Chapter 4.50
MULTIFAMILY HOUSING PROPERTY TAX EXEMPTION

Sections:

4.50.010    Purpose.

4.50.020    Definitions.

4.50.030    Residential targeted areas – Criteria – Designation – Rescission.

4.50.040    Project eligibility.

4.50.050    Application procedure – Fee.

4.50.060    Application review – Issuance of conditional certificate – Denial – Appeal.

4.50.070    Amendment of contract.

4.50.080    Extension of conditional certificate.

4.50.090    Final certificate – Application – Issuance – Denial and appeal.

4.50.100    Exemption – Duration – Affordability requirements – Limits.

4.50.110    Enforcement.

4.50.120    Appeals to hearing examiner.

4.50.130    Annual reporting.

4.50.010 Purpose.

A. The purposes of this chapter are:

1. To encourage more multifamily housing opportunities within the city;

2. To stimulate the construction of new multifamily housing and the rehabilitation of existing vacant and underutilized buildings for multifamily housing;

3. To increase the supply of multifamily housing opportunities within the city for low and moderate income households;

4. To accomplish the planning goals required under the Growth Management Act, Chapter 36.70A RCW, as implemented by the city’s comprehensive plan;

5. To promote community development and affordable housing; and

6. To encourage additional housing in certain areas to support investment in public transit projects.

B. Any one or a combination of these purposes may be furthered by the designation of a residential targeted area under this chapter. (Ord. 11C-02 § 1).

4.50.020 Definitions.

A. “Affordable housing” means both “affordable units” and “moderate income units.”

B. “Affordable unit” means a renter-occupied dwelling unit reserved for occupancy by eligible households and affordable to households whose household annual income does not exceed 60 percent of the King County median household income, adjusted for household size, as determined by HUD, and no more than 30 percent of the monthly household income is paid for monthly housing expenses (rent and an appropriate utility allowance). In the event that HUD no longer publishes median income figures for King County, the city may use or determine such other method as it may choose to determine the King County median income, adjusted for household size.

C. “Code official” means the director of the city’s development services group, 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.

D. “Eligible household” means one or more adults and their dependents who, as set forth in the regulatory agreement referenced in MICC 4.50.040(G), certify that their household annual income does not exceed the applicable percent of the median household income for King County, adjusted for household size, as determined by the United States Department of Housing and Urban Development (HUD); and who certify that they meet all qualifications for eligibility, including any requirements for recertification on income eligibility.

E. “Household annual income” means the aggregate annual income of all persons over 18 years of age residing within the same household for a period of at least four months.

F. “Moderate income unit” means a renter-occupied dwelling unit reserved for occupancy by eligible households and affordable to households whose household annual income does not exceed 80 percent of the King County median household income, adjusted for household size, as determined by HUD, and no more than 30 percent of the monthly household income is paid for monthly housing expenses (rent and an appropriate utility allowance). In the event that HUD no longer publishes median income figures for King County, the city may use or determine such other method as it may choose to determine the King County median income, adjusted for household size.

G. “Multifamily housing” means a building or townhouse project having four or more dwelling units designed for permanent residential occupancy resulting from new construction or rehabilitation or conversion of vacant, underutilized, or substandard buildings.

H. “Owner” means the property owner of record.

I. “Permanent residential occupancy” means multifamily housing that provides rental occupancy for a period of at least one month, and excludes hotels, motels, and other businesses that predominately offer rental accommodation on a daily or weekly basis.

J. “Rehabilitation improvement” means:

1. Modifications to an existing structure, the residential portion of which has been vacant for at least 12 months prior to application for exemption under this chapter, that are made to achieve a condition of substantial compliance with the applicable building and construction codes; or

2. Modifications to an existing occupied residential structure or mixed use structure that contains occupied residential units that add at least four additional multifamily dwelling units.

K. “Residential targeted area” means an area within an urban center as defined by Chapter 84.14 RCW and that has been so designated by the city council pursuant to this chapter.

