HomeMy WebLinkAboutReg 2020-04-06 Item 5A - Resolution - Utilize Funds Collected Under Provisions of WA State House Bill 1406 and Ordinance #2613COUNCIL AGENDA SYNOPSIS
Initials
Meeting Date
Prepared by
Mayor's review
Council review
03/23/20
MS
04/06/20
MS
ITEM INFORMATION
ITEMNO.
5.A.
STAFF SPONSOR: MEREDITH SAMPSON
ORIGINAL AGENDA DATE: 03/23/20
AGENDA ITEM TITLE HB 1406 Revenue Spending Options
CATEGORY ® Discussion
Mtg Date 03123120
❑ Motion
Mtg Date
® Resolution
Mtg Date 04106120
❑ Ordinance
Mtg Date
❑ Bid Award
Mtg Date
❑ Public Hearing
Mtg Date
❑Other
Mtg Date
SPONSOR ❑Council ❑Mayor ❑HR ®DCD ❑Finance ❑Fire ❑'IS ❑P&R ❑Police ❑PTr ❑Court
SPONSOR'S Tukwila passed Resolution No. 1966 and Ordinance No. 2316 with an effective date of
SUMMARY November 1, 2019 to impose the Affordable Supportive Housing State Shared Tax
authorized by HB 1406. Tukwila must now decide how to spend that revenue, whether it be
pooling the revenue with SKHHP, keeping the revenue to be used on affordable housing
initiatives in Tukwila, or a combination of the two.
REVIEWED BY ❑ Trans&Infrastructure ❑ CommunitySvs/Safety ❑ Finance Comm. ❑ Planning/Economic Dev.
❑ LTAC ❑ Arts Comm. ❑ Parks Comm. ❑ Planning Comm.
DATE: 03/02/20 AND 3/16/20 COMMITTEE CHAIR: MCLEOD
RECOMMENDATIONS:
SPONSOR/ADMIN. Department of Community Development
COMMITTEE Forward to Committee of the Whole
COST IMPACT / FUND SOURCE
EXPENDITURE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED
Fund Source:
Comments:
MTG. DATE
RECORD OF COUNCIL ACTION
03/23/20
Forward to next Regular Meeting
04/06/20
MTG. DATE
ATTACHMENTS
03/23/20
Informational Memorandum dated 03/02/2020 (updated after 3/2 PED Committee)
Attachments (House Bill 1406, SKHHP Resolution No. 2019-06, Notice from DOR)
Resolution in draft form
Minutes from the March 2 & March 16 PED Committee
04/06/20
Informational Memorandum dated 03/31/20 (updated after 3/23 C.O.W.)
Draft Resolution
11
12
City of Tukwila
Allan Ekberg, Mayor
INFORMATIONAL MEMORANDUM
TO: Planning & Economic Development
FROM: Minnie Dhaliwal, Deputy Director of Department of Community
Development
BY: Meredith Sampson, Associate Planner
CC: Mayor Ekberg
DATE: March 2, 2020 (updated March 314-6, 2020)
SUBJECT: HB 1406 Investments in Affordable Housing, Revenue Options
ISSUE
How does Tukwila want to allocate revenue received from HB 1406?
BACKGROUND
During the 2019 legislative session, the state approved HB 1406 which is a local revenue
sharing program for local governments. This allows local governments to collect a portion of
state sales tax for addressing affordable housing. The tax credit is in place for up to 20 years.
All projects funded by HB 1406 must serve those at or below 60% of the area median income
(AMI). Homelessness and affordable housing are key issues both in the region as a whole and
in the City of Tukwila itself. The revenue available to cities through this bill is a way to begin to
address this issue through acquiring, rehabilitating, or constructing affordable housing;
operations and maintenance of new affordable housing or supportive housing facilities; or for
rental assistance. House Bill 1406 can be found as Attachment A.
In September 2019 Tukwila passed Resolution No. 1966 and Ordinance No. 2316 with an
effective date of November 1, 2019 to impose the Affordable Supportive Housing State Shared
Tax authorized by HB 1406. The maximum award amount that Tukwila may receive each year
is $165,998.21.
