Chapter 3.63
MULTIFAMILY PROPERTY TAX EXEMPTION PROGRAM1
Sections:
3.63.030 Designation of residential targeted areas.
3.63.040 Terms of the tax exemption.
3.63.060 Application procedure.
3.63.070 Application review – Issuance of conditional certificate – Denial – Appeal.
3.63.080 Extension of conditional certificate.
3.63.100 Issuance of final certificate.
3.63.110 Annual compliance review and report.
3.63.120 Cancellation of tax exemption.
3.63.130 Conflict of provisions.
3.63.010 Purpose.
Pursuant to Chapter 84.14 RCW, the purpose of this chapter is to:
A. Provide limited exemptions from ad valorem property taxation for qualified development or redevelopment of multifamily housing projects in designated areas; and
B. Promote and incentivize the development or redevelopment of an appropriate and equitable mix of housing, as a catalyst for additional investment and activity in the targeted areas, in accordance with the city’s comprehensive plan; and
C. Stimulate new construction or rehabilitation of existing vacant and underutilized buildings for multifamily housing in designated residential targeted areas to increase and improve housing opportunities, including affordable housing; and
D. Accomplish the planning goals required under the Growth Management Act, Chapter 36.70A RCW, as implemented by the city’s comprehensive plan. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.020 Definitions.
Unless expressly provided for below, in construing the provisions of this chapter definitions of key terms shall follow the definitions as set forth in RCW 84.14.010. Definitions for additional terms in this chapter may be found in BIMC 18.36.030, as applicable.
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 under this chapter, “affordable housing” means residential housing that is within the means of low-income households, as defined by this chapter. Income eligibility threshold levels for this definition and the others in this chapter shall be set using such levels for the Bremerton-Silverdale metropolitan statistical area, as calculated by the United States Department of Housing and Urban Development and updated annually.
B. “Household” shall have the definition as set forth in RCW 84.14.010.
C. “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/household size.
D. “Median family/household income” means the median household income for the Bremerton-Silverdale metropolitan statistical area, as calculated by the United States Department of Housing and Urban Development and updated annually.
E. “Multiple-unit housing” (also “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 or motels. Multifamily housing units may result from new construction or rehabilitation or conversion of vacant, underutilized, or substandard buildings to multifamily housing, and may form part of a mixed use development.
F. “Owner” shall have the definition as set forth in RCW 84.14.010.
G. “Permanently affordable ownership” shall have the definition as set forth in RCW 84.14.021.
H. “Permanent residential occupancy” shall have the definition as set forth in RCW 84.14.010.
I. “Rehabilitation improvements” shall have the definition as set forth in RCW 84.14.010.
J. “Residential targeted area” shall have the definition as set forth in RCW 84.14.010 and the areas that have been so designated by the city council pursuant to Chapter 84.14 RCW and in accordance with this chapter.
K. “Substantial compliance” shall have the definition as set forth in RCW 84.14.010.
L. “Urban center” shall have the definition as set forth in RCW 84.14.010. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.030 Designation of residential targeted areas.
Pursuant to RCW 84.14.040, the Bainbridge Island city council designates the following areas as the targeted areas where the provisions of this chapter are applicable, and as shown in Figures 3.63.030-1 and 3.63.030-2 below:
A. Winslow Master Plan Study Area.
B. Winslow Sewer Service Area.
C. Within the Lynwood Center Neighborhood Center Area, the Neighborhood Center (NC), NC/R-12, and R-5 zones.
Figure 3.63.030-1: Winslow Master Plan Study Area and Winslow Sewer Service Area
Figure 3.63.030-2: Lynwood Center Neighborhood Center Area
(Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.040 Terms of the tax exemption.
A. Duration of Exemption. For projects that have applied and been certified in accordance with this chapter, the value of new housing construction, conversion, and rehabilitation improvements qualifying under this chapter are exempt from ad valorem property taxation. For both 12-year and 20-year exemptions, the exemption begins on January 1st of the year immediately following the calendar year of issuance of the tax exemption certificate, if the property otherwise qualifies for the exemption under this chapter and meets the conditions of this section.
B. Limits on Exemption. The exemption does not apply:
1. To the value of land or to the value of non-housing related improvements not qualifying under this chapter.
2. In the case of rehabilitation of existing buildings, to the value of improvements constructed prior to submission of the completed application required under this chapter.
