Chapter 3.65
MULTIFAMILY HOUSING PROPERTY TAX EXEMPTION*

Sections:

3.65.010    Purpose.

3.65.020    Definitions.

3.65.030    Residential targeted areas – Criteria – Designation – Rescission.

3.65.040    Project eligibility.

3.65.050    Application procedure – Fee.

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

3.65.070    Amendment of contract.

3.65.080    Extension of conditional certificate.

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

3.65.100    Exemption – Duration – Limits.

3.65.110    Annual certification – Cancellation of exemption.

3.65.120    Appeals to hearing examiner.

3.65.130    Annual reporting.

*Code reviser’s note: Ord. 07-0271 added these provisions as Chapter 3.60 KMC. They have been editorially renumbered to avoid duplication.

3.65.010 Purpose.

A. The purposes of this chapter are:

1. To encourage more multifamily housing opportunities, including affordable housing, within the City;

2. To stimulate the construction of new multifamily housing, including affordable 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; and

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

B. Any one or a combination of these purposes may be furthered by the designation of a residential targeted area under this chapter. [Ord. 07-0271 § 1.]

3.65.020 Definitions.

A. “Affordable housing” means: (1) for an owner-occupied dwelling unit, housing reserved for occupancy by a low or moderate income household, and (2) for a renter-occupied dwelling unit, housing reserved for occupancy by a low or moderate income household and whose monthly housing costs, including utilities other than telephone, do not exceed 30 percent of the household’s monthly income.

B. “Assessor” means the King County assessor.

C. “Director” means the director of the City’s community development department, or any other City office, department or agency that shall succeed to its functions with respect to this chapter, or the director’s designee.

D. “Eligible household” means a household that certifies that its household monthly income or household annual income at time of initial occupancy, as applicable, does not exceed the income maximums, and that certifies that it meets all qualifications for eligibility, including, if applicable, any requirements for recertification on income eligibility.

E. “Household” means a single person, family, or unrelated persons living together.

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

G. “Low or moderate income household” means a household whose adjusted income is equal to or less than 85 percent of the King County median family income adjusted for family size, as reported by the United States Department of Housing and Urban Development. If HUD no longer publishes median family income figures for King County, the City may use or determine such other method as it may choose to determine the King County family median income adjusted for household size.

H. “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.

I. “Owner” means the owner of the real property on which the project proposed for tax exemption is located, and its successors and assigns. If tax exemption is requested or authorized for 12 years pursuant to this chapter, “owner” also means a nonprofit corporation that will own or owns the affordable housing units.

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

K. “Rehabilitation improvements” 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 contained in KMC Title 15; or

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

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

M. “Substantial compliance” means compliance with the applicable building and construction codes contained in KMC Title 15 that is typically required for rehabilitation as opposed to new construction. [Ord. 13-0363 §§ 1, 2; Ord. 07-0271 § 1.]

3.65.030 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 area stated in subsection (D) of this section, upon a finding by the city council 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 affordable, 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, including affordable housing opportunities, within the City; or

b. Stimulate the construction of new 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 housing was 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 better jobs and housing balance.

C. At any time the city council may, by ordinance, 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 parcels lying northwest of the intersection of Northeast 181st Street and 68th Avenue Northeast, which are shown on the map attached to the ordinance codified in this chapter, meet the criteria of this chapter on residential targeted areas and are designated as such. [Ord. 07-0271 § 1.]

3.65.040 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. A building or buildings in the project on the property shall have at least four dwelling units. Any project may be proposed in phases. If applicable, the affordable housing units may be located in all or some of the buildings in the project.

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 shall fail to comply with one or more requirements the building code as set forth in KMC Title 15.

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. Prior to issuing a certificate of occupancy, an agreement in a form acceptable to the city attorney that addresses eligible household qualifications and any other applicable topics of the affordable housing units shall be recorded with King County department of records and elections. This agreement shall be a covenant running with the land and shall be binding on the assigns and successors of the owners.

G. The project shall comply with all applicable zoning, land use, building and housing requirements contained in this code.

H. New construction of multifamily housing and rehabilitation improvements shall 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. [Ord. 07-0271 § 1.]

3.65.050 Application procedure – Fee.

A. The owner of property applying for exemption under this chapter shall submit an application to the director, on a form established by the director. The owner shall verify the application by oath or affirmation. The application shall contain such information as the director may deem necessary or useful, and shall include:

1. A brief written description of the project, including phasing if applicable, and preliminary schematic site and floor plans of the multifamily 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. In the case of rehabilitation of an existing vacant structure, verification of noncompliance with applicable building and housing codes, 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; and

4. If tax exemption for 12 years is proposed, and the owner of the affordable housing units will be different from the owner applying for the exemption, a description of the person or entity that will own the affordable housing units and an explanation of the financing plan for such units.

