HomeMy WebLinkAbout5302ORDINANCE NO. 5302
AN ORDINANCE of the City Council of the City of
Bremerton, Washington, amending certain provisions of Chapter
3.78 of the Bremerton Municipal Code by repealing and replacing
Figures 3.78(a) and 3.78(b), and adding Figures 3.78(c) through
3.78(g) to include all Centers in the Residential Target Area
allowing exemptions from ad valorem property taxation for new
multifamily housing.
WHEREAS, exemptions from ad valorem property taxes for multifamily housing
encourage increased residential opportunities within designated residential targeted areas,
stimulate new construction and rehabilitation of existing buildings, assist in directing future
population growth and helps to achieve development densities which are more conducive to
transit use in designated residential targeted areas; and
WHEREAS, on October 4, 2006 the City Council of the City of Bremerton,
Washington, passed Ordinance No. 4968 adopting Chapter 3.78 of the Bremerton Municipal
Code (BMC) establishing exemptions from ad valorem property taxation for new multifamily
housing in designated residential targeted areas of the City and established a residential targeted
area for the multifamily property tax exemption within the Downtown Regional Center; and
WHEREAS, on April 9, 2007, the State Legislature passed House Bill 1910
amending Chapter 84.14 RCW relating to multifamily tax exemptions; and
WHEREAS, on December 19, 2007, the City Council passed Ordinance No. 5036
amending Chapter 3.78 BMC to be consistent with House Bill 1910, and expanded and added
additional residential targeted areas; and
WHEREAS, on March 3, 2010, the City Council passed Ordinance No. 5105
amending Chapter 3.78 BMC to further expand the Downtown Regional Center Residential
Target Area; and
WHEREAS, on December 19, 2012, the City Council passed Ordinance No. 5202
amending Chapter 3.78 BMC to include three parcels located at 1008, 1016, and 1018 Burwell
Street into the Downtown Regional Center; and
WHEREAS, on November 5th, 2014, the City Council passed Ordinance No.
5260 amending Chapter 3.78 BMC to include all of the newly expanded Downtown Regional
Center in the boundaries of the residential targeted area for multifamily tax exemption; and
WHEREAS, the City desires to offer an equal opportunity for redevelopment
incentives by expanding the residential targeted areas to include all centers with the potential for
multifamily housing development; and
Multifamily Property Tax Exemption
Residential Target Area Expansion — 2016
WHEREAS, the proposed expansion of the residential targeted area for the
multifamily property tax exemption is within an urban center as defined by Chapter 84.14 RCW
and as designated in the City's comprehensive plan; and
WHEREAS, the residential targeted area, as expanded in this ordinance lacks
sufficient available, desirable, and convenient residential housing, including affordable housing
units, to meet the needs of the public who would be likely to live in the residential targeted area,
if desirable, attractive, and livable places to live were available; and
WHEREAS, on April 30, 2016 and May 7, 2016, the public was notified by a
legal advertisement in the Kitsap Sun of the opportunity to make comment and participate in the
public hearing by the City Council; and
WHEREAS, on May 18, 2016, the City Council conducted a public hearing and
considered all testimony; NOW, THEREFORE;
THE CITY COUNCIL OF THE CITY OF BREMERTON, WASHINGTON, DOES
HEREBY ORDAIN AS FOLLOWS:
SECTION 1. The recitals set forth above are hereby adopted and incorporated as
set forth in full.
SECTION 2. Boundaries Expanded. The boundaries of the residential targeted
areas as described in Chapter 3.78 of the Bremerton Municipal Code entitled "Downtown
Regional Center Residential Target Area" are hereby expanded as set forth in Exhibit A,
attached hereto and incorporated herein by this reference.
SECTION 3. Chapter 3.78 BMC Amended - Figures 3.78(a) and 3.78(6)
Repealed and Replaced. Chapter 3.78 of the Bremerton Municipal Code is amended by
repealing and replacing Figure 3.78(a) and Figure 3.78(b) with a new Figure 3.78(a) and Figure
3.78(b), and by adding to Chapter 3.78 new Figures 3.78(c) through 3.78(g) as set forth in
Exhibit B, attached hereto and incorporated herein by this reference.
