Chapter 3.30
MULTIFAMILY DWELLING UNIT LIMITED PROPERTY TAX EXEMPTION
Sections:
3.30.030 Residential targeted areas – Designation.
3.30.040 Tax exemption – Duration – Valuation – Exceptions.
3.30.060 Application procedure.
3.30.080 Amendment of contract.
3.30.090 Extension of conditional certificate – Required findings – Denial – Appeal.
3.30.100 Final certificate – Application – Issuance – Denial – Appeal.
3.30.110 Annual certification.
3.30.120 Cancellation of tax exemption – Appeal.
3.30.010 Purpose.
As provided for in Chapter 84.14 RCW, the purpose of this chapter is to provide limited exemptions from ad valorem property taxation for qualified new multifamily housing constructed in the community business, city center core and frame zones, in order to:
(1) Accomplish the planning goals of the Growth Management Act, Chapter 36.70A RCW, and the city of Federal Way comprehensive plan; and/or
(2) Encourage residential opportunities, including affordable housing, within the community business, city center core and frame; and/or
(3) Stimulate new construction of multifamily housing in the community business, city center core and frame to increase housing opportunities; and/or
(4) Assist in directing future population growth into the community business, city center core and frame, thereby reducing development pressures on single-family residential neighborhoods; and/or
(5) Achieve development densities that are more conducive to transit use in the community business, city center core and frame; and/or
(6) Promote community development and community business, city center core and frame revitalization, in fulfillment of the comprehensive plan.
(Ord. No. 23-969, § 1, 9-19-23; Ord. No. 23-964, § 3, 8-8-23; Ord. No. 09-606, § 1, 3-17-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-230.)
3.30.020 Definitions.
In construing the provisions of this chapter, the following definitions shall be applied:
“Affordable housing” means the definition provided for in RCW 84.14.010.
“Assessor” means the King County assessor.
“Director” means the director of the Federal Way community development department, or any other city office, department or agency that shall succeed to its functions with respect to this chapter, or his or her authorized designee.
“High cost area” means the definition provided for in RCW 84.14.010.
“Household” means the definition provided for in RCW 84.14.010.
“Low-income household” means the definition provided for in RCW 84.14.010.
“Moderate-income household” means the definition provided for in RCW 84.14.010.
“Multifamily housing” means a building or townhouse having four or more dwelling units designed for permanent residential occupancy.
“Owner” means the property owner of record.
“Permanent residential occupancy” means multifamily housing that provides either rental or owner occupancy for a period of at least one month. This excludes hotels and motels that predominantly offer rental accommodation on a daily or weekly basis.
“Residential targeted area” means the community business, city center core and frame zones, as designated by the city council pursuant to this chapter.
(Ord. No. 23-964, § 4, 8-8-23; Ord. No. 09-606, § 1, 3-17-09; Ord. No. 09-600, § 17, 1-6-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-231.)
3.30.030 Residential targeted areas – Designation.
(1) Pursuant to this section, the Federal Way city center and community business zone, consisting of the parcels zoned CC-C, CC-F, and BC, are designated as a “residential targeted area.”
(2) If a part of any legal lot is within the residential targeted area, then the entire lot shall be deemed to lie within the residential targeted area.
(Ord. No. 23-964, § 5, 8-8-23; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-232.)
3.30.040 Tax exemption – Duration – Valuation – Exceptions.
(1) Exemption, duration of. The value of new housing construction, conversion, and rehabilitation improvements qualifying under this chapter is exempt from ad valorem property taxation, as follows:
(a) For properties for which applications for certificates of tax exemption eligibility are submitted under Chapter 84.14 RCW, the value is exempt:
(i) For eight successive years beginning January 1st of the year immediately following the calendar year of issuance of the certificate; or
(ii) For 12 successive years beginning January 1st of the year immediately following the calendar year of issuance of the certificate, if the property otherwise qualifies for the exemption under this chapter and meets the conditions in this subsection. For the property to qualify for the 12-year exemption under this subsection, the applicant must commit to renting or selling at least 20 percent of the multifamily housing units as affordable housing units to low and moderate-income households, and the property must satisfy that commitment and any additional affordability and income eligibility conditions adopted by the local government under this chapter. In the case of projects intended exclusively for owner occupancy, the minimum requirement of this subsection may be satisfied solely through housing affordable to moderate-income households.