L. “Substantial compliance” means compliance with the applicable building and construction codes contained in MICC Title 17 that is typically required for rehabilitation as opposed to new construction. (Ord. 11C-02 § 1).

4.50.030 Residential targeted areas – Criteria – Designation – Rescission.

A. Following notice and public hearing as prescribed in RCW 84.14.040, the city council may designate one or more residential targeted areas, in addition to the areas stated in subsection D of this section, upon a finding by the city council in its sole discretion that the residential targeted area meets the following criteria:

1. The residential targeted area is within an urban center as defined by Chapter 84.14 RCW;

2. The residential targeted area lacks sufficient available, desirable and convenient residential housing, including affordable housing to meet the needs of the public who would be likely to live in the urban center if desirable, attractive and livable residences were available; and

3. Providing additional housing opportunity, including affordable housing, in the residential targeted area will assist in achieving one or more of the following purposes:

a. Encourage increased residential opportunities within the city; or

b. Stimulate the construction of new affordable multifamily housing; or

c. Encourage the rehabilitation of existing vacant and underutilized buildings for multifamily housing.

B. In designating a residential targeted area, the city council may also consider other factors, including:

1. Whether additional housing in the residential targeted area will attract and maintain an increase in the number of permanent residents;

2. Whether providing additional housing opportunities for low and moderate income households would meet the needs of citizens likely to live in the area if affordable residences were available;

3. Whether an increased permanent residential population in the residential targeted area will help to achieve the planning goals mandated by the Growth Management Act under Chapter 36.70A RCW, as implemented through the city’s comprehensive plan; or

4. Whether encouraging additional housing in the residential targeted area supports plans for significant public investment in public transit or a better jobs and housing balance.

C. At any time, the city council may, in its sole discretion, amend or rescind the designation of a residential targeted area pursuant to the same procedural requirements as set forth in this chapter for original designation.

D. The following areas, as shown in Map 1 in subsection (D)(1) of this section, meet the criteria of this chapter for residential targeted areas and are designated as such:

1. Mercer Island Town Center and adjacent multifamily zoned lots.

MAP 1

E. If more than 50 percent of any legal lot is within a residential targeted area as shown in Map 1 in subsection (D)(1) of this section, then the entire lot shall be deemed to lie within such area. (Ord. 11C-02 § 1).

4.50.040 Project eligibility.

To be eligible for exemption from property taxation under this chapter, the property shall satisfy all of the following requirements:

A. The property must be located in a residential targeted area.

B. The project must be multifamily housing consisting of at least four dwelling units within a residential structure or as part of 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.

C. For new construction, a minimum of four new dwelling units must be created; for rehabilitation or conversion of existing occupied structures, a minimum of four additional dwelling units must be added.

D. Existing dwelling units proposed for rehabilitation shall have been unoccupied for a minimum of 12 months prior to submission of an application and have failed to comply with one or more requirements of the building code.

E. No application may result in the net loss of existing affordable housing which receives housing assistance through federal low or moderate income housing programs (e.g., HUD Section 8 program).

F. Affordable housing shall be provided in the project as described in MICC 4.50.100 for the life of the building.

G. Prior to issuing a temporary or final certificate of occupancy, an agreement in a form acceptable to the city attorney that addresses: price restrictions; eligible household qualifications at time of initial occupancy and at annual recertification over the lifetime of the improvements qualifying under this chapter; long-term affordability; remedies to the city for noncompliance including taking action to require the owner to perform its obligations or such other action necessary to enforce the obligations of the agreement; and any other applicable topics of the affordable housing, and shall be recorded with the county recorder’s office. This agreement shall be a covenant running with the land and building, and shall be binding on the assigns, heirs and successors of the applicant. Affordable units and moderate income units that are provided under this section shall remain as affordable units and moderate income units for the life of the building.