B. At the time of application under this section, the owner shall pay an initial application fee as established by resolution and pursuant to the provisions of RCW 84.14.080. In addition, at the time of application under this section, the owner shall pay a fee of $150.00 to cover the county assessor’s administrative costs. If the director approves the application, the City shall forward the fee for the county assessor’s administrative costs to the county assessor. If the director denies the application, the City shall refund the fee for the assessor’s administrative costs to the applicant.

C. The director shall notify the owner within 28 days of the application being filed if the director determines that an application is not complete, and shall identify what additional information is required before the application will be complete. Within 14 days of receiving additional information, the director shall notify the owner in writing if the director determines that the application is still not complete, and what additional information is necessary. An application shall be deemed to be complete if the director does not notify the applicant in writing by the deadlines in this section that the application is incomplete; however, a determination of completeness does not preclude the director from requiring additional information during the review process if more information is needed to evaluate the application according to the criteria in this chapter.

D. The application shall be submitted any time before, but no later than, the date the building or other construction permit is issued under KMC Title 15. [Ord. 07-0271 § 1.]

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

A. The director shall approve or deny an application under this chapter. If the application is approved, the owner shall enter into a contract with the City, subject to approval by resolution of the city council regarding the terms and conditions of the project and eligibility for exemption under this chapter. If tax exemption for 12 years is requested, the owner of the affordable housing units, if different from the owner of the other multifamily housing units, also shall enter into such contract. The city council’s resolution to approve the owner’s contract with the City shall be adopted within 90 days of the director’s receipt of the completed application. Upon city council approval of the contract, the director shall execute the contract which shall be substantially in the form of the contract as approved by the city council, 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 director shall state in writing the reasons for the denial and send notice of denial to the owner’s last known address within 10 days of the denial.

C. An owner may appeal the director’s denial of the application to the city council 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 city council shall be based upon the record before the director, and the director’s decision shall be upheld unless the owner can show that there is no substantial evidence on the record to support the director’s decision. The city council’s decision on appeal is final. [Ord. 07-0271 § 1.]

3.65.070 Amendment of contract.

A. Any owner seeking an amendment to the contract may do so by submitting a request in writing to the director at any time within three years of the date of the city council’s approval of the contract.

B. The director shall have authority to approve amendments to the contract that are reasonably within the scope and intent of the contract approved by the city council. Amendments that are not reasonably within the scope and intent of the approved contract, as determined by the director, shall be submitted to the city council for approval by resolution.

C. Any owner seeking amendments to the contract, which in the sole discretion of the director require approval by the city council, shall pay to the City an amendment application fee as established by resolution.

D. The date for expiration of the conditional certificate shall not be extended by contract amendment unless: (1) all the conditions for extension set forth in KMC 3.65.080 are met, or (2) the conditions set forth in KMC 3.65.080(A) and (B) are met and the city council specifically approves the extension. [Ord. 07-0271 § 1.]

3.65.080 Extension of conditional certificate.

The conditional certificate may be extended by the director for a period not to exceed 24 consecutive months. The owner shall submit a written request stating the grounds for the extension together with a fee as established by resolution. The director may grant an extension if the director 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. 07-0271 § 1.]

3.65.090 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 certificate of occupancy, the owner may request a final certificate of tax exemption. The owner shall file with the director such information as the director may deem necessary or useful to evaluate eligibility for the final certificate, and shall include:

1. A statement of expenditures made with respect to each multifamily housing unit and to each affordable housing unit, and the total expenditures made with respect to the entire property;

2. A description of the completed work and a statement of qualification for the exemption;

3. A statement that the work was completed within the required three-year period or any approved extension; and

4. If applicable, a statement that the project meets the affordable housing unit requirements.

B. Within 30 days of receipt of all materials required for a final certificate, the director shall determine whether the completed work is consistent with the application and contract approved by the city council and is qualified for 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 director 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 assessor within 10 days of the expiration of the 30-day period provided under subsection (B) of this section.

D. The director is authorized to cause to be recorded, or to require the owner to record, in the real property records of the King County department of records and elections, the contract with the City required under KMC 3.65.060(A), and such other documents as will identify such terms and conditions of eligibility for exemption under this chapter as the director deems appropriate for recording, including requirements under this chapter relating to affordability of units.

