FA ResolutionTaxExemptionSTF
Content
COUNCIL DATE AGENDA ITEM
12/03/08 4E
CITY COUNCIL MEETING
Olympia, Washington December 3, 2008
Resolution Setting January 6, 2009 as Public Hearing Date for Multi-Family Housing Tax Exemption __________________________________________________________________
CITY MANAGER’S RECOMMENDATION: Approve the attached Resolution setting January 6, 2009 as the date for a public hearing on revising the designations of residential targeted areas for the purpose of providing tax exemptions for eligible improvements.
STAFF CONTACT: ORIGINATED BY: PRESENTERS AND OTHERS NOTIFIED:
Steven Friddle, Community Services Manager, (360) 753-8591, [email protected] Community Planning and Development Department None – Consent Calendar Notified: Notice will be sent once the hearing date is set 1. Proposed Resolution None The 10-year multi-family tax exemption provisions contained in Olympia Municipal Code 5.86 were first adopted in August 1997 (Ordinance 5713). The ordinance was amended in December 1997 to expand the residential target area located on Olympia’s Westside (Ord. 5734). Further Amendments to the Target Area descriptions were not made as new zoning districts were created or amended within the Target Areas. The issue of property tax exemptions was raised during the course of the 2008 Comprehensive Plan discussion and hearing. The Finance Committee reviewed and recommended preliminary approval of the proposed amendments on October 20, 2008.
ATTACHMENTS: BUDGET IMPACT/ SOURCE OF FUNDS: PRIOR COUNCIL/ COMMITTEE REVIEW:
BACKGROUND:
The 2007 Legislature modified the property tax exemption provisions to provide new affordable housing incentives. In summary, the 10-year Multi-Family Tax Exemption provision was replaced with an 8-year or 12-year exemption (E2SHB 1910). The 8-year exemption is available to market-rate multifamily projects and the 12-year exemption requires that at least 20% of the multifamily units be rented or sold to low or moderate income families.
The proposed amendments address two issues. First, OMC 05.86 needs to be updated to make it consistent with the revised state code. Council directed staff to update the ordinance to ensure that our local provisions are consistent with the changes made to RCW 18.14. Second, in preparing the amendment, staff determined that the “Residential Target Area” descriptions also need to be updated to match current zoning designations. The draft ordinance set forth in Exhibit B updates the target areas and amends the OMC to be consistent with state law. Pursuant to RCW 84.14.040, before a target area is designated, the City Council should adopt a resolution of intention which sets a public hearing date to consider the new area. The resolution set forth in Attachment 1 sets a hearing date of January 6, 2009 to allow for public comment on the proposed changes to the target areas. It is important to note that, if Council amends the Comprehensive Plan and Zoning map for the isthmus, that area will be removed from eligibility in the tax exemption program. A change to the zoning for certain properties on the Isthmus would result in the properties no longer meeting the existing two tier eligibility description contained in the current downtown target area description (See also issue 2 in analysis below). Accordingly, the target area designations in the proposed ordinance reflect a decision to remove the isthmus from the tax exemption program.
ANALYSIS AND OPTIONS:
Issue # 1. Updating local codes to comply with State law by replacing the 10-year property tax exemption with an 8 or 12 year exemption. The primary purpose for the change in state law was to provide additional incentives to promote construction of affordable housing. The exemption applies only to the increased value of building housing (rehabilitation or new construction). The exemption does not apply to the land or any non-housing improvements. Olympia has a variety of requirements that all multi-unit housing projects must meet to be eligible for a tax exemption, including: • the housing must be located in one of the three designated residential target areas; • 50 percent of the space must be for permanent residential occupancy; • at least 4 or more new housing units must be created; • new construction and rehabilitation must be completed within three years of approval of the application; • property to be rehabilitated must be vacant at least 12 months prior to application; and • tenant displacement is prohibited; and • the applicant must enter into a contract with the city and agree to these terms and conditions. The new state law and the proposed amendment defines “low-income households” as those making at or below 80 percent of the area median income. Moderate-income households are defined as those making at or
Page 2 of 4