(2) Limits on exemption. The exemption does not apply to the value of land or to the value of nonhousing improvements not qualifying under FWRC 3.30.050, nor does the exemption apply to increases in assessed valuation of land and nonqualifying improvements. This section also does not apply to increases in assessed valuation made by the assessor on nonqualifying portions of building and value of land, nor to increases made by lawful order of a county board of equalization, the Department of Revenue, or a county, to a class of property throughout the county or specific area of the county to achieve the uniformity of assessment or appraisal required by law.
(Ord. No. 23-969, § 2, 9-19-23; Ord. No. 09-606, § 1, 3-17-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-233.)
3.30.050 Project eligibility.
To qualify for exemption from property taxation under this chapter, the property must satisfy all of the following requirements:
(1) The property must be located in the designated residential targeted area.
(2) The project must consist of at least four dwelling units of multifamily housing, located within a residential structure or a mixed-use development, in which at least 50 percent of the space within such residential structure or mixed-use development is intended for permanent residential occupancy.
(3) The project must comply with all zoning requirements, land use regulations, and building code requirements contained in the Federal Way Revised Code and applicable upon land use permit approval or submittal of a complete building permit application, whichever occurs sooner.
(4) For the duration of the exemption granted under this chapter, the property shall have no violations of applicable zoning requirements, land use regulations, or building code requirements contained in the Federal Way Revised Code for which the community development department shall have issued an order to cease activity (“OTC”) or notice of violation and order to correct (“NOV”) that are not resolved by a voluntary correction agreement, vacation by the hearing examiner, or action of the property owner in compliance with the applicable code requirements as determined by the director, within the time period for compliance provided in such OTC or NOV and any extension of the time period for compliance granted by the director.
(5) New construction multifamily housing must be completed within three years from the date of approval of the application or by any extended deadline granted by the director pursuant to FWRC 3.30.090.
(6) Prior to issuance of a temporary certificate of occupancy, or a permanent certificate of occupancy if no temporary certificate is issued, the owner must enter into a contract with the city, approved by the city council, under which the owner has agreed to the implementation of the development on terms and conditions satisfactory to the city council.
(Ord. No. 23-969, § 3, 9-19-23; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-234.)
3.30.060 Application procedure.
The owner of property applying for exemption under this chapter shall submit an application to the director on a form established by the director. The owner shall verify the correctness of the information contained in the application by his/her signature and affirmation made under penalty of perjury under the laws of the state of Washington. The application shall contain such information as the director may deem necessary or useful, which at a minimum shall include:
(1) A completed city of Federal Way application form, including information setting forth the grounds for tax exemption;
(2) A brief written description of the project, and schematic site and floor plans of the multifamily units and the structure(s) in which they are proposed to be located;
(3) Floor and site plans of the proposed project, which plans may be revised by the owner provided such revisions are made prior to the city’s final action on the exemption application;
(4) A statement from the owner acknowledging the potential tax liability when the property ceases to be eligible for exemption under this chapter;
(5) At the time of initial application under this section, the owner shall pay to the city an initial application fee of $150.00, plus an amount necessary to cover recording fees under FWRC 3.30.100;
(6) The application may be submitted at any time prior to issuance of a temporary certificate of occupancy, or a permanent certificate of occupancy if no temporary certificate is issued.
(Ord. No. 23-969, § 4, 9-19-23; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-235.)
3.30.070 Application review – Approval – Required findings – Issuance of conditional certificate – Denial – Appeal.
(1) The director may approve an application if he or she finds that:
(a) A minimum of four new units are being constructed;
(b) The proposed project is or will be, at the time of completion, in conformance with all approved plans, and all applicable requirements of the Federal Way Revised Code or other applicable requirements or regulations in effect at the time the application is approved;
(c) The owner has complied with all of the requirements of this chapter, including but not limited to project eligibility requirements contained in FWRC 3.30.050 and application requirements contained in FWRC 3.30.060;
(d) The project site is located within a designated residential targeted area; and
(e) If applicable, the proposed multiunit housing project meets the affordable housing requirements as described in FWRC 3.30.040.
(2) The director shall deny an application if the foregoing criteria are not met.
(3) If the application is approved, the owner shall enter into a contract with the city, approved by the city council, regarding the terms and conditions of the project under this article.
