Chapter 3.95
MULTIFAMILY PROPERTY TAX EXEMPTION
Sections:
3.95.030 Designation of residential targeted areas.
3.95.040 Eligibility standards and guidelines.
3.95.050 Application procedures for conditional certificate.
3.95.060 Application procedures, review, and issuance of conditional certificate.
3.95.070 Application procedures for final certificate.
3.95.080 Annual compliance review.
3.95.090 Cancellation of tax exemption.
3.95.010 Purpose.
The purpose of this chapter, providing for an exemption from ad valorem property taxation for multifamily housing in the residential targeted area, is to:
A. Encourage increased residential opportunities, including affordable housing opportunities, within the residential targeted area;
B. Stimulate new multifamily housing construction and the rehabilitation of existing vacant and underutilized buildings for multifamily housing in the designated residential targeted area;
C. Assist in meeting the requirements of the Growth Management Act; and
D. Achieve development densities that promote economic investment and are more conducive to transit use in the designated residential targeted area. (Ord. 2105 § 1, 2023).
3.95.020 Definitions.
The definitions in this section apply throughout this chapter:
A. “Affordable housing” means residential housing that is rented by a person or household whose monthly housing costs, including utilities other than telephone, do not exceed 30 percent of the household’s monthly income. For the purposes of housing intended for owner occupancy, “affordable housing” means residential housing that is within the means of low- or moderate-income households.
B. “Low-income household” means a single person, family, or unrelated persons living together whose adjusted income is at or below 80 percent of the median family income adjusted for family size, for Pierce County, as reported by the United States Department of Housing and Urban Development.
C. “Moderate-income household” means a single person, family, or unrelated persons living together whose adjusted income is more than 80 percent but is at or below 115 percent of the median family income adjusted for family size, for Pierce County, as reported by the United States Department of Housing and Urban Development.
D. “Multifamily housing” means a building or a group of buildings having four or more dwelling units not designed or used as transient accommodations and not including hotels and motels. Multifamily units may result from new construction or rehabilitated or conversion of vacant, underutilized, or substandard buildings to multifamily housing.
E. “Owner” or “property owner” means the property owner of record.
F. “Permanent residential occupancy” means multifamily housing that provides either rental or owner-occupancy for a period of at least one month, excluding hotels, motels, or other types of temporary housing that predominately offer rental accommodation on a daily or weekly basis.
G. “Residential targeted area” means an area within an urban center or urban growth area that has been designated by the governing authority as a residential targeted area.
H. “Urban center” means a compact identifiable district designated by the city council where residents may obtain a variety of products and services. Urban centers shall contain several existing or previous businesses, adequate public facilities, and a mixture of land uses and activities. (Ord. 2105 § 1, 2023).
3.95.030 Designation of residential targeted areas.
A. The lands identified in the MFTE Residential Target Area map (see Exhibit 1) are designated as residential targeted areas.
B. If a part of any legal lot is within a residential targeted area, then the entire lot shall be deemed to lie within such residential targeted area.
C. Additional residential targeted areas may be designated if the city council determines that an area meets the criteria set forth in Chapter 84.14 RCW.
Exhibit 1: Residential Target Area (RTA)
(Ord. 2105 § 1, 2023).
3.95.040 Eligibility standards and guidelines.
A. To be eligible for exemption from property tax under this chapter, the property must satisfy all of the following requirements:
1. The project must be located within the residential targeted area designated in FMC 3.95.030;
2. The project must be multifamily housing consisting of at least four dwelling units within a mixed-used structure or as part of a mixed-use development, in which at least 50 percent of the space must provide for permanent residential occupancy;
3. The project must be designed to comply with the city’s comprehensive plan, applicable development regulations, and applicable building and housing code requirements;
4. The applicant must commit to renting or selling at least 20 percent of the multifamily housing units as affordable housing units to low-income households whose income is no more than 80 percent of the Pierce County area family median income, and the property must satisfy that commitment and any additional affordability and income eligibility conditions adopted by the local government city 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;
5. The project must be scheduled for completion within three years from the date of issuance of the conditional certificate;
6. If the property proposed to be rehabilitated is not vacant, an applicant must provide each existing tenant housing of comparable size, quality, and price and a reasonable opportunity to relocate;
7. The mix and configuration of housing units used to meet the requirement for affordable units under this chapter shall be substantially proportional to the mix and configuration of the total housing units in the project; and
8. The applicant must enter into a development agreement with the city, approved by the city council, under which the applicant has agreed to the implementation of the project on terms and conditions satisfactory to the city.