below 115 percent of the area median income. A city has the option to impose additional affordable housing requirements, limits and conditions. If a property changes use before the exemption ends, then back taxes are recovered based on the difference between the taxes paid and the taxes that would have been paid without the tax exemption. Issue # 2. Update the Residential Target Area Descriptions to recognize the new zoning districts and areas. Since 1997, State and local law has allowed a property tax exemption for new housing construction in downtown and the two commercial/residential corridors that extend up the east and west sides (See OMC 18.86.030(B). Each Target Area is currently defined with both a geographical boundary and underlying zoning districts. In reviewing the ordinance, staff noted that the zoning districts in the Target Areas had not been updated as zoning districts were revised and a Westside boundary change was not codified. Currently no properties qualify in the Eastside or Westside districts due to zoning changes and downtown areas zoned Urban Waterfront – Housing (UW-H) as follows: Area 1 - Downtown Residential Target Area: Within the downtown properties within: • Portions of the UW district were rezoned UW-H and RMH in 2002; • The RMH district were rezoned to a new UR in 2004; Area 2 - Eastside Residential Target Area • All properties within the eastside target area boundary were rezoned from PO-RM and CMR to HDC-1 in 2000. Area 3 - Westside Residential Target Area • All properties within the Westside target area boundary were rezoned from PO-RM and CMR to HDC-1 and HDC- 2 in 2000; • Properties within the R6-12 district were rezoned to PO-RM and RM18 and were intended to be added to the target area in 2005. The area added is the block east of Woodruff Park described as “The block bounded by Perry Street on the west, Garfield Street on the north, Plymouth Street on the east and Harrison Avenue on the south.” 2008 Comprehensive Plan Amendment and Isthmus Rezone Request Finally, the Land Use and Environment Committee has recommended that the isthmus area be removed from the Downtown Residential Target Area since the proposed height amendment appears to provide sufficient incentive for housing. This will occur automatically by virtue of the zoning change from UW to UW-H. The purpose of the hearing on the attached ordinance will be to reconfirm areas that are to be retained, removed or added to the target areas designations as described in the proposed ordinance and as generally depicted on the attached map. Option 1: Approve the attached Resolution setting January 6, 2009 as the date for a public hearing on revising the designations of residential
Page 3 of 4
targeted areas for the purpose of providing tax exemptions for eligible improvements. Implications 1. Allows for adequate notice of public hearing 2. Clarifies areas included in target area designations 3. Update provides clarity and ease of administration 4. Reaffirms intent to maintain consistency with prior rezones
Page 4 of 4
12/03/08 4E
CITY COUNCIL MEETING
Olympia, Washington December 3, 2008
Resolution Setting January 6, 2009 as Public Hearing Date for Multi-Family Housing Tax Exemption __________________________________________________________________
CITY MANAGER’S RECOMMENDATION: Approve the attached Resolution setting January 6, 2009 as the date for a public hearing on revising the designations of residential targeted areas for the purpose of providing tax exemptions for eligible improvements.
STAFF CONTACT: ORIGINATED BY: PRESENTERS AND OTHERS NOTIFIED:
Steven Friddle, Community Services Manager, (360) 753-8591, [email protected] Community Planning and Development Department None – Consent Calendar Notified: Notice will be sent once the hearing date is set 1. Proposed Resolution None The 10-year multi-family tax exemption provisions contained in Olympia Municipal Code 5.86 were first adopted in August 1997 (Ordinance 5713). The ordinance was amended in December 1997 to expand the residential target area located on Olympia’s Westside (Ord. 5734). Further Amendments to the Target Area descriptions were not made as new zoning districts were created or amended within the Target Areas. The issue of property tax exemptions was raised during the course of the 2008 Comprehensive Plan discussion and hearing. The Finance Committee reviewed and recommended preliminary approval of the proposed amendments on October 20, 2008.
ATTACHMENTS: BUDGET IMPACT/ SOURCE OF FUNDS: PRIOR COUNCIL/ COMMITTEE REVIEW:
BACKGROUND:
The 2007 Legislature modified the property tax exemption provisions to provide new affordable housing incentives. In summary, the 10-year Multi-Family Tax Exemption provision was replaced with an 8-year or 12-year exemption (E2SHB 1910). The 8-year exemption is available to market-rate multifamily projects and the 12-year exemption requires that at least 20% of the multifamily units be rented or sold to low or moderate income families.