SECTION 4. BMC 3.78.020 Amended. Section 3.78.020 of the Bremerton
Municipal Code entitled "Definitions" is hereby amended to read as follows:
3.78.020 DEFINITIONS.
When used in this chapter, the following terms shall have the following meanings, unless
the context indicates otherwise:
(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 thirty (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.
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Multifamily Property Tax Exemption
Residential Target Area Expansion — 2016
(b) 'Building codes" means the City and State building and fire codes as set
forth in Chapters 17.04, 18.02 and 18.03 BMC.
(c) "City" means the City of Bremerton.
(d) "Department" means the City Department of Community Development.
(e) "Director" means the Director of the Department of Community
Development, or designee.
(f) "High-cost area" means a county where the third quarter median house
price for the previous year as reported by the Washington Center for Real Estate Research at
Washington State University is equal to or greater than one hundred thirty (13 0) percent of the
statewide median house price published during the same time period.
(g) "Household" means a single person, family, or unrelated persons living
together.
(h) "Low-income household" means a single person, family, or unrelated
persons living together whose adjusted income is at or below eighty (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. For cities located in high-cost
areas, "low-income household" means a household that has an income at or below one hundred
(100) percent of the median family income, adjusted for family size, for the county where the
project is located.
(i) "Moderate -income household" means a single person, family, or unrelated
persons living together whose adjusted income is more than eighty (80) percent but is at or below
one hundred fifteen (115) 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. For cities located in high-cost areas, "moderate -income household" means a
household that has an income that is more than one hundred (100) percent, but at or below one
hundred fifty (150) percent, of the median family income adjusted for family size, for the county
where the project is located.
0) "Multifamily housing" means a building having ten (10) 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.
(k) "Multifamily property tax exemption" means an exemption from ad
valorem property taxation for multifamily housing.
(1) "Owner" means the property owner of record.
(m) "Permanent residential occupancy" means multiunit 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 (1) month. This excludes hotels and
motels that predominantly offer rental accommodation on a daily or weekly basis.
(n) "Rehabilitation improvements" means modifications to existing structures
that are vacant for twelve (12) months or longer that are made to achieve a condition of
substantial compliance with existing building, fire, and zoning codes, or modification to existing
occupied structures which increase the number of multifamily housing units.
(o) "Residential targeted area" also "residential target area" means the
geographic area located within the areas set forth in Figures 3.78(a) and-IbLou 3.78(bg).
3
Multifamily Property Tax Exemption
Residential Target Area Expansion — 2016
(p) "Substantial compliance" means compliance with all local building, fire
and zoning code requirements, which are typically required for rehabilitation as opposed to new
construction.
SECTION 5. BMC 3.78.050 Amended. Section 3.78.050 of the Bremerton
Municipal Code entitled "Project Eligibility" is hereby amended to read as follows:
3.78.050 PROJECT ELIGIBILITY.
A proposed multifamily housing project must meet the following requirements for
consideration for a property tax exemption:
(a) Location. The project must be located within a residential targeted area as
defined in BMC 3.78.020 and as set forth in Figures 3.78(a) and-throu 3.78(hg).
(b) Tenant Displacement Prohibited. The project must not displace existing
residential tenants of structures that are proposed for redevelopment. If the property proposed to
be rehabilitated is not vacant, an applicant shall provide each existing tenant housing of
comparable size, quality, and price and a reasonable opportunity to relocate.
(c) Noncompliance with Building Codes. Existing dwelling units proposed for
rehabilitation must fail to comply with one or more standards of the applicable State or City
building codes.
(d) Size of Project. The new, converted, or rehabilitated multiple -unit housing
must provide for a minimum of fifty (50) percent of the space for permanent residential
occupancy. The project, whether new, converted, or rehabilitated multiple -unit housing, must
include at least ten (10) units of multifamily housing within a residential structure or as part of an
urban development. In the case of existing multifamily housing that is occupied or which has not
been vacant for twelve (12) months or more, the multifamily housing project must also provide
for a minimum of four (4) additional multifamily units for a total project of at least ten (10) units
including the four (4) additional units. Existing multifamily housing that has been vacant for
twelve (12) months or more does not have to provide additional units.
(e) Proposed Completion Date. New construction of multifamily housing and
rehabilitation improvements must be completed within three (3) years from the date of approval
of the application.
(f) 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. The project must also comply with any other standards and
guidelines adopted by the City Council for the residential targeted area.