(4) Following council approval of the contract, the director shall issue a conditional certificate of acceptance of tax exemption. The conditional certificate shall expire three years from the date of approval unless an extension is granted as provided in FWRC 3.30.090.
(5) If the application is denied, the director shall state in writing the reasons for the denial and send notice of denial to the owner’s last known address within 10 days of the denial.
(6) An owner may appeal a denial of a tax exemption application to the city council by filing a notice of appeal with the city clerk within 30 calendar days of receipt of notice of the denial. The appeal before the city council shall be based upon the record before the director, and the director’s decision will be upheld unless the owner can show that there is no substantial evidence on the record to support the director’s decision. The city council’s decision on appeal is final.
(Ord. No. 09-606, § 1, 3-17-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-236.)
3.30.080 Amendment of contract.
(1) Any owner seeking amendment(s) to the contract approved by the director may do so by submitting a request in writing to the director at any time within three years of the date of the director’s approval of the contract.
(2) Any owner seeking amendments to the approved form of contract shall pay to the city an amendment application fee of $150.00 for administrative costs, plus any amount necessary to cover recording fees under FWRC 3.30.100.
(3) The date for expiration of the conditional certificate shall not be extended by contract amendment unless all the conditions for extension set forth in FWRC 3.30.090 are met.
(Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-237.)
3.30.090 Extension of conditional certificate – Required findings – Denial – Appeal.
(1) The conditional certificate may be extended by the director for a period not to exceed 24 consecutive months. The owner shall submit a written request stating the grounds for the extension together with a fee of $150.00 for the city’s administrative cost to process the request. The director may grant an extension if the director finds that:
(a) The anticipated failure to complete construction within the required time period is due to circumstances beyond the control of the owner; and
(b) The owner has been acting, and could reasonably be expected to continue to act, in good faith and with due diligence; and
(c) All the conditions of the original contract between the owner and the city will be satisfied upon completion of the project.
(2) If an extension is denied, the director shall state in writing the reason for denial and shall send notice to the owner’s last known address within 10 calendar days of the denial. An owner may appeal the denial of an extension to the hearing examiner as provided in process IV of FWRC Title 19, Zoning and Development Code.
(Ord. No. 09-594, § 11, 1-6-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-238.)
3.30.100 Final certificate – Application – Issuance – Denial – Appeal.
(1) Upon completion of the construction as provided in the contract between the owner and the city, and upon issuance of a temporary certificate of occupancy, or a permanent certificate of occupancy if no temporary certificate is issued, the owner may request a final certificate of tax exemption. The owner shall file with the director such information as the director may deem necessary or useful to evaluate eligibility for the final certificate, which shall at a minimum include:
(a) A statement of expenditures made with respect to each multifamily housing unit and the total expenditures made with respect to the entire property;
(b) A description of the completed work and a statement of qualification for the exemption;
(c) If applicable, a statement that the project meets the affordable housing requirements as described in FWRC 3.30.040;
(d) A statement that the work was completed within the required three-year period or any approved extension.
(2) At the time of application for final certificate under this section, the owner shall pay to the city a fee of $50.00 to cover the city’s administrative costs.
(3) Within 30 days of receipt of all materials required for a final certificate, the director shall determine whether the completed work, and the affordability of the units, is consistent with the contract between the city and owner, whether all or a portion of the completed work is qualified for exemption under this article and, if so, which specific improvements satisfy the requirements of this article.
(4) If the director determines that the project has been completed in accordance with the contract between the owner and the city and the requirements of this article, the city shall file a final certificate of tax exemption with the assessor within 10 days of the expiration of the 30-day period provided under subsection (3) of this section.
(5) The director is authorized to cause to be recorded, or to require the owner to record, in the real property records of the King County department of records and elections, the contract with the city required under FWRC 3.30.070, or such other document(s) as will identify such terms and conditions of eligibility for exemption under this article as the director deems appropriate for recording.
(6) The director shall notify the owner in writing that the city will not file a final certificate if the director determines that the project was not completed within the required three-year period or any approved extension, or was not completed in accordance with the contract between the owner and the city and the requirements of this article, or, if applicable, the affordable housing requirements as described in FWRC 3.30.040 were not met, or the owner’s property is otherwise not qualified for the limited exemption under this article.