B. Duration of Tax Exemption. The following property tax exemptions are available for qualified properties in designated residential targeted areas:
1. Twelve-Year Tax Exemption. If the property otherwise qualifies for the exemption under this chapter and meets the conditions in subsection (A) of this section, an exemption for 12 successive years beginning January 1st of the year immediately following the calendar year of issuance of the final certificate of tax exemption.
C. Extension of Tax Exemption. The owner of property that received a tax exemption pursuant to subsection (B)(1) of this section may apply for an extension for an additional 12 successive years.
1. Only one extension may be granted.
2. Failure to timely apply for an extension shall be deemed a waiver of the extension.
3. For the property to qualify for an extension:
a. The property must have qualified for, satisfied the conditions of, and utilized the 12-year exemption sought to be extended;
b. The owner must timely apply for the extension on forms provided by the city 18 months prior to the expiration of the original exemption;
c. The property must meet the requirements of this chapter for the property to qualify for an exemption under subsection (A) of this section as applicable at the time of the extension application; and
d. The property must continue to rent or sell at least 20 percent of the multifamily housing units as affordable housing units for low-income households for the extension period.
4. If an extension is granted by the city, at the end of both the tenth and eleventh years of a 12-year extension, the applicant or the property owner at that time must provide tenants of affordable units with notification of the applicant’s or property owner’s intent to provide the tenant with relocation assistance in an amount equal to one month as provided in RCW 84.14.020, as amended.
D. Limitation on Tax Exemption Value.
1. The exemption provided for in this chapter does not include the value of land or non-housing-related improvements not qualifying under this chapter.
2. In the case of rehabilitation of existing buildings, the exemption does not include the value of improvements constructed prior to the submission of the application for conditional certificate required by this chapter.
3. The exemption does not apply to increases in the assessed value made by the county assessor on nonqualifying portions of the building and value of land. (Ord. 2105 § 1, 2023).
3.95.050 Application procedures for conditional certificate.
A. A property owner who wishes to propose a project for a tax exemption shall file an application with the department of community development upon a form provided by that department.
B. The application for exemption must be filed prior to issuance of the project’s first certificate of occupancy, temporary or final.
C. The application shall include:
1. Information setting forth the grounds for the exemption;
2. A description of the project and a site plan, including the floor plan of units;
3. A statement that the applicant is aware of the potential tax liability when the project ceases to be eligible under this chapter;
4. Detailed narrative describing how the applicant shall comply with the affordability requirements of this chapter;
5. Verification by oath or written affirmation of the information submitted by the applicant is true and accurate.
D. Fees. The application fee to the city shall be $1,000 for four units, plus $100.00 per additional multifamily unit, up to a maximum total fee to the city of $5,000. If the application shall result in a denial by the city, the city will retain that portion of the fee attributable to its own administrative costs and refund the balance to the applicant. (Ord. 2105 § 1, 2023).
3.95.060 Application procedures, review, and issuance of conditional certificate.
A. Conditional Certificate.
1. The city manager may approve or deny an application for tax exemption.
2. The city manager may only approve the application if the requirements of RCW 84.14.060 and this chapter have been met.
3. A decision to approve or deny certification of an application shall be made within 90 days of receipt of a complete application for tax exemption.
4. If approved, the applicant must enter into a contract with the city setting forth the terms and conditions of the project and eligibility for exemption under this chapter.
5. This contract is subject to approval by the city council.
6. The applicant shall record, at the applicant’s expense, the contract with the county assessor within 10 days of contract execution and provide the city with the recording number.
7. Once the city council has approved the contract and it is fully executed and recorded, the city manager will issue the property owner a conditional certificate of acceptance of tax exemption.
a. The certificate must contain a statement by the city manager that the property has complied with the required findings indicated in RCW 84.14.060.
b. The conditional certificate expires three years from the date of issuance unless an extension is granted as provided for in this section.
8. If denied, the city manager must state in writing the reasons for denial and send notice to the applicant at the applicant’s last known address within 10 days of the denial by U.S. mail, return receipt requested.
9. The applicant may appeal the denial to the hearing examiner within 30 days of the date of issuance of the denial by filing an appeal statement with the city clerk and paying any applicable fee. The appeal before the hearing examiner will be based upon the record made before the city manager with the burden of proof on the applicant to show there was no substantial evidence to support the city manager’s decision. The hearing examiner’s decision is appealable to the Pierce County superior court.
B. Extension of Conditional Certificate.
1. The conditional certificate may be extended by the city manager for a period not to exceed 24 consecutive months. The applicant must submit a written request stating the grounds for the extension, accompanied by a nonrefundable processing fee of $250.00. An extension may be granted if the city manager determines that:
a. The anticipated failure to complete construction or rehabilitation within the required time period is due to circumstances beyond the control of the applicant;
b. The applicant has been acting and could reasonably be expected to continue to act in good faith and with due diligence; and
c. All conditions of the original contract between the applicant and the city will be satisfied upon completion of the project.
