Chapter 3.15
MULTIFAMILY TAX EXEMPTION PROGRAM
Sections:
3.15.030 Residential target area, target area designation and standards.
3.15.040 Tax exemption for multiple-unit housing in target areas.
3.15.050 Project eligibility and performance standards.
3.15.060 Application procedure.
3.15.070 Application review and conditional certification.
3.15.080 Extension of conditional certificate.
3.15.100 Annual certification and report.
3.15.110 Cancellation of tax exemption.
3.15.010 Purpose.
A. As provided for in Chapter 84.14 RCW, the purpose of this chapter is to provide limited or 12-year exemptions from ad valorem property taxation for qualified new multiple-unit housing located in designated residential targeted areas.
B. This chapter is intended to promote and incentivize the development and redevelopment of a balanced socioeconomic mix of housing within the residential target area as a catalyst for additional investment and development of land uses to create vibrant, urban mixed-use districts. (Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.020 Definitions.
For the purposes of this chapter, the following definitions shall apply:
A. “Administrator” means the director of the city of Port Townsend planning and community development department or designee assigned to carry out this chapter.
B. “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.
C. “Household” means a single person, family, or unrelated persons living together.
D. “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 the county where the project is located, as reported by the United States Department of Housing and Urban Development.
E. “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 120 percent of the median family income adjusted for family size, for the county where the project is located, as reported by the United States Department of Housing and Urban Development.
F. “Multiple-unit housing” means a building having four or more dwelling units not designed or used as transient accommodations and not including hotels and motels. Multiple-unit housing may result from new construction or rehabilitated or conversion of vacant, underutilized, or substandard buildings to multiple-unit housing.
G. “Owner” means the property owner of record.
H. “Permanent residential occupancy” means multiple-unit housing that provides either rental or owner occupancy on a nontransient basis. This includes owner-occupied or rental accommodation that is leased for a period of at least one month. This excludes hotels and motels that predominately offer rental accommodation on a daily or weekly basis.
I. “Rehabilitation improvements” means modifications to existing structures, that are vacant for 12 months or longer, that are made to achieve a condition of substantial compliance with existing building codes or modification to existing occupied structures which increase the number of multiple-unit housing units.
J. “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 in accordance with this chapter. Residential targeted area may not include a campus facilities master plan. For purposes of this chapter, an area may be designated a residential target area if the requirements in subsection L of this section either currently exist, are provided for in the city’s capital facilities plan or transportation improvement plan, or would be required to be installed by the developer as a condition of development.
K. “Substantial compliance” means compliance with local building or housing code requirements that are typically required for rehabilitation as opposed to new construction.
L. “Urban center” means a compact identifiable district where urban residents may obtain a variety of products and services. An urban center must contain:
1. Several existing or previous, or both, business establishments that may include but are not limited to shops, offices, banks, restaurants, governmental agencies; and
2. Adequate public facilities including streets, sidewalks, lighting, transit, domestic water, and sanitary sewer systems; and
3. A mixture of uses and activities that may include housing, recreation, and cultural activities in association with either commercial or office, or both, use. (Ord. 3287 § 5, 2022; Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.030 Residential target area, target area designation and standards.
A. Residential target areas shall meet the criteria set forth in RCW 84.14.040 and this chapter.
B. Designation of additional residential target areas shall follow the process and procedures identified in RCW 84.14.040.
C. The residential target area(s) have been designated by the city council as shown on the map adopted with the ordinance codified in this chapter and maintained by the planning and community development department.
D. At any time, the city council may, by ordinance, in its sole discretion, amend or rescind the designation of a residential targeted area pursuant to the same procedural requirements of this section for the original designation.
E. If a part of any legal lot is within a residential targeted area as shown on the adopted residential target area(s), then the entire lot shall be deemed to lie within such residential targeted area. (Ord. 3287 § 5, 2022; Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.040 Tax exemption for multiple-unit housing in target areas.
A. Duration of Exemption. The value of improvements qualifying under this chapter is exempt from ad valorem property taxation as follows:
1. For properties for which applications are submitted after the date of adoption of the ordinance codified in this chapter, the value is exempt.
For 12 successive years beginning January 1st of the year immediately following the calendar year of issuance of the final certificate of tax exemption, if the property otherwise qualifies for the exemption and the applicant/owner rents or sells at least 20 percent of the multiple-unit housing units as affordable housing to low- and moderate-income households as further defined in this section.
a. For rental projects, at least 20 percent of the multiple-unit housing units in the project must be rented throughout the duration of the 12-year exemption period as affordable housing to low-income households at 80 percent or less of median income.
b. For ownership projects, at least 20 percent of the multiple-unit housing units in the project must be sold as affordable housing to low- or moderate-income households at 120 percent or less of median income.