The revenue from HB 1406 can be used for:
1. Acquiring, rehabilitating, or constructing affordable housing; and/or
2. Operations and maintenance of new affordable housing or supportive housing facilities;
and/or
3. Providing rental assistance to tenants (only an option for cities with a population less
than 100,000 people). Tukwila's current population is 20,294.
DISCUSSION
Tukwila must make a decision regarding how to spend the revenue received from HB 1406 for
the next 20 years. There are three options for spending the revenue:
1. Pool revenue with participating South King Housing and Homelessness Partners
(SKHHP) cities.
Tukwila currently participates in South King Housing and Homelessness Partners
(SKHHP), which is a coalition formed by an interlocal agreement between Auburn,
Burien, Covington, Des Moines, Federal Way, Kent, Normandy Park, Renton, King
County, and Tukwila. The purpose of SKHHP is to increase the available options for 13
INFORMATIONAL MEMO
Page 2
South King County residents to access affordable housing and to preserve the existing
affordable housing stock.
Tukwila Signed SKHHP Resolution No. 2019-06 (Attachment B) which supports the idea
of all participating SKHHP cities pooling the revenue received from HB 1406. Auburn,
Burien, and Des Moines have both passed resolutions to pool all funding received from
HB 1406 with SKHHP, assuming all other cities will also pool their resources. If other
cities decide not to pool their revenue, they will not pool either.
If all cities pool their revenue from HB 1406, the maximum revenue would be
approximately one million dollars per year. The maximum yearly revenue per City is
capped at .0073% of the sales tax revenue from 2019 and could be less based on actual
sales tax collected each year. This tax credit is in place for 20 years, totaling
approximately 20 million dollars overall if sales tax revenue stays consistent in the
region. This money would be used toward affordable housing projects within the
participating cities.
City
Estimated Annual Revenue
Auburn
$154,992
Burien
$65,477
Covington
$43,678
Des Moines
$29,793
Federal Way
$124,142
Kent
$185,467
Normandy Park
$4,866
Renton
$236,380
Tukwila
$165,998
Total
$1,010,793
Table 1. Estimates based on 2018 data
Of the participating SKHHP members, so far Auburn, Burien, and Des Moines have
passed resolutions to pool 100% of their revenue from HB 1406. Kent has deferred this
decision to the Mayor. The language used in the SKHHP Resolution No. 2019-06
specifies urging member cities to pool their funds. At this time King County is undecided
as to how and where their revenue from this bill will be spent.
The SKHHP Executive Board will be the body that will decide on how the pooled
revenue from HB 1406 will be spent. Counties and cities that enact the provisions of HB
1406 may issue general obligation or revenue bonds, and may use money collected
under HB 1406 for the repayment of bonds.
2. Maintain all revenue to be used in Tukwila.
Tukwila could choose to keep all revenue collected from HB 1406 to be used toward:
acquiring, rehabilitating, or constructing housing; operations and maintenance of new
affordable housing; and/or providing rental assistance to low-income tenants, all within
the City of Tukwila.
Some examples of revenue spending within the City are:
14
INFORMATIONAL MEMO
Page 3
• Rehabilitating Tukwila's existing affordable housing stock, which may include
partnering with King County Housing Authority.
• Partnering with existing affordable housing developers on projects that are
shovel -ready.
• Providing rental assistance to Tukwila's low-income tenants.
• Exploring the option to bond with the purposes of funding affordable housing
construction
3. Keep a portion of the revenue for rental assistance or rehabilitation of the existing
affordable housing stock in Tukwila and pool the remainder with SKHHP.
Tukwila could choose to split the revenue from HB 1406 between rental assistance and
pooling funds with SKHHP. Table 2 shows the maximum amount per year that Tukwila
would keep for rental assistance and the amount that would be pooled with SKHHP
when different percentages of the revenue from SHB 1406 are retained by the City.