3. To increases in assessed valuation made by the Kitsap County assessor on nonqualifying portions of buildings or other improvements and value of land nor to increases made by lawful order of a county board of equalization, the Department of Revenue, or Kitsap County, to a class of property throughout the county or specific area(s) of the county to achieve the uniformity of assessment or appraisal required by law.
C. Conclusion of Exemption. At the conclusion of the exemption period, the value of the new housing construction, conversion, or rehabilitation improvements shall be considered as new construction for the purposes of Chapters 36.21 and 84.55 RCW as though the property was not exempt under Chapter 84.14 RCW. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.050 Project eligibility.
A proposed multifamily housing project must meet all of the following requirements for consideration for a property tax exemption under this chapter:
A. Location. The project must be located within a residential targeted area as provided in BIMC 3.63.030.
B. Size of Project. The project, whether new, converted, or rehabilitated multiple-unit housing, must include at least four units of multifamily housing within a residential structure or as part of a mixed use development. In the case of existing occupied multifamily housing development, the multifamily housing project must also provide for a minimum of four additional multifamily units. Existing multifamily vacant housing that has been vacant for 12 months or more does not have to provide additional multifamily units. In a mixed use development, the new, converted, or rehabilitated multiple-unit housing must provide for a minimum of at least 50 percent of floor area for permanent residential occupancy.
C. Number of Affordable Housing Units.
1. For approval under the 12-year multifamily tax exemption program pursuant to this chapter and Chapter 84.14 RCW, the minimum number of affordable housing units are:
a. For rental projects, at least 20 percent of the total housing units shall be rented throughout the duration of the 12-year exemption period to low-income households.
b. For ownership projects, 100 percent of the housing units shall be sold as affordable housing to low-income households. If a unit is sold prior to the end of the 12-year exemption period, then the city shall verify the income of subsequent buyers.
2. For approval under the 20-year multifamily tax exemption program pursuant to this chapter and Chapter 84.14 RCW, at least 25 percent of the total housing units must be built by or sold to a qualified nonprofit or local government that will assure permanent affordable homeownership and shall be permanently designated as affordable housing.
D. Compliance with Land Use Process, Standards, and Guidelines. The project must be designed to comply with the city’s comprehensive plan, applicable development regulations, and applicable building codes.
E. Mix and Configuration of Housing Types. The mix and configuration of housing units (e.g., studio, one bedroom, two bedroom) that 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. When a project includes more than one building with multifamily housing units, all of the affordable housing units must not be located in the same building.
F. 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.
G. Project Completion. The project must be scheduled for completion within three years from the date of issuance of the conditional certificate. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.060 Application procedure.
A property owner who wishes to propose a project for a tax exemption shall complete the following:
A. An exemption application provided by the city shall be completed and filed with the department of planning and community development prior to issuance of a building permit for the project. The city may adopt an application fee as authorized by RCW 84.14.080.
B. The exemption application shall contain and require such information as deemed necessary by the city manager to review the project for eligibility, including:
1. A brief written description of the project, including timing and the construction schedule, the grounds for the exemption, and floor plans.
2. Information describing how the applicant will comply with applicable affordability requirements set forth in BIMC 3.63.050.C.
3. A statement from the owner acknowledging the potential tax liability when the project ceases to be eligible under this chapter.
4. An affidavit signed by the owner stating the occupancy record of the property for a period of 12 months prior to filing the application.
5. Verification of the correctness of the information submitted by the owner’s signature and affirmation made under penalty of perjury under the laws of the state of Washington. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.070 Application review – Issuance of conditional certificate – Denial – Appeal.
A. City Manager’s Decision. The city manager may certify as eligible an application which is determined to comply with all applicable requirements of this chapter and Chapter 84.14 RCW. A decision to approve or deny an application shall be made within 90 calendar days of receipt of a complete application.
B. Approval of Application – Contract Required. If an application is approved, the applicant shall enter into a contract with the city regarding the terms and conditions of implementation of the project, and in accordance with the following:
1. The contract shall be reviewed by the city, regarding the terms and conditions of the project and eligibility for exemption under this chapter. The contract shall be a covenant running with the land and shall be binding on the assigns, heirs, and successors of the applicant.