(7) The owner may appeal the director’s decision to the hearing examiner by filing a notice of appeal with the city clerk within 14 calendar days after issuance of the notice of the denial. The appeal before the hearing examiner shall follow the provisions for appeal contained in FWRC 19.65.120. The owner may appeal the hearing examiner’s decision to the King County superior court according to the procedures contained in RCW 34.05.510 through 34.05.598, as provided in RCW 84.14.090(6), within 30 days of notification by the city to the owner of the decision.
(Ord. No. 09-606, § 1, 3-17-09; Ord. No. 09-594, § 12, 1-6-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-239.)
3.30.110 Annual certification.
(1) Within 30 days after the first anniversary of the date the city filed the final certificate of tax exemption and each year thereafter, for a period of 10 years, the property owner shall file a certification with the director, verified upon signed affirmation under penalty of perjury under the laws of the state of Washington. The certification shall contain such information as the director may deem necessary or useful, and shall at a minimum include the following information:
(a) A statement of occupancy and vacancy of the multifamily units during the previous year;
(b) A certification that the property has not changed use and, if applicable, that the property has been in compliance with the affordable housing requirements as described in FWRC 3.30.040 since the date of filing of the final certificate of tax exemption, and continues to be in compliance with the contract with the city and the requirements of this article;
(c) A description of any improvements or changes to the property made after the filing of the final certificate or most recent certification, as applicable.
(2) Failure to submit the annual certification may result in cancellation of the tax exemption.
(Ord. No. 09-606, § 1, 3-17-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-240.)
3.30.120 Cancellation of tax exemption – Appeal.
(1) If at any time the director determines that the property no longer complies with the terms of the contract or with the requirements of this article, or the use of the property is changed or will be changed to a use that is other than residential, or if the owner intends to discontinue compliance with the affordable housing requirements as described in FWRC 3.30.040, or the property for any reason no longer qualifies for the tax exemption, the tax exemption shall be canceled and additional taxes, interest and penalties imposed pursuant to state law.
(2) If the owner intends to convert the multifamily housing to another use or intends to discontinue compliance with the affordable housing requirements as described in FWRC 3.30.040, the owner must notify the director and the King County assessor within 60 days of the change in use. Upon such change in use, the tax exemption shall be canceled and additional taxes, interest and penalties imposed pursuant to state law.
(3) Upon determining that a tax exemption shall be canceled, the director shall notify the property owner by certified mail, return receipt requested. The property owner may appeal the determination by filing a notice of appeal with the city clerk, within 30 days after issuance of the decision by the director, specifying the factual and legal basis for the appeal. The appeal before the hearing examiner shall follow the procedures set forth in FWRC 19.65.120. At the appeal hearing, all affected parties may be heard and all competent evidence received. The hearing examiner shall affirm, modify, or repeal the decision to cancel the exemption based on the evidence received. The hearing examiner shall give substantial weight to the director’s decision to cancel the exemption, and the burden of proof and the burden of overcoming the weight accorded to the director’s decision shall be upon the appellant. An aggrieved party may appeal the hearing examiner’s decision to the King County superior court in accordance with the procedures in RCW 34.05.510 through 34.05.598, as provided in RCW 84.14.110(2), within 30 days after issuance of the decision of the hearing examiner.
(Ord. No. 09-606, § 1, 3-17-09; Ord. No. 09-594, § 13, 1-6-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-241.)
3.30.130 Review of program.
(1) The provisions of this chapter shall be reviewed five years after the effective date of the ordinance codified herein. Such review may include, but not be limited to, the number of dwelling units granted property tax exemption under this program, consideration of the multifamily development trends in the city and region, review of administrative processes and procedures, as well as public comment. If the program is terminated, no further applications for a conditional certificate of tax exemption shall be accepted. Incomplete applications shall be returned to the owner.
(2) Notwithstanding subsection (1) of this section, pending complete applications for a conditional certificate, extension of conditional certificate or final certificate shall be processed as provided in this chapter under FWRC 3.30.050 through 3.30.090. FWRC 3.30.040, 3.30.070, 3.30.100, and 3.30.110 shall survive the expiration of this chapter and shall apply to all properties that have been issued a final certificate of tax exemption under this chapter until expiration, termination or cancellation of the certificate.
(Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-242.)