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Home My WebLink AboutReg 2014-11-03 Item 7 - Resolution - Public Hearing Date for Considering "Residential Targeted Area" for Multi-Family Property Tax ExemptionCOUNCIL AGENDA SYNOPSIS Jaitials MeeiinsDate Prepared by y121-'s eviel Council review 11/03/14 DCS Z Motion Mg Dale 11/3/14 Z Resolution Mg Date 11/3/14 [I] Ordinance Mtg Date E Bid A ard AI Date E Public Hearing Mtg Date El Other Mtg Date CA'rix;()ItY Dismssion Mtg Date SP ( )N SOR E Council Z Mayor LI EIR El DCD Finance Lj Fire E IT El P &R E Police jIJ PIF SPoNSOR'S Staff is proposing for the City to adopt a multi-family property tax exemption program to SUMMARY encourage new housing in a portion of the Transit Oriented Development District (Southcenter area). The Council is being asked to approved a resolution setting a public hearing for 11/24/14. REVIP,W1,1) BY p COW Mtg. Z CA&P Cmte 17&S Cmte E Transportation Cmte E Utilities Cmte E Arts Comm. 0 Parks Comm. E Planning Comm. DATE: 10/28/14 COMMITTEE CHAIR: DUFFIE RECOMMENDATIONS: SPoNsoR/ADmiN. C()mmITTFT Mayor's Office Unanimous Approval; Forward to Regular Meeting ITEM INFORMATION ITEM No, 7 73 STAFF SPoNsoit: DEREK SPECK ORIGINAL AGENDA DATE: 11/3/14 AG kNDA HEM THU: Multi-Family Residential Property Tax Exemption 11/3/14 Z Motion Mg Dale 11/3/14 Z Resolution Mg Date 11/3/14 [I] Ordinance Mtg Date E Bid A ard AI Date E Public Hearing Mtg Date El Other Mtg Date CA'rix;()ItY Dismssion Mtg Date SP ( )N SOR E Council Z Mayor LI EIR El DCD Finance Lj Fire E IT El P &R E Police jIJ PIF SPoNSOR'S Staff is proposing for the City to adopt a multi-family property tax exemption program to SUMMARY encourage new housing in a portion of the Transit Oriented Development District (Southcenter area). The Council is being asked to approved a resolution setting a public hearing for 11/24/14. REVIP,W1,1) BY p COW Mtg. Z CA&P Cmte 17&S Cmte E Transportation Cmte E Utilities Cmte E Arts Comm. 0 Parks Comm. E Planning Comm. DATE: 10/28/14 COMMITTEE CHAIR: DUFFIE RECOMMENDATIONS: SPoNsoR/ADmiN. C()mmITTFT Mayor's Office Unanimous Approval; Forward to Regular Meeting COST IMPACT / FUND SOURCE EXIT;NDITURI: RiQUIRE1) AMOUNT BUDGETED APPROPRIATION REQUIRED $ $ Fund Source: Cotnments: MTG. DATE RECORD OF COUNCIL ACTION 11/3/14 MTG. DATE ATTACHMENTS 11/3/14 Informational Memorandum dated 10/22/14 updated after the CAP Committee meeting Draft Resolution and Map of proposed residential targeted area Summary by the Puget Sound Regional Council Minutes from the Community Affairs and Parks Committee meeting of 10/28/14 73 74 City of Tukwila Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Community Affairs and Parks Committee FROM: Economic Development Administrator DATE: October 22, 2014 (Revised after Committee Meeting) 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. At the October 28, 2014 Community Affairs and Parks Committee Meeting, the Committee requested edits to the draft resolution. The changes are shown in strike-throuqh underline format. 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. 75 76 INFORMATIONAL MEMO Page 2 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. 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 W:12014 Info Memos-Council\MFPTE Reso memo-Revised.doc DRAFT A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, STATING THE CITY'S INTENT TO DESIGNATE CONSIDER 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 consider designating 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. W:\Word Processing \Resolutions\Multi-Family Property Tax Exemption Program 10-20-14 DS:bjs Page 1 of 2 77 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 W:\Word Processing\Resolutions\Multi-Family Property Tax Exemption Program 10-20-14 DS:bjs 78 Page 2 of 2 Exhibit A City of Tukwila Multi - Family Property Tax Exemption Residential Targeted Area Target Parcels Southcenter Plan Boundary 79 Puget Sound Regional [UQ�|JUW|KJCUU|K^U , Housing N nnovp NOons 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 vczlorem property taxation on the residential improvement value for a period of eight or 12 years. The 12-year exemption requires a minimum level ofaffordable housing to be included in the development (at Ieast 20% ofthe unitsorl00%ifthebui|dinQis 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? Tool Profile This too encourages multifamily development and redevelopment in Focus Area compact mixed-use districts (urban centers) where housing and affordable • Urban Centers housing options are deficient. Through the multifamily tax exemption, a • Transit Oriented Development jurisdiction can incentivize dense and diverse housing options in urban • Expensive Housing Markets centers lacking in housing choices or affordable units. MFTE can also apply to rehabilitating existing properties and redeveloping vacant or underused Housing Types • Multifamily properties. • Ownership • Rental Where is the multifamily tax exemption most applicable? • Market Rate Cities planning under the Growth Management Act (RCW 36.70a) that have • Subsidized designated urban centers with a deficiency of housing opportunities are Affordability Level eligible to implement this tool. In King, Pierce, Snohomish and Kitsap • oomzzu% AM/ counties, cities must have at Ieast 5,000 in population. Cities must • Less than 80% AMI designate eligible areas that contain urban centers. Urban centers—in the context of the K4FTE'enab|ing legislation—have a particular meaning: Goal • Affordability "...a compac identifiable district where urban resident 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 Iimited to shops, offices, banks, restaurants, governmental agencies; (b) Adequate public facilities including streets, sidewalks, Iighting, 