E. The director shall notify the owner in writing that the City will not file a final certificate if the director determines (1) that the project was not completed within the required three-year period or any approved extension or was not completed in accordance with subsection (B) of this section or (2) that the owner’s property is not otherwise qualified under this chapter.

F. Within 30 days of the date of notice of denial of final certificate, the owner 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 KMC 3.65.120. [Ord. 07-0271 § 1.]

3.65.100 Exemption – Duration – Limits.

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

1. For eight successive years beginning January 1st of the year immediately following the calendar year of issuance of the certificate; or

2. For 12 successive years beginning January 1st of the year immediately following the calendar year of issuance of the certificate, if (a) the owner commits to renting or selling at least 25 percent of the multifamily housing units as affordable housing units and (b) the owners and renters of the affordable housing units meet the income and eligibility requirements of this chapter. If the original owner of the property transfers title to the portion of the property on which the affordable housing units are located to the nonprofit corporation that owns such units, such transfer shall not affect the 12-year tax exemption for the new housing construction and rehabilitation improvements qualifying under this chapter.

B. The exemptions in subsections (A)(1) and (2) of this section do 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 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. 13-0363 § 3; Ord. 07-0271 § 1.]

3.65.110 Annual certification – Cancellation of exemption.

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. Thirty days after the anniversary of the date the City filed the final certificate of tax exemption and each year for the tax exemption period, the owner shall file a certification with the director, verified upon oath or affirmation, which shall contain such information as the director may deem necessary or useful, and shall include the following information:

1. A statement of occupancy and vacancy of the rehabilitated or newly constructed property during the previous year;

2. Information demonstrating compliance of the owners and renters of the affordable housing units with the requirements of KMC 3.65.100(A)(2), this chapter and the contract with the City, if applicable;

3. A certification that the property has not changed use since the date of filing of the final certificate of tax exemption;

4. A description of any improvements or improvements constructed after the filing of the final certificate or last declaration;

5. The income of each renter household at the time of initial occupancy and the income of each initial purchaser of owner-occupied units at the time of purchase for each of the units receiving a tax exemption; and

6. Any additional information requested by the City in regards to the units receiving a tax exemption.

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

D. For the duration of the exemption granted under this chapter, the property shall have no violation of applicable zoning, land use and building and housing code requirements of this code for which the designated City department or contract agency shall have issued a notice of violation or notice of civil infraction that is not resolved by a certificate of compliance, certificate of release, or withdrawal within the time period for compliance provided in such notice of violation or notice of civil infraction and any extension of the time period for compliance granted by the director.

E. For owner-occupied affordable housing units, in addition to any other requirements in this chapter, the affordable owner-occupied units must continue to meet the income eligibility conditions of this chapter. In the event of a sale of an affordable owner-occupied unit to a household other than an eligible household, the property tax exemption for that affordable owner-occupied unit shall be cancelled pursuant to this section.

F. For renter-occupied affordable housing units, in addition to any other requirements in this chapter, the affordable renter-occupied units must continue to meet the income eligibility conditions of this chapter. In the event of a rental of an affordable renter-occupied unit to a household other than an eligible household, the property tax exemption for the property shall be cancelled pursuant to this section.

G. If the owner converts the multifamily housing to another use, the owner shall notify the director and the assessor within 60 days of the change in use. Upon such change in use, the tax exemption shall be cancelled and additional taxes, interest and penalty imposed pursuant to State law.

H. The director shall cancel the tax exemption for any property or individual unit 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 cancelled, the director shall notify the owner by certified mail, return receipt requested. The 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 KMC 3.65.120. [Ord. 07-0271 § 1.]

3.65.120 Appeals to hearing examiner.

A. The City’s hearing examiner is provided jurisdiction to hear appeals of the decisions of the director on the final certificate of tax exemption and cancellation thereof.

B. The hearing examiner’s procedures shall apply to hearings under this chapter to the extent they are consistent with the requirement of this chapter and Chapter 84.14 RCW. The hearing examiner shall give substantial weight to the director’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 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. 07-0271 § 1.]

3.65.130 Annual reporting.

A. If the City issues tax exemption certificates pursuant to this chapter, the director shall submit annually by December 31st of each year to the Department of Community, Trade and Economic Development the report required by RCW 84.14.100.

B. Annually, beginning in 2010, the director 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. The report may include recommendations on whether any neighborhoods should be added or removed and whether affordability limits should be changed in certain areas, and shall analyze any issues related to the use of the program for home-ownership units. The annual report shall be submitted to the city council no later than March 30th of each year the program is in effect, starting in 2010. Each report shall include information for the previous year. [Ord. 13-0363 § 4; Ord. 07-0271 § 1.]