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Home My WebLink AboutWS 2026-06-01 COMPLETE AGENDA PACKETCITY OF TUKWILA City Council Work Session Monday, June 1, 2026 at 5:30 p.m. Location: Tukwila City Hall, Council Chambers, 6200 Southcenter Boulevard, Tukwila, WA 98188 Join remotely: 1-253-292-9750, Access Code: 70090635# or click here to join the meeting AGENDA 1. CALL TO ORDER 2. PUBLIC COMMENTS Those wishing to provide public comments may verbally address the City Council both on -site at Tukwila City Hall or remotely via phone or Microsoft Teams for up to 5 minutes for items both on and not on the meeting agenda. Per the Council Rules of Procedure, the total time for public comment should not generally exceed 30 minutes and time may be reduced to 3 minutes if there are more than 6 speakers. To provide comment remotely, please email citycouncil(c�tukwilawa.gov with your name and topic by 5:00 PM on the meeting date. Please clearly indicate that your message is for public comment during the meeting, and you will receive further instructions. 3. BUSINESS ITEMS a. Multi -family Property Tax Exemption (MFTE) Program Overview Pg. 2 Derek Speck, Economic Development Administrator 4. ADJOURNMENT This agenda is available at www.tukwilawa.cov, and in alternate formats with advance notice for those with disabilities. Tukwila Council meetings are audio/video taped, and available at w.tukwilawa.gov If you are in need of translation or interpretation services at a Council meeting, please contact us at 206-433-1800 by 12:00 p.m. on the meeting date. CITY COUNCIL WORK SESSION JUNE 1. 2026 2 • Present overview of the multi -family property tax exemption (METE) program in preparation for Council consideration and decisions in Q3. • Council questions • What additional information woulc Council like? 3 Under State law (RCW 84.14) new multi -family residential development (construction, conversion, or rehabilitation) can be exempted from property taxes for 8, 12 or 20 years Intended to increase supply of housing (including affordable) and reduce sprawl Cities decide whether to adopt Cities decide "residential targeted area" and may include additional criteria In 2025 State Legislature passed HB1491 which significantly amended RCW 84.14 in areas near high -capacity transit stops. 4 Minimum Number of Units as Affordable Affordable Includes "Low Income" Affordable Includes "Moderate Income" Minimum Term None None None None 20% Yes Yes 12 years 20% Yes No 99 years • "Affordable housing" means 30% or less of household income paid for rent and utilities • "Low Income" means household income at or below 80% of AMI. • "Moderate Income" means household income at or below 115% of AMI. • Area Median Income (AMI) is adjusted for household size. • Ownership may have slightly different limits and requirements. 5 ................................................,„......„.„,„...„...„..„,.......„...„,.,.,..........„........x...„.........lki.'„,g. ............ .......„„............................„. ....... .... . ............... ................„„.. ..........„...........„................................„................„.....„„„....„ "„'„........................„...................................,......,.......... „... „..„ . .......... ...... .......... ......................... 80% 115% 1-..,:-..........!:::.'Peir'ait)...t1,.....:........„!,..,.......!i....,...........:,....,.J..!::::!..:.,!,,;,117..i1.1.,,,:,........,,,,:„...„. 92,080 132,000 •::::::,::::-.:::!...::::::::.:!...:::::::::,..,....g:::111:,:;..4f1:1......:': "IrSttrIS,;:,':,......;.,,:::;:;:,i.'.......,,,....::::';';:i::.i.......,...........,:•....4.! 105,280 151,000 ...................................„„............„,..„„„.„,.........................................„............„ ...... ........„...,„................... .............................................................,................„,„.,„,„„„„„,„.... --......... $118,400 170,000 ''..n,',':::::':'1'.'.:......i:'..1:::::,::.;.:::.:::::;:::,'::::::.:::.:::::::::::.::::::;.....4:::i''''...:,..:::;:i4...;,ii.:,..",.it:',',;..,..ii.::....j.i':.:.;:,:,..j.;:.;,::.?:,.:]...,L,',•:::.?;,.:,..•:,,:,:(.;.;.:',',.:',,......:.:.....,:(.;,:':::.,.':..,,..;',;::::•:::',:.;..,:.-,. II;::::!,,,!...!!!..),!.:;.:!:::.:fi..;........i.,;::::':ii:',..::::::4'...:...irecer• "'"..:IticS.':i'..1:::.):4::::,..:::.,...:i...2.!:;;;I:,i,:,',::::,i: $142,080 S204,000 • This chart is a sample related to the required thresholds in the multi -family property tax exemption program per RCW 84.14. • The data for 80% of Area Median Income (AMI) is from Washington State Housing Finance Commission effective 5/1/2026. Data is available for larger households. • Data for 115% of AMI calculated by City Economic Development staff. • "Affordable" rents would be 30% of AMI. 6 Adopted in 2014 Revised in 2017 Revised in 2021 Revised in 2023 4:- Expanded residential targeted area Cap of 800 units -:.Sunset clause December 31, 2028 Southcenter Residential Targeted Area *la EIT1 ftrek Zoning Mewl E=1. C404, Limits TUC Zoning t_.