Max. HB 1406
Percent Used
Maximum
Maximum
Number of
Revenue/Year
for Tukwila
$/Year Used
$/Year
Tukwila
Rental
for Tukwila
pooled to
households
Assistance
Rental
SKHHP
to be
Assistance
served
$165,998
10%
$16,599.80
$149,398.20
24
$165,998
15%
$24,899.70
$141,098.30
36
$165,998
20%
$33,199.60
$132,798.40
47
$165,998
25%
$41,499.50
$124,498.50
59
$165,998
30%
$49,799.40
$116,198.60
71
Table 2. Split Revenue between Rental Assistance and SKHHP
Tukwila is in a unique position compared to other participating SKHHP cities. Only cities
with a population under 100,000 people qualify to use the revenue from this bill on rental
assistance, which Tukwila has. Tukwila also has an existing program in place that
provides direct services to residents, which many other SKHHP cities do not.
In 2019, Human Services provided rental assistance to 66 households with grants
averaging between $5004700. However, an additional 181 residents were qualified and
counted as a 'turn -away'— meaning they qualified for assistance, but the City had no
funds available to assist. Between 2018 and 2019, the City experienced a 376% percent
increase in rental assistance need over the previous year. For context, in 2018, the City
turned away 35 qualified residents; the percent change is indicating the City is
experiencing a significant increase in need for rental assistance which it did not
meet. Approximately 70% of financial assistance calls to human services are requests
for rental assistance. Allocating a portion of the revenue collected through this bill could
allow the City to stabilize additional households and enable those households to remain
in Tukwila.
If there are funds that have not been expended for rental assistance in Tukwila at the
end of each year, these funds could then be pooled with SKHHP.
Staff has looked at the buildina permit data of previous renovations of existina affordable
housing owned by King County Housing Authority (KCHA) in Tukwila. The value of
improvements ranges from $1.4 million dollars to $575,000. The higher end was for
renovating a three story 30-unit apartment building in 2007 to upgrade its fire protection 15
INFORMATIONAL MEMO
Page 4
and mechanical system. The lower end was for minimal exterior envelope upgrades
such as new siding, trim and roof repairs to a two story apartment complex with 32 units
in 2019. The majority of KCHA housing was built in the 1960s and 1970s. As these
properties age, they become more expensive to operate and maintain. With each
Passing year, features such as utility systems, building envelopes, and elevators come
closer to the end of their useful life span. To finance improvements, KCHA has used low-
income housing tax credits, tax-exempt bonds, and federal money to extend the life of its
public housing. If City Council elects to use some of the HB 1406 money for renovating
existing housing it is likely that the split amount would not be sufficient to make a
significant impact and the cost to upgrade apartments would outstrip the annual revenue
available.
Update March 31. 2020:
At the March 23, 2020 Committee of the Whole meeting, Councilmembers asked staff to provide
analysis and recommendations on how the City could use the HB 1406 funding in light of the
current COVID-19 pandemic. While there has been a collective effort among the SKHHP cities
to pool funds, the City recognizes that there are likely to be significant impacts in the Tukwila
community due to the loss of income of many residents. This loss of income will likely increase
the need for rental and utility assistance. (While HB 1406 funds cannot be used for utility
assistance, those funds could be used for rental assistance and free up existing Human
Services fundina for utilitv assistance).
To date, the City has collected approximately $45,000 in HB 1406 funds. This represents
distributions through the month of January, as sales tax distribution lags approximately two
months. It is reasonable to assume that the City will be distributed another approximately
$12,000 - $14,000 for February and that the distribution for March and subsequent months will
be substantiallv lower due to the loss of sales tax associated with COVID-19.
Councilmembers specifically asked for information on what the need is for rental and utility
assistance in the community. At this point it is not completely clear as there are many moving
pieces at this time. It is unknown how many residents will benefit from the federal stimulus bill
that will provide cash payments to those who qualify. Also, additional funding sources have
been made available in the region for renters seeking assistance, including United Way, Seattle
Foundation and other funding. It is reasonable to expect that additional programs will come
online as well in the comina weeks.