H. The mix and configuration of housing units (e.g., studio, one-bedroom, two-bedroom, etc.) used to meet the requirement for affordable housing under MICC 4.50.100 shall be substantially proportional to the mix and configuration of the total housing units in the project.

I. The project shall comply with all applicable zoning requirements, land use regulations, and building and housing code requirements.

J. New construction of multifamily housing and rehabilitation improvements must be scheduled to be completed within three years from the date of approval of the application, or within an authorized extension of this time limit authorized in writing by the code official. (Ord. 11C-02 § 1).

4.50.050 Application procedure – Fee.

A. The owner of property applying for exemption under this chapter shall submit an application to the code official, on a form established by the code official, along with an initial application fee. The owner shall verify the application by oath or affirmation. The application shall include:

1. A brief written description of the project, including phasing if applicable, and preliminary schematic site and floor plans of the multifamily housing units and the structure(s) in which they are proposed to be located;

2. A statement from the owner acknowledging the potential tax liability when the property ceases to be eligible for exemption under this chapter;

3. Information describing how the applicant will comply with the affordability requirements in MICC 4.50.100; and

4. In the case of rehabilitation of an existing vacant structure under MICC 4.50.020(J)(1), verification from the fire and building departments of noncompliance with applicable building and housing codes as required under MICC 4.50.020(J)(1), and an affidavit from the owner verifying that the existing dwelling units have been vacant for a period of 12 months prior to filing the application.

B. The code official shall notify the applicant within 28 days of the application being filed if the code official determines that an application is not complete and shall identify what additional information is required relevant to the application for a property tax exemption before the application will be complete. Within 14 days of receiving additional information, the code official shall notify the applicant in writing if the code official determines that the application is still not complete, and what additional information is necessary. An application shall be deemed to be complete if the code official does not notify the applicant in writing by the deadlines in this section that the application is incomplete. If at any time the applicant does not respond in writing to the code official’s request for additional information for 90 days, the application shall be considered abandoned.

C. The application shall be submitted any time before, but no later than, the date that a temporary or final certificate of occupancy is issued. (Ord. 11C-02 § 1).

4.50.060 Application review – Issuance of conditional certificate – Denial – Appeal.

A. The code official shall approve or deny an application under this chapter, which shall take place within 45 days of the code official’s determination of a complete application, unless extended by mutual agreement of the applicant and the code official. Any time waiting for the applicant to respond for a request for additional information shall not count towards the 45 days. If the application is approved, the applicant shall enter into a contract with the city regarding the terms and conditions of the project and eligibility for exemption under this chapter. The code official shall execute the contract, and 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 this chapter.

B. If the application is denied, the code official shall state in writing the reasons for the denial and send notice of denial to the applicant’s last known address within 10 days of the denial.

C. An applicant may appeal the code official’s denial of the application to the hearing examiner by filing a notice of appeal with the city clerk along with the appeal fee as established by resolution within 30 days of the date of the denial. The appeal before the hearing examiner shall be based upon the record before the code official, and the code official’s decision shall be upheld unless the applicant can show that there is no substantial evidence on the record to support the code official’s decision. The hearing examiner’s decision on appeal is final. (Ord. 11C-02 § 1).

4.50.070 Amendment of contract.

A. Any applicant seeking amendment(s) to the contract may do so by submitting a request in writing to the code official at any time within three years of the code official’s approval of the application.

B. The code official shall have authority to approve amendments to the contract between the applicant and the city that are reasonably within the scope and intent of the contract.

C. Any applicant seeking amendments to the approved contract shall pay to the city an amendment application fee as established by resolution. (Ord. 11C-02 § 1).

4.50.080 Extension of conditional certificate.

The applicant shall submit a written request stating the grounds for the extension together with a fee as established by resolution. The code official may grant an extension to the conditional certificate for a period not to exceed 24 consecutive months if the code official 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 owner;

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 applicant and the city will be satisfied upon completion of the project. (Ord. 11C-02 § 1).