SECTION 6. Severability. If any one or more sections, subsections, or
sentences of this ordinance are held to be unconstitutional or invalid, such decision shall not
affect the validity of the remaining portion of this ordinance and the same shall remain in full
force and effect.
SECTION 7. Effective Date. This ordinance shall take effect and be in force ten
(10) days from and after its passage, approval and publication as provided by law.
n
Multifamily Property Tax Exemption
Residential Target Area Expansion — 2016
PASSED by the City Council the 1 �'` day of %ft , 2016
ERIC YOUWjER&6uncil President
Approved this ff day of , 2016
PATTY LEN yor
ATTEST:
APPROVED AS TO FORM:
SHANNON CORIN, City Clerk RO ER A. LUBOVIC , City Attorney
PUBLISHED the J 4-- day of W , 2016
EFFECTIVE the day of zjvim-. , 2016
ORDINANCE NO. t%bA
R•\Legal\Legal\Ordinances\Community DevelopmentWulti Family Tax Exemption-2016.doc
5
Multifamily Property Tax Exemption
Residential Target Area Expansion — 2016
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DEPARTMENT OF
COMMUNITY DEVELOPMENT
MEMORANDUM
To: City Council
From: Kelli Lambert
Date: May 2, 2016
Re: Multifamily Tax Incentive — Expansion of the Residential Target Area
EXECUTIVE SUMMARY
The proposed revision expands and implements the Multifamily Tax Exemption (MFTE) to expand the current MFTE
Residential Target Area boundaries to include Growth Centers as adopted in the 2016 Comprehensive Plan.
HISTORY
The Multifamily Tax Exemption is allowed by state law (RCW 84.14) to be enacted by local jurisdictions with a
population over 15,000 people for the purpose of providing an available market of desirable and convenient
residential units, including affordable units. Residential target areas must be within an Urban Center as defined by
the City's Comprehensive Plan and must lack sufficient available, desirable, and convenient residential housing,
including affordable units, to meet the needs of the public who would be likely to live in the residential target area if
attractive, affordable, and livable places were available.
The state regulation for the multi -family tax exemptions (Chapter 84.14 RCW) provides for:
1) An 8 year tax exemption for market value housing units, and
2) A 12 year tax exemption for affordable housing units to low and moderate -income households.
As noted in the 2007 House Bill Report of HB1910: "Cities must adopt and implement an affordable housing
requirement for properties applying for property tax exemptions. The requirement must provide for mixed -income
housing that includes a percentage of units that are affordable to low and moderate -income households." Based
on this language it would appear that governmental entities implementing the program are required to adopt and
implement affordable housing requirements and therefore must apply the 12 year tax exemption along with the 8
year tax exemption.
In October 2006, through Ordinance No. 4968 the City of Bremerton adopted the Multifamily Tax Exemption
Program, with amendments in 2007, 2010, and 2014 expanding the target areas to include all of the territory in the
Downtown Regional Center Plan and the Wheaton -Riddell Center.
The City of Bremerton has approved four MFTE applications so far: the 606 Apartments, Evergreen Pointe,
Spyglass Hill apartments on Highland Avenue; and Inhabit Burwell, the apartments proposed at the location of the
former Nite Shift Tavern. Please see the attached "Frequently Asked Questions" for how the program works.
STAFF RECOMMENDATION
It is in the best interests of the City to provide this incentive, therefore giving an equal opportunity for the use of
these incentives for redevelopment and thereby encouraging creation of new housing units throughout the City's
centers. By approving this ordinance, the City will remain consistent by offering the MFTE in all Centers. This
includes the Downtown Regional Subarea and the Wheaton -Riddell District Center, which were already within the
MFTE target area; and would add the Wheaton -Sheridan District Center, Eastside Employment Center, Manette
Neighborhood Center, Charleston District Center, and the Bay Vista Subarea.
PROGRAM BENEFITS
The discussion below reiterates reasons why the Multifamily Tax Incentive Program is in the best interest of the City of
Bremerton, and how this proposal still meets the intent of the enabling State law. Please note that this ordinance would not
change the MFTE, except to expand the target area and increase opportunities to utilize it throughout the City.
