitude to design their MFTE laws to meet local
planning goals. Proposals must meet local zoning and development standards and any affordability and occupancy
criteria the jurisdiction sets. Based on the intent of the MFTE, key decisions to shape the ordinance include:
• Encouraging more versus less participation from developers. The threshold number of units to qualify for
the exemption and public benefit requirements could influence the level of participation by developers. A
low threshold and limited public benefit requirements, for example, might make the program more
accessible to developers, but yield a smaller return in public benefit for foregone revenue. A high
threshold and demanding public benefit requirement, however, might make the program unattractive to
developers. Striking a balance between requirements, goals and attractiveness is essential to a successful
MFTE program.
• Encouraging affordable housing versus market -rate housing. RCW 84.14 allows cities to provide a bonus
for affordable housing provision by allowing 12 years of tax exemption, versus the eight years offered for
market -rate developments. Cities could further encourage developers to opt for the 12 -year exemption
by setting a threshold number of units or public benefit to attract development. Offering other incentives
(e.g., density bonuses, flexible single family development regulations) along with the MFTE can strengthen
interest in affordable development in the city.
• Encouraging more rental or ownership housing. The law provides incentives for affordable multifamily
rental housing where the whole development is eligible for the tax exemption if at least 20% of the units
are affordable to low- and moderate- income households. To receive the 12 -year exemption, buildings
intended to be entirely owner- occupied must price all of their units affordably for moderate - income
households. Setting a threshold number of rental versus ownership units could influence the type of tax
exemption applications received in favor of a particular tenure.
• Ensuring that affordability endures. Affordable units may be at risk of losing their affordable status both
at the end of the MFTE time period and during its existence if a developer decides to opt out of the
program. Requiring affordability covenants for these units is one method for preserving affordability.
Implementation. State law requires an application process and procedures. Cities will need to allocate staff and
resources to reviewing applications. A fee may be charged for the request. The agency has 90 days to approve or
deny the application.
Monitoring. The law requires regular reporting by applicants and by cities. Upon construction and annually
thereafter, the property owner must file reports containing information such as occupancy, vacancy, and other
items required by the city. Cities will also want to make sure that these requirements are not too onerous. In some
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cases, partnerships between non - profits and for - profits to ensure secure income certifications and monitoring may
be helpful.
Cities must report to the State of Washington Department of Commerce annually by December 31 regarding
certificates granted, unit types, monthly rent and sales costs, and other information. Cities could use these regular
reports to monitor the success of the program and build supporting data for future program goals. Some cities
establish a sunset clause by which time the city may re -adopt or let expire the tax exemption program.
Model Policies, Model Regulations, Other Information
State of Washington: RCW 84.14
See adopted ordinances of the following cities at: http: / /www.mrsc.org/codes.aspx
• Bremerton: Downtown Core and Multiple Residential Zones
• Burien: Downtown Commercial Zone
• Everett: Downtown and vicinity
• Kirkland: Central Kirkland /Houghton; Totem Lake and North Rose Hill; Juanita; and NE 85th Street
• Lynwood: City Center
• Puyallup: central business district (CBD) and certain areas south of the CBD
• SeaTac: 154th Street and SeaTac /Airport Station Areas
• Seattle: 39 neighborhoods or districts
• Shoreline: Ridgecrest District
• Tacoma: 17 mixed -use centers designated on the Generalized Land Use Plan and in the Comprehensive Plan
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