2. The applicant may appeal a denial of the extension to the hearing examiner within 30 days of the issuance date of the denial by filing an appeal statement with the city clerk and paying any applicable fee. The hearing examiner’s decision is appealable to the Pierce County superior court. (Ord. 2105 § 1, 2023).
3.95.070 Application procedures for final certificate.
A. Application. Upon completion of the improvements provided in the contract between the applicant and the city, the applicant may request a final certificate of tax exemption. The applicant must file with the community development department the following information:
1. A statement that the project meets affordable housing requirements of this chapter;
2. The total number and type of units produced;
3. The number, size, and type of units produced which meet the affordable housing requirement;
4. The development cost of each unit produced;
5. The total monthly rent or total sale amount of each unit produced, affordable and market rent;
6. The annual income and household size of each renter household for each of the affordable units;
7. A statement of expenditures made with respect to each multifamily housing unit and the total expenditures made with respect to the entire property; and
8. A description of the completed work and a statement of qualification for the exemption; and
9. A statement that the work was completed within the required three-year period or any authorized extension;
10. A final certificate of occupancy issued by the building official for all occupiable portions of the project, commercial and residential;
11. Within 30 days of receipt of all materials required for an application for final certificate, the city manager shall determine whether a final certificate should be issued. The city manager’s determination shall be based on whether the improvements and the affordability of units satisfy the requirements of this chapter, the requirements and findings of RCW 84.14.060, and are consistent with the approved development agreement.
B. Approval. If the city manager determines that the project qualifies for the exemption, the city manager shall issue to the property owner a final certificate of tax exemption and file the final certificate with the county assessor within 10 days of the expiration of the 30-day period provided in this section.
C. Denial. The city manager shall notify the applicant in writing within 10 days of the expiration of the 30-day period provided in this section that the final certificate will not be issued if it is determined that:
1. The improvements were not completed within three years of issuance of the conditional certificate, or any authorized extension of the time limit;
2. The improvements were not completed in accordance with the contract between the applicant and the city;
3. The owner’s property is otherwise not qualified under this chapter;
4. If applicable, the affordable housing requirements of this chapter have not been met; or
5. The owner and the city manager cannot come to an agreement on the allocation of the value of improvements allocated to the exempt portion of the rehabilitation improvements, new construction and multi-use new construction.
D. Appeal. The applicant may appeal the denial to the hearing examiner within 30 days of the date of issuance of the denial by filing an appeal statement with the city clerk and paying any applicable fee. The appeal before the hearing examiner will be based upon the record made before the city manager with the burden of proof on the applicant to show there was no substantial evidence to support the city manager’s decision. The hearing examiner’s decision is appealable to the Pierce County superior court. (Ord. 2105 § 1, 2023).
3.95.080 Annual compliance review.
A. Declaration of Compliance.
1. Annually, when requested by the department of community development, for a period of 12 years, the property owner shall file a notarized declaration with the director indicating the following:
a. The number, size, and type of each unit, market rate and affordable.
b. The total monthly rent each unit, affordable and market rent.
c. For projects receiving a 12-year exemption, the annual income and household size of each renter household for each of the affordable units.
d. A description of subsequent improvements or changes to the property.
B. Verification. City staff shall also conduct on-site verification of the declaration. Failure to submit the annual declaration may result in the tax exemption being canceled. (Ord. 2105 § 1, 2023).
3.95.090 Cancellation of tax exemption.
A. Cancellation.
1. If at any time during the exemption period, the city manager determines the property owner is not complying with the term of the contract, the tax exemption will be canceled. This cancellation may occur in conjunction with the annual review or at any other time when noncompliance has been determined. If the owner intends to convert the multifamily housing to another use, the owner must notify the director and the Pierce County assessor within 60 days of the change in use.
2. Effect of Cancellation. If a tax exemption is canceled due to a change in use or other noncompliance, the Pierce County assessor may impose an additional tax on the property, together with interest and penalty, and a priority lien may be placed on the land, pursuant to state legislative provisions.
3. Notice and Appeal. Upon determining that a tax exemption is to be canceled, the city manager shall notify the property owner by certified mail. The property owner may appeal the determination by filing a notice of appeal with the city clerk within 30 days, specifying the factual and legal basis for the appeal. The hearing examiner will conduct a hearing at which all affected parties may be heard and all competent evidence received. The hearing examiner will affirm, modify, or repeal the decision to cancel the exemption based on the evidence received. An aggrieved party may appeal the hearing examiner’s decision to the Pierce County superior court. (Ord. 2105 § 1, 2023).