2. For any development project including owner-occupied units, the contract with the city shall also require that an owners’ association organized under RCW 64.34.300 be formed for all owner-occupied units within the development, for at least the length of the exemption period granted, to assume the responsibility for collecting from all individual unit owners the information and documents required to complete the annual reporting requirements and for filing the required annual report with the city for each of the individual homeowners.
3. Amendment of Contract. Within three years of the date of approval of the contract, an owner may request an amendment(s) to the contract by submitting a request in writing to the city manager. The fee for an amendment is as set forth in the city’s current fee schedule. The city manager shall have authority to approve minor changes to the contract that are reasonably within the scope and intent of the contract approved by the city council, as solely determined by the city manager. Amendments that are not reasonably within the scope and intent of the approved contract, as solely determined by the city manager, shall be submitted to the city council for review and approval. The date for expiration of the conditional certificate shall not be extended by contract amendment unless all the conditions for extension set forth in this section are met.
C. Issuance of Conditional Certificate. If the application meets all requirements of this chapter and Chapter 84.14 RCW, the city manager shall issue a conditional certificate of acceptance of tax exemption. The certificate must contain a statement by a duly authorized administrative official of the city that the property has complied with the required findings of this chapter and RCW 84.14.060. The conditional certificate shall expire three years from the date of approval unless an extension is granted as provided in this chapter.
D. Denial of Application. If an application is denied, the city manager shall state in writing the reasons for denial and shall send notice to the applicant at the applicant’s last known address within 10 calendar days of issuance of the denial.
E. Appeal. In accordance with RCW 84.14.070, an applicant may appeal a denial to the city council within 30 calendar days of receipt of the denial by filing a complete appeal application and fee, as set forth in the city’s current fee schedule, with the city manager. The appeal before the city council will be based on the record made before the city manager. The city manager’s decision shall be upheld unless the applicant can show that there is no substantial evidence on the record to support the city manager’s decision. The city council’s decision on appeal will be final. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.080 Extension of conditional certificate.
A. Extension. The conditional certificate and time for completion of the project may be extended by the city manager for a period not to exceed a total of 24 consecutive months. To obtain an extension, the applicant must submit a written request with a fee, as set forth in the city’s current fee schedule, stating the grounds for the extension. An extension may be granted if the city manager determines that:
1. The anticipated failure to complete construction or rehabilitation within the required time period is due to circumstances beyond the control of the owner; provided, that financial hardship, regardless of the cause or reason, shall not be considered by the city manager as a circumstance beyond the control of the owner in order to grant an extension; 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 (and as amended) between the applicant and the city will be satisfied upon completion of the project.
B. Denial of Extension. If an extension is denied, the city manager shall state in writing the reason for denial and shall send notice to the applicant’s last known address within 10 calendar days of issuance of the denial.
C. Appeal. An applicant may appeal the denial of an extension to the hearing examiner within 14 calendar days of receipt of the denial by filing a complete appeal application and appeal fee with the city manager. The appeal before the hearing examiner shall be processed as a closed record hearing. No appeal to the city council is provided from the hearing examiner’s decision. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.090 Final certificate.
Upon completion of the improvements agreed upon in the contract between the applicant and the city and upon issuance of a temporary or permanent certificate of occupancy, the applicant may request a final certificate of tax exemption by filing with the city manager such information as the city manager may deem necessary or useful to evaluate the eligibility for the final certificate, including the following:
A. A statement of expenditures made with respect to each multifamily housing unit and the total expenditures made with respect to the entire property;
B. A description of the completed work and a statement of qualification for the exemption;
C. The total monthly rent or total sale amount of each multifamily housing unit rented or sold to date;
D. A statement that the work was completed within the required three-year period or any authorized extension;
E. Information on the applicant’s compliance with the affordability requirements of this chapter; and
F. Any additional information requested by the city pursuant to meeting any reporting requirements under applicable requirements of the BIMC, or Chapter 84.14 RCW. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.100 Issuance of final certificate.
A. City Manager’s Decision. Within 30 calendar days after receipt of all materials required for a final certificate, the city manager shall determine whether the specific improvements satisfy the requirements of the contract, application, and this chapter.
B. Granting of Final Certificate. If the city manager determines that the project has been completed in accordance with this chapter and the contract between the applicant and the city, and has been completed within the authorized time period, the city shall file a final certificate of tax exemption with the Kitsap County assessor within 10 calendar days of the expiration of the 30-day review period provided under subsection A of this section. The city manager is authorized to cause to be recorded, at the owner’s expense, in the real property records of the Kitsap County department of records, the contract with the city, as amended if applicable, and such other document(s) as will identify such terms and conditions of eligibility for exemption under this chapter as the city manager deems appropriate for recording, including requirements under this chapter relating to affordability of units.