4.50.090 Final certificate – Application – Issuance – Denial and appeal.

A. Upon completion of the rehabilitation improvements or new construction as provided in the contract between the applicant and the city, and upon issuance of a final certificate of occupancy, the applicant may request a final certificate of tax exemption. The applicant shall file with the code official:

1. A statement of expenditures made with respect to each multifamily housing unit, including phasing if applicable, 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. A statement that the work was completed within the required three-year period or any approved extension; and

4. Information on the applicant’s compliance with the affordability requirements in MICC 4.50.100.

B. Within 30 days of receipt of all materials required for a final certificate, the code official shall determine whether the completed work and the affordability of the units are consistent with the application and contract and are qualified for limited exemption under Chapter 84.14 RCW, and which specific improvements completed meet the requirements of this chapter and the required findings of RCW 84.14.060.

C. If the code official determines that the project has been completed in accordance with subsection A of this section, the city shall file a final certificate of tax exemption with the county assessor within 40 days of receipt of all materials required for a final certificate.

D. The code official is authorized to cause to be recorded, or to require the applicant or owner to record with the county recorder’s office, the contract with the city required under MICC 4.50.060(A), and such other document(s) as will identify such terms and conditions of eligibility for exemption under this chapter as the code official deems appropriate for recording, including requirements under this chapter relating to affordability of units.

E. The code official shall notify the applicant in writing that the city will not file a final certificate if:

1. The code official determines the project was not completed within the required three-year period or any approved extension; or

2. The code official determines the project was not completed in accordance with subsection B of this section; or

3. The code official determines that the owner’s property is not otherwise qualified under this chapter; or

4. The owner and the code official cannot agree on the value of the improvements allocated to the exempt portion of rehabilitation improvements, new construction and multi-use new construction.

F. Within 30 days of the date of notice of denial of final certificate, the applicant may file a notice of appeal with the city clerk along with the appeal fee as established by resolution specifying the factual and legal basis for the appeal. The appeal shall be heard by the city’s hearing examiner pursuant to MICC 4.50.120. (Ord. 11C-02 § 1).

4.50.100 Exemption – Duration – Affordability requirements – Limits.

A. The value of new housing construction and rehabilitation improvements qualifying under this chapter shall be exempt from ad valorem property taxation as follows:

1. In the Town Center for eight successive years beginning January 1 of the year immediately following the calendar year of issuance of the certificate for rental projects where at least 10 percent of the units are affordable units.

2. In the multifamily area for eight successive years beginning January 1 of the year immediately following the calendar year of issuance of the certificate for rental projects where at least five percent of the units are affordable units.

3. In the Town Center for 12 successive years beginning January 1 of the year immediately following the calendar year of issuance of the certificate for rental projects where at least 10 percent are affordable units and an additional 10 percent are moderate income units.

4. In the multifamily area for 12 successive years beginning January 1 of the year immediately following the calendar year of issuance of the certificate for rental projects where at least five percent of the units are affordable units and an additional 15 percent are moderate income.

If the percentage of affordable units or moderate income units is a fraction, then the number of required units shall be rounded up to the next whole number (unit) if the fraction of the whole number is at least 0.66.

B. The exemption does not apply to the value of land or to the value of improvements not qualifying under this chapter, to increases in assessed valuation of land and nonqualifying improvements, or to increases made by lawful order of the King County board of appeals and equalization, Washington State Department of Revenue, State Board of Tax Appeals, or King County, to a class of property throughout the county or a specific area of the county to achieve uniformity of assessment or appraisal as required by law. In the case of rehabilitation of existing buildings, the exemption does not include the value of improvements constructed prior to submission of the completed application required under this chapter. (Ord. 11C-02 § 1).

4.50.110 Enforcement.

A. A property that receives a tax exemption under this chapter shall continue to comply with the contract and the requirements of this chapter in order to retain its property tax exemption.