Implements Growth Strategy - The Multifamily Tax Incentive is one tool the legislature made available for
implementation of the GMA. Bremerton and other cities' growth strategies are based on strong centers -based land use
concepts, which reduce sprawl pressure on rural lands. The tax incentive is meant in part to increase the viability of dense
development in centers. Creating a vibrant and active downtown and centers districts where people live is a key goal of
the City's Comprehensive Plan. The intent and purpose of the law is to apply to full centers districts where carefully
considered and appropriate.
Economic Need — An additional state requirement is that an economic need for the incentive must be present to make
new multi -family development viable. The Housing element of the 2016 Comprehensive Plan include Housing Goal H3:
Support access to quality and affordable housing for all Bremerton residents; and policy H4 (C) Target and enhance the
use of tax incentives to improve affordable housing throughout the City, and particularly in Centers where housing is
intended to be in close proximity to public transportation.
Urban Centers - The State Law also includes language requiring that the Tax Incentive must be applied only in urban
centers which lack sufficient available, desirable, and convenient residential housing, including affordable housing. All the
areas proposed to be included in the target areas fit these criteria.
Stay Competitive nth Peer Cities - Most of Bremerton's peer cities in the region and state have similar programs. Like
Bremerton, Tacoma and Spokane apply the incentive to their entire downtown areas, including all of their center districts.
Bellingham and Vancouver, WA apply the incentive to the full extent of their greater downtowns. Seattle currently has 39
targeted residential areas. Most of these cities have extensively used the program for more than 10 years. Without a
strong incentive program, Bremerton is at a competitive disadvantage in capturing new urban development in the region.
Positive Fiscal Impact - The fiscal impacts of implementing the Incentive are complex. While the City foregoes additional
near term property tax revenues for 8 or 12 years, a range of other revenue sources balance the reduction. On any new
development, significant sales tax and Real Estate Excise Tax (REET) are collected. Utility hookup fees are collected, and
other taxes on utility usage by new residents (e.g. phone and cable) are collected. Sales taxes generated by new resident
spending at local businesses will also increase. It should also be noted that as a revenue source, the city's share of
property taxes are small relative to the portion going to Kitsap County. Finally, after 8 or 12 years the exemption ends.
Most major multifamily buildings have much longer (40 — 50 year) lifespans.
Adjustable Program - It is important to note that the Incentive is an adjustable program that can and should be revisited
and modified over time. State law revisions call for periodic monitoring to ensure the program is still needed, and is serving
0 Page 2
its stated purpose. The Council may choose to cease, or change the boundaries of the residential target area at any future
time based on shifts in economic and development conditions.
Encourage Affordable Housing -A purpose of the program instate law is to encourage construction of quality affordable
housing. Bremerton's Comprehensive and Consolidated Plans and other policies also call for provision of affordable
housing. The Incentive program reduces prices for buyers and rental rates in new buildings. New rental construction can
help upgrade and modernize the rental stock — making new quality rental construction more feasible.
Please see Attachment I for more detailed information about the MFTE program, including eligibility and process for
administration.
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Attachment I
Staff Memorandum: Multifamily Tax Exemption
BMC 3.78 MULTIFAMILY PROPERTY TAX EXEMPTION
FREQUENTLY ASKED QUESTIONS
The Multifamily Tax Exemption (M FTE, see regulations in BMC 3.78) was established by state law (RCW
84.14) to help cities attract residential development, by offering a limited exemption from ad valorem
property taxes on the value of improvements only, for 8 or 12 years. The exemptions do not include the
value of land or non -housing -related improvements.
What proiects are eligible?
• Create at least 10 new Multifamily (MF) housing units
• Located within a Targeted Residential Area
• New housing, or rehabilitated existing housing
• If rehabilitated, must not displace any tenants
• If rehabilitating occupied units, must create an additional 4 units
• At least 50% of space is for permanent residential occupancy (if mixed use)
• Conform to applicable local plans and regulations
How do you determine whether the proiect is eligible for the 8 -year or the 12 -year exemption?
To be eligible for the 8 year exemption, the project only needs to meet the criteria listed above. In order
to be eligible for the 12 year exemption, the project must, in addition, make at least 20 percent of the
units affordable to low*- and moderate* *-income families, for the duration of the exemption (12 years).
*Low income = income at or below 80% of Bremerton -Silverdale Adjusted Median Income (AM 11)
**Moderate income = income 80-115% of AMI
Affordable = rent, including utilities, does not exceed 30% of gross income
1 As of 2016, the AMI for a family of four in the Bremerton -Silverdale area is $78,100, adjusted for family
size.