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." (R[VV84l4.010) Tool considered very effective for producing units at less than 80% AMI. Case Studies • oumm Multifamily Tax Exemption • Lynnwood Multifamily Tax Exemption • Tacoma Multifamily Tax Exemption 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. MFTEs have been effective in producing multifamily units in the region's larger cities. Since its inception, the MFTE Iaw has been expanded to include smaller cities. The effectiveness of this tool in Iargerjurisdictions 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 Puget und Pegional Council 80 developments. Dense development is also economically efficient in expensive housing markets, and can reduce housing costs. What do 1 need to know about usinq or developing a multifamily tax exemption? The MFTE implementation proces 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) summanzed here: • The new or rehabilitated multiple-unit housing must be Iocated in city-designated residential target areas within the urban center. w 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 anaa 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 Puget Sound Regional Council 2 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 Iocal planning goals. Proposals must meet Iocal 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 ver usmarkmt,atehousinO.R[VV84.l4aUowocbiestoprovdeabonus 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 areaffurdab|eto|mw'andmodumte-inommehuuseho|ds.Toveceivethe1Z-yearexemption'buUdinQs 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 Puget Sound Regional Council 3 82 cases, partnerships between non-profits and for-profit 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 K�^�|^��'�� Model �� ||��f'�� Other Information .,�~~~°'-. " ~^.. .,~,~' ...,~~~= Regulations, ^�~..� � .~, ~-~.- State of Washington: RCW 84.14 See adopted ordinances of the following cities at: hupvywww.mozurmtodesaspx • 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 Puget Sound Regional Council 4 84 City of Tukwila Community Affairs and Parks Committee COMMUNITY AFFAIRS AND PARKS COMMITTEE - Meeting Minutes October 28, 2014 — 5:30 p.m. — Hazelnut Conference Room PRESENT Councilmembers: Joe Duffie, Chair; Dennis Robertson, Verna Seal Staff: Jack Pace, Evie Boykan, Derek Speck, Laurel Humphrey Guests: Omar Lee, South Center WA, LLC; Vanessa Zaputil, Resident CALL TO ORDER: Committee Chair Duffie called the meeting to order at 5:30 p.m. I. PRESENTATIONS II. BUSINESS AGENDA A. Contract: Community Development Block Grant (CDBG) Funds for 2014 Minor Home Repair Staff is seeking Council approval for the Mayor to sign a contract with King County for the receipt of $125,000 in Community Development Block Grant funds for the 2014 Minor Home Repair Program. This program is administered by the Office of Human Services and provides home repair services to low and moderate income homeowners. Tukwila serves as the fiscal agent for the contract which also includes Des Moines, Covington and SeaTac. UNANIMOUS APPROVAL. FORWARD TO NOVEMBER 3, 2014 REGULAR CONSENT AGENDA. B. Resolution: Residential Targeted Area for Multi - Family Property Tax Exemption and Setting a Public Hearing Staff is seeking Council approval of a resolution that would state the City's intent to designate a portion of the Southcenter District as a "residential targeted area" for purposes of a mult- family property tax exemption program and to set a time and place for a public hearing. RCW 84.14 allows cities to exempt qualified multi - family housing from property taxes within certain "residential targeted areas" as an incentive for development and redevelopment. Councilmember Robertson raised questions about the timing of setting a public hearing on the matter prior to receiving a staff report and analysis. Staff reviewed the schedule on this item, noting that the Committee will be fully briefed on a proposed ordinance on November 12, prior to the November 24 public hearing set by this resolution. Setting of the public hearing date by resolution is a process spelled out in the RCW and recommended by the City Attorney. To provide clarity on this matter, the Committee requested two amendments as follows: Title: A Resolution of the City Council... stating the City's intent to ate consider a residential targeted area, etc. Section 1 The City of Tukwila intends to consider designating decfie that portion of the Tukwila Urban Center Transit Oriented Development Neighborhood, etc. 85 Community Affairs & Parks Committee Minutes October 28, 2014 - Page 2 Committee members and staff discussed the topic generally with the understanding that a detailed staff report will be provided on November 12 for further conversation. Ms. Zaputil encouraged the Committee to consider implications to other taxing authorities in the area. Mr. Lee spoke in favor of the proposal and asserted that if the City Council approves this designation he will be applying on behalf of the Washington Place development. Councilmember Robertson referenced the July 8 Finance and Safety Committee and July 14 Committee of the Whole discussions on fee options relevant to Washington Place and asked if other fee options would be brought to the Council. Staff stated that the traffic, parks and fire impact fees have been reduced as appropriate and as the Code allows. Councilmember Robertson requested copies of the relevant Code sections and documentation on the fee reductions. UNANIMOUS APPROVAL WITH REQUESTED AMENDMENTS. FORWARD TO NOVEMBER 3, 2014 REGULAR MEETING. III. MISCELLANEOUS Meeting adjourned at 6:33 p.m Next meeting: Tuesday, November 12, 2014, 5:30 p.m. �� °�' Committee Chair Approval Minu't s by LH, Reviewed by DS 86