B. Limits on Exemption. The exemption does not apply to the value of land or to the value of non-housing-related improvements not qualifying under this chapter, 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 county 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. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.050 Project eligibility and performance standards.
To qualify for exemption from property taxation under this section, the project must satisfy all of the following requirements:
A. Location. The project must be located within a residential target area identified in PTMC 3.15.030.
B. Size. The qualifying new multiple-unit residential apartment project must include a minimum of four units of multiple-unit housing. Existing multiple-unit housing that has been vacant for 12 months or more does not have to provide additional units.
C. The new, converted, or rehabilitated multiple-unit housing must provide for a minimum of 50 percent of the space for permanent residential occupancy. In the case of existing occupied multiple-unit development, the multiple-unit housing must also provide for a minimum of four additional multiple-unit units. Existing multiple-unit vacant housing that has been vacant for 12 months or more does not have to provide additional multiple-unit units.
D. Mixed-Use and Mixed-Use Redevelopment Projects. New and redevelopment projects of existing buildings located within the residential target area proposing a mixed-use commercial, office, or retail project with multiple-unit residential units may qualify for the tax exemption if four or more residential units are included within the project.
E. Compliance with Guidelines and Standards. The project must be designed to comply with the city’s comprehensive plan, building, housing, and zoning codes and any other applicable regulations in effect at the time the application is approved.
F. The applicant must enter into a contract with the city, approved by city council, under which the applicant agrees to the implementation of the development on terms and conditions satisfactory to the city council.
G. Completion Deadline. The project must be completed within three years from the date of approval of the contract by the city council. The administrator may grant one two-year extension, provided the applicant has demonstrated a good faith effort to complete the project. (Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.060 Application procedure.
Applications under this chapter will be processed as a Type I-A permit application as defined in Chapter 20.01 PTMC. A property owner who wishes to propose a project for a tax exemption shall complete the following:
A. File with the planning and community development department the required application form, provided by the department, setting forth the grounds for tax exemption along with the required application fees. The application materials shall include the following information:
1. A brief written description of the project, and schematic site and floor plans of the multiple-unit dwelling units and the structure(s) in which they are proposed to be located.
2. Floor and site plans of the proposed project, which plans may be revised by the owner, provided such revisions are made and presented to the administrator prior to the city’s final action on the exemption application.
3. A statement from the owner acknowledging the potential tax liability when the property ceases to be eligible for exemption under this section.
4. Verification by oath or affirmation of the information submitted.
B. Deadline. The application shall be submitted prior to the issuance of the building permit for the project, unless otherwise approved by the council. The administrator shall approve or deny an exemption application within 90 days of receipt of a complete application. (Ord. 3287 § 5, 2022; Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.070 Application review and conditional certification.
A. Approval. The administrator may approve an application if he/she finds that:
1. The owner has complied with all the requirements of this section, including but not limited to the project eligibility requirements contained in this chapter and the applicable requirements contained within this code; and
2. The proposed project is, or will be at the time of completion, in conformance with all approved plans, and all applicable requirements of this code or other applicable requirements or regulations in effect at the time the application is approved.
B. Contract Required. 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 section.
C. Issuance of Conditional Certificate. Following council approval of the contract, the administrator shall issue a conditional certificate of acceptance of tax exemption. The conditional certificate shall expire three years from the date of council approval of the contract unless an extension is granted as provided in PTMC 3.15.080.
D. Application Denial.
1. Denial. The administrator shall deny an application if the criteria in this chapter are not met. The administrator 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.
2. Appeal. The owner may appeal the administrator’s decision to the hearing examiner in accordance with Chapter 20.01 PTMC.
E. Contract Amendment. An owner may request an amendment(s) to the contract by submitting a request in writing to the administrator, together with the required fee, any time within three years of the date of the approval of the contract as provided for in PTMC 3.15.080. The date for expiration of the conditional certificate shall not be extended by contract amendment unless all the conditions for extension are met. (Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.080 Extension of conditional certificate.
A. Application. The conditional certificate may be extended by the administrator for a period not to exceed 24 consecutive months. The owner shall submit a written request stating the grounds for the extension together with the required application fee.
B. Approval. The administrator may grant an extension if he/she finds that:
1. The anticipated failure to complete construction within the required time period is due to circumstances beyond the control of the owner; and
2. The owner has been acting, and could reasonably be expected to continue to act, in good faith and with due diligence; and
3. All the conditions of the original contract between the owner and the city will be satisfied upon completion of the project.