B. Within 30 days after the first anniversary of the date the city filed the final certificate of tax exemption and each year for the life of the building, the property owner shall file a certification with the code official, verified upon oath or affirmation, which shall contain the following information:

1. A statement of occupancy and vacancy of the multifamily units during the previous year;

2. A certification that the property has not changed use 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 chapter;

3. A description of any improvements or changes to the property made after the filing of the final certificate or last declaration, as applicable;

4. Information demonstrating the owner’s compliance with the affordability requirements of MICC 4.50.100;

5. The total monthly rent of each unit;

6. The income of each renter household at the time of initial occupancy;

7. The value of the tax exemption for the project; and

8. Any additional information requested by the city regarding the units receiving a tax exemption (pursuant to meeting any reporting requirements under Chapter 84.14 RCW).

C. Failure to submit the annual declaration may result in cancellation of the tax exemption pursuant to this section.

D. If, during the duration of the exemption granted under this chapter, a violation of the zoning or building code occurs, and if the designated city department issues a notice of violation or notice of civil infraction, and if the violation is not resolved within a time period specified by the city, then the tax exemption under this chapter shall be cancelled pursuant to this section.

E. In addition to any other requirements in this chapter, the affordable housing must continue to meet the conditions of MICC 4.50.100. In the event of a rental of an affordable unit or a moderate income unit to a household other than an eligible household, or at a rent greater than prescribed in the regulatory agreement referenced in MICC 4.50.040(G), the property tax exemption for the property shall be canceled pursuant to this section.

F. If the owner converts the multifamily housing to another use, the owner shall notify the code official and the county assessor within 60 days of the change in use. Upon such change in use, the tax exemption shall be canceled pursuant to this section.

G. The code official shall cancel the tax exemption for any property that no longer complies with the terms of the contract or with the requirements of this chapter. Upon cancellation, additional taxes, interest and penalties may be imposed pursuant to state law. Upon determining that a tax exemption shall be canceled, the code official 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 along with the appeal fee established by resolution within 30 days of the date of notice of cancellation, specifying the factual and legal basis for the appeal. The appeal shall be heard by the hearing examiner pursuant to MICC 4.50.120.

H. The city shall take such other action at law or in equity as may be necessary or desirable to enforce any of the provisions or obligations, covenants, and conditions of the agreement referred to in MICC 4.50.040(G) up to and including a refund of all taxes not paid as a result of the exemption. (Ord. 11C-02 § 1).

4.50.120 Appeals to hearing examiner.

A. The city’s hearing examiner is provided jurisdiction to hear appeals of the decisions of the code official.

B. The hearing examiner’s procedures shall apply to hearings under this chapter to the extent they are consistent with the requirements of this chapter and Chapter 84.14 RCW. The hearing examiner shall give substantial weight to the code official’s decision and the burden of overcoming the weight shall be on the appellant. The decision of the hearing examiner constitutes the final decision of the city. An aggrieved party may appeal the hearing examiner’s decision to superior court under RCW 34.05.510 through 34.05.598 if the appeal is properly filed within 30 days of the date of the notification by the city to the appellant of that decision. (Ord. 11C-02 § 1).

4.50.130 Annual reporting.

A. If the city issues tax exemption certificates pursuant to this chapter, the code official shall submit the report required by RCW 84.14.100 to the Department of Commerce by December 31 of each year.

B. Annually, the code official or designee shall review the program established by this chapter and provide a report to the city council outlining development activity, types and numbers of units produced and their locations, rent and sales prices, information regarding the number of low and moderate income households benefiting from the program, and other appropriate factors. These reports may include recommendations on whether any neighborhoods should be added or removed, and whether affordability limits should be changed in certain areas. The annual report shall be submitted to the city council no later than March 30 of each year the program is in effect, starting in 2012; each report shall include information for the previous year. (Ord. 11C-02 § 1).