The proposed amendments address two issues. First, OMC 05.86 needs to be updated to make it consistent with the revised state code. Council directed staff to update the ordinance to ensure that our local provisions are consistent with the changes made to RCW 18.14. Second, in preparing the amendment, staff determined that the “Residential Target Area” descriptions also need to be updated to match current zoning designations. The draft ordinance set forth in Exhibit B updates the target areas and amends the OMC to be consistent with state law. Pursuant to RCW 84.14.040, before a target area is designated, the City Council should adopt a resolution of intention which sets a public hearing date to consider the new area. The resolution set forth in Attachment 1 sets a hearing date of January 6, 2009 to allow for public comment on the proposed changes to the target areas. It is important to note that, if Council amends the Comprehensive Plan and Zoning map for the isthmus, that area will be removed from eligibility in the tax exemption program. A change to the zoning for certain properties on the Isthmus would result in the properties no longer meeting the existing two tier eligibility description contained in the current downtown target area description (See also issue 2 in analysis below). Accordingly, the target area designations in the proposed ordinance reflect a decision to remove the isthmus from the tax exemption program.
ANALYSIS AND OPTIONS:
Issue # 1. Updating local codes to comply with State law by replacing the 10-year property tax exemption with an 8 or 12 year exemption. The primary purpose for the change in state law was to provide additional incentives to promote construction of affordable housing. The exemption applies only to the increased value of building housing (rehabilitation or new construction). The exemption does not apply to the land or any non-housing improvements. Olympia has a variety of requirements that all multi-unit housing projects must meet to be eligible for a tax exemption, including: • the housing must be located in one of the three designated residential target areas; • 50 percent of the space must be for permanent residential occupancy; • at least 4 or more new housing units must be created; • new construction and rehabilitation must be completed within three years of approval of the application; • property to be rehabilitated must be vacant at least 12 months prior to application; and • tenant displacement is prohibited; and • the applicant must enter into a contract with the city and agree to these terms and conditions. The new state law and the proposed amendment defines “low-income households” as those making at or below 80 percent of the area median income. Moderate-income households are defined as those making at or
Page 2 of 4
below 115 percent of the area median income. A city has the option to impose additional affordable housing requirements, limits and conditions. If a property changes use before the exemption ends, then back taxes are recovered based on the difference between the taxes paid and the taxes that would have been paid without the tax exemption. Issue # 2. Update the Residential Target Area Descriptions to recognize the new zoning districts and areas. Since 1997, State and local law has allowed a property tax exemption for new housing construction in downtown and the two commercial/residential corridors that extend up the east and west sides (See OMC 18.86.030(B). Each Target Area is currently defined with both a geographical boundary and underlying zoning districts. In reviewing the ordinance, staff noted that the zoning districts in the Target Areas had not been updated as zoning districts were revised and a Westside boundary change was not codified. Currently no properties qualify in the Eastside or Westside districts due to zoning changes and downtown areas zoned Urban Waterfront – Housing (UW-H) as follows: Area 1 - Downtown Residential Target Area: Within the downtown properties within: • Portions of the UW district were rezoned UW-H and RMH in 2002; • The RMH district were rezoned to a new UR in 2004; Area 2 - Eastside Residential Target Area • All properties within the eastside target area boundary were rezoned from PO-RM and CMR to HDC-1 in 2000. Area 3 - Westside Residential Target Area • All properties within the Westside target area boundary were rezoned from PO-RM and CMR to HDC-1 and HDC- 2 in 2000; • Properties within the R6-12 district were rezoned to PO-RM and RM18 and were intended to be added to the target area in 2005. The area added is the block east of Woodruff Park described as “The block bounded by Perry Street on the west, Garfield Street on the north, Plymouth Street on the east and Harrison Avenue on the south.” 2008 Comprehensive Plan Amendment and Isthmus Rezone Request Finally, the Land Use and Environment Committee has recommended that the isthmus area be removed from the Downtown Residential Target Area since the proposed height amendment appears to provide sufficient incentive for housing. This will occur automatically by virtue of the zoning change from UW to UW-H. The purpose of the hearing on the attached ordinance will be to reconfirm areas that are to be retained, removed or added to the target areas designations as described in the proposed ordinance and as generally depicted on the attached map. Option 1: Approve the attached Resolution setting January 6, 2009 as the date for a public hearing on revising the designations of residential
Page 3 of 4
targeted areas for the purpose of providing tax exemptions for eligible improvements. Implications 1. Allows for adequate notice of public hearing 2. Clarifies areas included in target area designations 3. Update provides clarity and ease of administration 4. Reaffirms intent to maintain consistency with prior rezones
Page 4 of 4
