At the July 26 Edmonds City Council meeting, councilmembers unanimously approved a “resolution of intent” to start the process for implementing a Multi-Family Tax Exemption Program in the Westgate area.
The council also set a public hearing for the Aug. 16 council meeting to receive feedback on the idea.
So what exactly would the program do?
During the July 26 council meeting, Patrick Doherty, the City of Edmonds’ Economic Development and Community Services Director, explained that the Washington State Legislature created a Multi-Family Tax Exemption Program in 1995. The aim “was to help spur redevelopment in lagging urban centers that have been designated by cities to fulfill GMA (Growth Management Act) goals, thereby reducing sprawl and promoting smart growth” Doherty said.
The Edmonds City Council approved a plan in April 2015 to rezone the Westgate commercial area to include taller buildings and mixed residential/commercial use. At the time of passage, officials noted it would probably be years before such redevelopment occurred, since the rezoning applies only to new development, and many of the existing businesses are well-established.
Implementing a Multi-Family Tax Exemption Program (MFTP) could speed up the process, by providing developers and investors with an incentive to come to the Westgate area, Doherty said.
“There can be many challenges transforming the older, auto-age, low-density strip center-type development into more mixed-use type neighborhoods that we envision in our plans,” Doherty said. These barriers — including unwilling property sellers who need to aggregate multiple properties and existing long-term leases — “can really stall the transformation to mixed-use centers for decades,” Doherty said.
During his presentation, Doherty also noted that it’s more difficult for smaller cities to compete with higher-rent metropolitan areas like Seattle and Bellevue for development dollars, because developers receive a higher return on their investment in those areas.
The Multi-Family Tax Exemption Program has already been implemented by cities statewide — including Mountlake Terrace, Lynnwood and Shoreline — and Doherty said he’s heard that the incentives do make a difference.
Many developers have come to see the MFTP as “a necessary tool to help overcome the challenges of urban redevelopment in all the highest-rent housing markets,” he added.
Under state law, the program is applicable to projects containing at least four dwelling units. It exempts the residential improvement value — the value of the residential portion of the project — only. “The nonresidential portion — usually meaning the commercial part — is not exempt and the land value is not exempt,” Doherty said. State law provides two options for exemption periods, eight years or 12 years. The 12-year exemption period is available only if the project includes at least 20 percent affordable housing — defined as units available for rent or purchase “to low- or moderate- income households,” he explained.
“There is no increase in taxes to taxpayers,” Doherty said. “Even though a project may be partially exempt for property taxes during the exemption period, existing taxpayers see no additional burden. Exempted taxes simply do not accrue during the exemption period. Upon completion of the exemption period, the entire project is taxed in full,” he said.
Now that the council has approved a resolution of intent to start the MFTP program, next comes the public hearing during the Aug. 16 city council meeting. Following that hearing, if the council decides it wants to continue with the program, city staff will come back in a few months with program details for council discussion and approval, Doherty said.
You can see the Power Point from the July 26 meeting here.
— By Teresa Wippel