C. Denial of Final Certificate. The city manager shall notify the applicant in writing that a final certificate will not be filed if the city manager determines that:
1. The improvements were not completed within the authorized time period;
2. The improvements were not completed in accordance with the contract between the applicant and the city; or
3. The owner’s property is otherwise not qualified under this chapter.
D. Appeal. An applicant may appeal a denial of a final certificate to the hearing examiner within 14 calendar days of issuance of the denial of a final certificate by filing a complete appeal application and appeal fee with the city manager. The appeal before the hearing examiner shall be processed as a closed record hearing. No appeal to the city council is provided from the hearing examiner’s decision. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.110 Annual compliance review and report.
A. Within 30 calendar days after the first anniversary of the date of filing the final certificate of tax exemption and each year for the tax exemption period, the property owner shall be required to file a notarized declaration with the city manager indicating the following:
1. A statement of occupancy and vacancy of the multifamily units during the previous 12 months;
2. A certification by the owner that the property has not changed use and continues to be in compliance with the contract with the city and the applicable requirements of this chapter;
3. A description of changes or improvements to the property made after the city’s issuance of the final certificate of tax exemption;
4. The total monthly rent of each multifamily housing unit rented or the total sale amount of each unit sold during the 12 months ending with the anniversary date;
5. A breakdown of the number, type, and specific multifamily housing units rented or sold during the 12 months ending with the anniversary date;
6. If granted a 12-year exemption, information demonstrating the owner’s compliance with the affordability requirements of this chapter, including, but not limited to, the income of each renter household at the time of initial occupancy or the income of each purchaser of owner-occupied units at the time of purchase;
7. The value of the tax exemption for the project; and
8. Any additional information requested by the city pursuant to meeting any reporting requirements under Chapter 84.14 RCW.
B. City staff may also conduct on-site verification of the declaration and reporting required under this section. Failure to submit the annual declaration and report may result in cancellation of the tax exemption pursuant to this chapter and shall result in a review of the exemption, as provided in RCW 84.14.110.
C. If the city issues final tax exemption certificates pursuant to this chapter, the city manager shall submit the report required by RCW 84.14.100 to the State Department of Commerce by April 1st of each year. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.120 Cancellation of tax exemption.
A. The city manager may cancel a tax exemption on a property if the city manager determines any of the following:
1. The owner is not complying with the terms of the contract or 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, building, or fire code requirements; or
4. The owner fails to submit the annual declaration and report specified in BIMC 3.63.110.
B. If the owner intends to convert the multifamily housing to another use, the owner shall notify the city manager and the Kitsap County assessor in writing within 60 calendar days of the change in use.
C. Cancellation may occur in conjunction with the annual review or at any such time noncompliance has been determined.
D. Upon cancellation of the tax exemption, additional taxes, interest, and penalties shall be imposed on the property, and a priority lien may be placed on the land, pursuant to state law.
E. Notice of Cancellation. Upon determining that a tax exemption is to be canceled, pursuant to RCW 84.14.110, the city manager shall notify the owner by mail, return receipt requested.
F. Appeal of Cancellation. The owner may appeal the determination of cancellation to the hearing examiner by filing a notice of appeal and appeal fee with the city clerk within 30 calendar days of the date of the notice of cancellation, specifying the factual and legal basis for the appeal. The appeal shall be heard by the hearing examiner as a closed record hearing. No appeal to the city council is provided from the hearing examiner’s decision. (Ord. 2021-23 § 1 (Exh. A), 2021)
3.63.130 Conflict of provisions.
If any provision of this chapter is in legal conflict with the provisions of Chapter 84.14 RCW, as currently adopted or hereafter amended, the provisions of Chapter 84.14 RCW shall govern and apply as if set forth in this chapter. If any provision of this chapter is in conflict with Chapter 18.21 BIMC, the provisions of this chapter shall govern. (Ord. 2021-23 § 1 (Exh. A), 2021)
Code reviser’s note: Ord. 2021-23 adds these provisions as Ch. 3.62. The chapter has been editorially renumbered to prevent duplication of numbering.