C. Denial – Appeal. The owner may appeal the administrator’s decision to the hearing examiner in accordance with Chapter 20.01 PTMC. (Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.090 Final certificate.
A. Application. Upon completion of the construction as provided in the contract between the owner and the city, the owner may request a final certificate of tax exemption. The owner shall pay all required fees and file with the administrator such information as the administrator may deem necessary or useful to evaluate eligibility for the final certificate, which shall at a minimum include:
1. A statement of expenditures made with respect to each multiple-unit housing unit and the total expenditures made with respect to the entire property;
2. A description of the completed work and a statement of qualification for the exemption;
3. The total monthly rent or total sale amount of each multiple-unit housing unit rented or sold to date;
4. The income of each renter household to date at the time of initial occupancy and the income of each initial purchaser of owner-occupied multiple-unit housing units to date at the time of purchase;
5. If applicable, a statement that the project meets the affordable housing requirements of this section, along with the number, type, and specific multiple-unit housing units rented or sold to date, as applicable, to meet the affordable housing requirements;
6. Any additional information requested by the city pursuant to meeting any reporting requirements under Chapter 84.14 RCW; and
7. A statement that the work was completed within the required three-year period or any approved extension.
B. Determination. Within 30 days of receipt of all materials required for a final certificate, the administrator shall determine whether the completed work 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 section and, if so, which specific improvements satisfy the requirements of this section.
C. Filing with County Assessor. For projects that comply with the requirements of this chapter, the city shall file a final certificate of tax exemption with the county assessor within 10 days of the expiration of the 30-day period provided in subsection B of this section.
D. Denial. The administrator shall notify the owner in writing that the city will not file a final certificate if: (1) the administrator 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 section, or the owner’s property is otherwise not qualified for the limited exemption under this section; or (2) the owner and administrator cannot come to an agreement on the allocation of the value of the improvements allocated to the exempt portion of the project.
E. Appeal. The owner may appeal the administrator’s decision to the hearing examiner in accordance with Chapter 20.01 PTMC. (Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.100 Annual certification and report.
A. Within 30 days after the first anniversary of the date the city issued the final certificate of tax exemption and each year thereafter for the duration of the tax exemption period, the property owner shall file an annual report with the finance director. Failure to submit the annual report may result in cancellation of the tax exemption. The certification shall contain such information as required by Chapter 84.14 RCW and as the finance director may deem necessary or useful, and shall at a minimum include the following information:
1. A statement of occupancy and vacancy of the multiple-unit dwelling units during the 12 months ending with the anniversary date;
2. 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 this section since the date the city issued the final certificate of tax exemption and that the project continues to be in compliance with the contract with the city and the requirements of this section;
3. A description of any improvements or changes to the property made after the city issued the final certificate of tax exemption;
4. The total monthly rent of each multiple-unit housing unit rented or the total sale amount of each multiple-unit housing unit sold to an initial purchaser during the 12 months ending with the anniversary date;
5. The income of each renter household at the time of initial occupancy and the income of each initial purchaser of owner-occupied multiple-unit housing units at the time of purchase during the 12 months ending with the anniversary date;
6. If applicable, a breakdown of the number, type, and specific multiple-unit housing units rented or sold during the 12 months ending with the anniversary date, as applicable, to meet the affordable housing requirements of this section; and
7. Any additional information requested by the city pursuant to meeting any reporting requirements under Chapter 84.14 RCW.
B. The finance director shall report annually by December 31st of each year, beginning in 2007, to the Department of Commerce. The report shall include reporting requirements specified in RCW 84.14.100. (Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).
3.15.110 Cancellation of tax exemption.
A. Cancellation. If at any time the administrator determines that: (1) the property no longer complies with the terms of the contract or with the requirements of this chapter; (2) the use of the property is changed or will be changed to a use that is other than residential; (3) the project violates applicable zoning requirements, land use regulations or building code requirements; or (4) 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. Upon determining that a tax exemption shall be canceled, the administrator shall notify the property owner by certified mail, return receipt requested.
B. Appeal. The property owner may appeal the determination in accordance with Chapter 20.01 PTMC Type I-A permit procedures.
C. Change of Use. If the owner intends to convert the multiple-unit housing to another use, the owner must notify the administrator and the 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. (Ord. 3235 § 1 (Exh. A), 2019; Ord. 3200 § 2 (Exh. A), 2018).