Historically, Human Services has had a lifetime maximum for assistance of $700 per family.
Staff recommends that during this pandemic that limit should be temporarily raised to $1,200
Per family in order to provide broader assistance to our community. With the funds already
collected and expected in the February distribution, the City could assist between 80 and 50
families with rental assistance. deoendina on the amount reauested oer family.
At this point, there are three alternatives for using 1406 funds that would make sense moving
forward:
Option 1: Stay with the existing recommendation of designating 30% of the funds to be used for
rental assistance and designating 70% to be pooled with SKHHP.
Option 2: Dedicate all of the HB 1406 funds received through February 2020 to be used for
rental assistance and then split the funds moving forward beginning in March 2020 with 30% of
the funds kept for rental assistance and 70% of the funds to be pooled with SKHHP.
16
INFORMATIONAL MEMO
Page 5
Option 3: Dedicate all of the HB 1406 funds to be used for rental assistance until the COVID-19
pandemic is over as determined by the City Administration: at that point pass new legislation to
align with keeping 30% of the funds for rental assistance and pooling 70% of the funds with
SKHHP_
FINANCIAL IMPACT
Tukwila began collecting revenue from HB 1406 on November 1, 2019 per official notice from
the Department of Revenue (Attachment C). Revenue is distributed to the City monthly from the
Department of Revenue as a percentage of Tukwila's sales tax that, prior to this bill, went to the
State.
Tukwila's maximum yearly revenue from HB 1406 is $165,998.21. Tukwila will keep .0073% of
the sales tax up to the maximum amount. Once the maximum award is reached, distribution of
the tax will stop for the remainder of the fiscal year.
RECOMMENDATION
Given the realities of COVID-19 pandemic, the likely need in the community, and the reality that
the HB 1406 distributions will be dramatically lower in March and subsequent months, staff now
recommends dedicating all of the HB 1406 funds to rental assistance until the pandemic is over
as determined by City Administration. Once the COVID-19 pandemic is over, staff recommends
that the Council consider passing new legislation to achieve the split of 30% of the funds kept
for rental assistance and 70% of the funds to be pooled with SKHHP. If there is not a need for
all of the funds for rental assistance, the City can pool the remaining funds with SKHHP.
ATTACHMENTS
A. House Bill 1406
B. SKHHP Resolution No. 2019-06
C. Notice from Department of Revenue
D. Resolution
17
in
NOTE: Text shown in strike-through/underline format reflects the
changes made after the March 23, 2020 Committee of the
Whole meeting.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TUKWILA, WASHINGTON, AUTHORIZING THE MAYOR TO KEEP
300�� OF U I ILIL_ THE FUNDS, UP TO A MAXIMUM OF $49,Qnn
ANNUALLY-, v COLLECTED UNDER THE PROVISIONS OF
WASHINGTON STATE HOUSE BILL 1406 AND CITY OF TUKWILA
ORDINANCE NO. 2613 FOR RENTAL ASSISTANCE TO LOW=
INCO MFETENANTS AND FOR TRANSFER OF TUG RFERAAINING
HOMELESSNESS PARTNERS AS OUTLINED HEREIN.