„1 Pawl SS Rag** Conter litost (Meted Owelogment t, Rentoi, ManagM comerdol comfit workpbce 7 • AirMark Apartments - 2018 • Mariblue (formerly Marvelle) - 2021 55+ • Merrill Gardens (formerly Holden) - 2022 Assisted living . Prose - 2025 4,:fr all ages All are 8-year exemptions (no affordability requirements) 8 • Prato District • Alliance Residential • Westfield Southcenter . Newporter parcel 9 Extend sunset clause Increase cap on number of units Add additional residential targeted areas (e.g. Tukwila International Boulevard) Add 20-year option Adapt for HB 1491 Revise criteria 10 Do we want more or better multi -family development? If so, why and where? • Meet housing targets • More affordability Rehabilitation, better design, unit types and sizes, etc. • Neighborhood benefits (stimulate more development, etc.) • Is the tax incentive necessary for new development to occur? • Neighboring cities programs • Forgone Revenue or Tax Shift • Effects on other taxing districts • Administrative resources 11 • Would development occur without tax incentive? Cost to provide service • Forgone property tax or tax shift After added to property tax rolls, grows at 1% annually • Stimulative benefits City Tax Revenues for New Construction With Eight Year Multi -Family Property Tax Exemption The example estimates City revenue on a new$30 million development, if the project receives an eight year property tax exemption. Tax Revenues Year U Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Property Taxes Utility Taxes MO on €ncome Sales Tax on Construction H&don Construction REST 5 3,758 $ 3,788 $ 3,325 7,200 7,416 - 22040 2,101 191,250 18,488 7,500 $ 3,864 $ 3,902 $ 7,536 7,353 2,164 2,229 3,941 $ 8,104 2,296 3,981 $ 8,347 2,365 Total $ 220,988 5 13,023 $ 4,341 4,021 8,597 2,435 $ 4,961 8,855 2,509 $ 95,008 9,121 2,584 Year 10 $ 95,958 9,394 2,662 15,425 14 Tax Shift/FerEene Revenue Property Taxes $ - $ 71,250 $ 71,963 $ 72,682 $ 73,409 $ 74,143 $ 74,884 $ 75,633 $ 76,390 $ - Assumptions (1) Land value is $1.5 million (5% of total project cost). City property tax levy rate is $2.5 per thousand ($0.0025). Annual levy increases 1%. (2) 3nn.idents spend $100 per month per unit for their utilities and inflation of 3%. Utility tax rate is 6%, (3) 0&3 on income assumes gross income on property based on rent of $2,000/unit/month and inflation of 3%. Tax rate $0.00085. (4) Construction starts and is completed in year 0. Property tax exemption starts in year 1. (5) Taxable construction is $22.5 million (75%nf the $30 million total project cast). City sales tax rate is $.0085. (5) Real estate excise tax (RE€T) assumes a rate of 0.5% and that the property is sold in year o and year 9. (7) Property market value increases 3% annually. Notes (1) This example is a general estimate of a new 100 unit ,apartment building built over one level of parking. (2) The property taxes on the land would likely be paid even without the development or the exemption. (3) The project may generate parks, fire, and transportation impact fees to be used for capital projects related to new development. (4) Tax Shift/Forgone Revenue shows the amount of property taxes that would either be shifted to other property taxpayers or would be revenue the city would not receive. It assumes $9 billion total assessed value. If fully shifted, the example project would increase property taxes on other properties by approximately $0.79 per $100,000 annually (approximately $5 for a $500,000 house). (5) This example only shows revenues. It does not show the city's costs of providing services to the new development. 12 Research HB 1491 Present options to Planning and Community Development Committee in 03 13 City Tax Revenues for New Construction With Eight Year Multi -Family Property Tax Exemption The example estimates City revenue on a new $30 million development, if the project receives an eight year property tax exemption. Tax Revenues Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Property Taxes $ 3,750 $ 3,788 $ 3,825 $ 3,864 $ 3,902 $ 3,941 $ 3,981 $ 4,021 $ 4,061 $ 95,008 $ 95,958 Utility Taxes 7,200 7,416 7,638 7,868 8,104 8,347 8,597 8,855 9,121 9,394 B&O on Income - 2,040 2,101 2,164 2,229 2,296 2,365 2,436 2,509 2,584 2,662 Sales Tax on Construction 191,250 - - - - - B&O on Construction 18,488 - - - - - - REET 7,500 - - 190,016 - Total $ 220,988 $ 13,028 $ 13,343 $ 13,666 $ 13,999 $ 14,341 $ 14,692 $ 15,054 $ 15,425 $ 296,728 $ 108,014 Tax Shift/Forgone Revenue Property Taxes $ - $ 71,250 $ 71,963 $ 72,682 $ 73,409 $ 74,143 $ 74,884 $ 75,633 $ 76,390 $ - $ Assumptions (1) Land value is $1.5 million (5% of total project cost). City property tax levy rate is $2.5 per thousand ($0.0025). Annual levy increases 1%. (2) Residents spend $100 per month per unit for their utilities and inflation of 3%. Utility tax rate is 6%. (3) B&O on income assumes gross income on property based on rent of $2,000/unit/month and inflation of 3%. Tax rate $0.00085. (4) Construction starts and is completed in year 0. Property tax exemption starts in year 1. (5) Taxable construction is $22.5 million (75% of the $30 million total project cost). City sales tax rate is $.0085. (6) Real estate excise tax (REET) assumes a rate of 0.5% and that the property is sold in year 0 and year 9. (7) Property market value increases 3% annually. Notes (1) This example is a general estimate of a new 100 unit apartment building built over one level of parking. (2) The property taxes on the land would likely be paid even without the development or the exemption. (3) The project may generate parks, fire, and transportation impact fees to be used for capital projects related to new development. (4) Tax Shift/Forgone Revenue shows the amount of property taxes that would either be shifted to other property taxpayers or would be revenue the city would not receive. It assumes $9 billion total assessed value. If fully shifted, the example project would increase property taxes on other properties by approximately $0.79 per $100,000 annually (approximately $5 for a $600,000 house). (5) This example only shows revenues. It does not show the city's costs of providing services to the new development. 14 Office of Economic Development 2023-4-11