How does it work?
The application is submitted before the building permit. DCD has 90 days to determine whether the
application meets the criteria. If the project is approved, the applicant enters into an agreement with
the City, and a Conditional Certificate of Tax Exemption is issued along with the building permit. This
Conditional Certificate expires 3 years from the date of approval. If something happens to delay the
project and it can't have final occupancy within the 3 years, one extension can be granted.
When the project is completed (per the agreement), the applicant files for a Final Certificate of Tax
Exemption, by providing:
• Statement of expenditures made with respect to each MF housing unit and total expenditures
made with respect to the entire property
• Description of the completed work and statement of qualification for the exemption
Attachment I
Staff Memorandum: Multifamily Tax Exemption
• Statement that work was completed within the 3 -year period, or any authorized extension
The Director has a 30 -day review period in which to approve or deny; if approved, the City issues the
Final Certificate of Tax Exemption and records it with the Kitsap County Assessor. Developments that
violate the terms of the exemption are required to pay back the exempted tax amounts, plus interest,
and a penalty fee.
The owner is responsible for annual compliance review — they need to file (within 30 days of first
anniversary of the date of filing of Final Certificate of Tax Exemption) a notarized declaration that the
property is in compliance with the provisions. DCD will send an annual reminder letter to applicants,
reminding them when required documentation is due. The City is responsible to report on tax
exemptions to CTED by 12/31 of each year.
• Annual reporting — DCD reports to WA Dept of Commerce:
o Statement of occupancy & vacancy for the previous 12 mos.
o Certification that the property has not changed use
o Description of changes/improvements constructed after issue of the Cert of Tax
Exemption
o For 12 -year exemption, income eligibility of tenants reviewed each year the exemption
is in effect
Financial Considerations
• 8 -year or 12 -year exemption from tax on improvements only (not land); sales tax and Real Estate
Excise Tax (REET) are still collected, plus utility hookup fees, and other taxes on utility usage by
new residents. The City's share of property taxes is small relative to the portion that goes to
Kitsap County. Taxes to school districts are not affected by the exemption.
• Other local spending would be expected to increase, due to new residents
N
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Exhibit B
Multitamily I ax exemption Urdinance
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Multitamily i ax txeminon Ordinance
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Multitamily I ax exemption Urdinance
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AFFIDAVIT OF PUBLICATION
Account #342133 AD#1100401
STATE OF WASHINGTON
COUNTY OF KITSAP
I, Teresa Hull, being first duly sworn on oath, deposes and says: That she is now, and at all times embraced in
the publication herein mentioned was the principal clerk of the printers and publishers of KITSAP SUN; that
said newspaper has been approved as a legal newspaper by order of the Superior Court of the County of Kitsap,
in which County it is published and is now and has been for more than six months prior to the date of the publi-
cation hereinafter referred to, published in the English language continually as a daily newspaper in Bremerton,
Kitsap County, Washington, a weekly newspaper in Kitsap County, Washington and is now and during all of
said time, was printed in an office maintained in the aforesaid place of publication of said newspaper; that the
following is a true text of an advertisement as it was published in regular issues (and not in supplement form) of
said newspaper on the following date, to wit: And on
May 24, 2016
such newspaper was regularly distributed to its subscribers during all of said period. The full amount of the fee
charged for the foregoing publication is the sum of $66.69. This amount has not been paid in full.
J"'V4'/z_
1 - V/
(Signature of Principal Clerk)
Subscribed and sworn to before me this day of May 26, 2016.
Notary Public
State of Washington
TISHA SULLIVAN
My Appointment Expires Aug 4, 2018
ORDINANCE NO. 5302
AN ORDINANCE of the City
Council of the City of Bremer-
ton, Washington, amending
certain provisions of Chap-
ter 3.78 of the Bremerton
Municipal Code by repealingg
and replacing Figures 3.78(a)
and 3.78(b), and adding Fig-
ures 3.78(s) through 3.78(8)
to include all Centers in
the Residential Target Area
allowing exemptions from ad
valorem property taxation
for new multifamily housing.
PASSED by the City Council on
the 18th day of May, 2016.
The full text of this ordinance
is available from the City
Clerk's Office, 345 Sixth
Street, Suite 600, Bremerton,
WA 98337.
MAY 24, 2016
AD# 1100401