WHEREAS, the 2019 Washington State Legislature enacted Substitute House Bill
(SHB) 1406 on July 28, 2019, which authorizes cities and counties to recapture a portion
of the Washington State sales tax for use to support affordable housing initiatives; and
WHEREAS, on September 16, 2019, the Tukwila City Council adopted and enacted
Resolution No. 1966 and Ordinance No. 2613, which authorize a recapture of Washington
State sales tax, under SHB 1406, that is estimated to generate approximately $165,000
per year for the next 20 years; and
WHEREAS, the Tukwila City Council authorized the Mayor to enter into an Interlocal
Agreement with 8 other south King County cities and King County to form the South King
Housing and Homelessness Partners; and
WHEREAS, the City of Tukwila executed the South King Housing and Homelessness
Partners (SKHHP) Interlocal Agreement on February 21, 2019; and
WHEREAS, the Interlocal Agreement states that "the Parties have determined that
the most efficient and expeditious way for the Parties to address affordable housing needs
in South King County is through cooperative action and pooling public and private
resources"; and
WHEREAS, all members of SKHHP have taken action to enact the sales tax
recapture provisions established in SHB 1406; and
W:\Word Processing\Resolutions\HB 1406 use of funds 4-1-20
MS:bjs Page 1 of 3
19
WHEREAS, on November 22, 2019, the SKHHP Executive Board adopted SKHHP
Resolution 2019-06, which urges its members to pool funds collected under the provisions
of SHB 1406; and
WHEREAS, the City of Tukwila is qualified under SHB 1406 to use funds collected
toward rental assistance to low-income tenants; and
WHEREAS, the City of Tukwila's Human Services Department has a program
already in place that provides direct services to households in need and has to turn away
qualified residents each year due to a lack of funds; and
WHEREAS, due to the COVID-19 pandemic there is a greater need for rental
assistance in the City of Tukwila. However, as the situation improves, the City Council
may reconsider a new resolution to determine future allocation of SHB 1406 funds for
rental assistance and pooling amount with SKHHP; and
WHEREAS, SHB 1406 funds may be used for the purpose of acquiring, rehabilitating
or constructing affordable housing; funding the operations and maintenance costs of new
units of affordable or supportive housing; and for rental assistance; and
WHEREAS, SHB 1406 requires counties and cities that enact its provisions to also
provide annual reports to the Department of Commerce;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY RESOLVES AS FOLLOWS:
Section 1. Resolution of Intent (Option 11. The City Council declares its intent to
authorize the City of Tukwila to keep 30% of the recaptured Washington State sales tax
funds collected under SHB 1406, up to a maximum of $49,800 annually, to be used for
rental assistance to Tukwila residents, and to transfer the remaining funds collected to the
South King Housing and Homelessness Partners (SKHHP).
Section 1. Resolution of Intent Motion 21. The Citv Council declares its intent to
authorize the City of Tukwila to keep 100% of the recaptured Washington State sales tax
funds collected under SHB 1406 through February 2020 to be used for rental assistance
to Tukwila residents. Beginning March 2020, allocate 30% of the recaptured Washington
State sales tax funds collected under SHB 1406 for rental assistance, up to a maximum of
$49.800 annually. and transfer the remainina funds collected to the South Kina Housina
and Homelessness Partners (SKHHP).
W:\Word Processing\Resolutions\HB 1406 use of funds 4-1-20
MS:bjs
20
Page 2 of 3
Section 1. Resolution of Intent [Option 31. The City Council declares its intent to
authorize the City of Tukwila to keep 100% of the recaptured Washington State sales tax
funds collected under SHB 1406 to be used for rental assistance to Tukwila residents until
the COVID-19 pandemic is over as determined by the City Administration. As the situation
improves, the City Council shall consider a new resolution to determine future allocation
of SHB 1406 funds for rental assistance and a Doolina amount with the South Kina Housina
and Homelessness Partners SKHHP.
Section 2. Further Authority; Ratification. All City officials, their agents, and
representatives are hereby authorized and directed to undertake all action necessary or
desirable from time to time to carry out the terms of, and complete the actions
contemplated by, this resolution. All acts taken pursuant to the authority of this resolution
but prior to its effective date are hereby ratified.
Section 3. This authorization is contingent upon each of the other SKHHP cities
taking similar action to direct a proportionate amount of SHB 1406 funds to SKHHP.
Section 4. Effective Date. This resolution shall take effect immediately upon its
passage and adoption.
PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at
a Regular Meeting thereof this day of
ATTEST/AUTHENTICATED:
Christy O'Flaherty, MMC, City Clerk
APPROVED AS TO FORM BY:
Office of the City Attorney
, 2020.
De'Sean Quinn, Council President
Filed with the City Clerk:
Passed by the City Council:
Resolution Number:
W:\Word Processing\Resolutions\HB 1406 use of funds 4-1-20
MS:bjs
Page 3 of 3
21