Chapter 3.25
TARGETED RESIDENTIAL INVESTMENT PROGRAM

Sections:

3.25.010    Purpose.

3.25.020    Definitions.

3.25.030    General terms of the tax exemptions.

3.25.040    General project eligibility.

3.25.050    Midway residential targeted area guidelines.

3.25.060    Downtown residential targeted area guidelines.

3.25.070    Application procedure.

3.25.080    Application review and issuance of conditional certificate.

3.25.090    Extension of conditional certificate.

3.25.100    Application for final certificate.

3.25.110    Issuance of final certificate.

3.25.120    Annual certification and report.

3.25.130    Cancellation of tax exemption.

Prior legislation: Ords. 3560, 3922, 4111, 4157, and 4222.

3.25.010 Purpose.

As provided for in Chapter 84.14 RCW, the purpose of this chapter is to provide limited exemptions from ad valorem property taxation for multifamily housing in designated urban centers to:

1. Encourage increased residential opportunities within urban centers designated by the city council as residential targeted areas; and

2. Stimulate new construction on vacant and underutilized sites and the rehabilitation of existing vacant and underutilized buildings for multifamily housing in residential targeted areas to increase and improve housing opportunities; and

3. Assist in directing future population growth in designated urban centers, thereby reducing development pressure on single-family residential neighborhoods; and

4. Achieve development densities which are more conducive to transit use in designated urban centers.

(Ord. No. 4360, § 2, 5-19-20)

3.25.020 Definitions.

When used in this chapter, the following terms shall have the following meanings, unless the context indicates otherwise:

1. Administrator means the Kent economic development director or his/her designee.

2. Multifamily housing means one or more new multistory buildings designed for permanent residential occupancy, each with four or more dwelling units.

3. Owner means the property owner of record.

4. Permanent residential occupancy means multifamily 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 month. This excludes hotels and motels that predominately offer rental accommodation on a daily or weekly basis.

5. Residential targeted areas include (a) the geographic area of greater Downtown Kent bordered generally by Titus Street, the Green River, Willis Street, South 240th/James Street, and Cloudy Street, and only including zones that permit multifamily housing, and (b) the Midway subarea as laid out in the Midway subarea plan, which geographic area is bordered generally by Interstate 5 on the east, and the city limits on the west and south. See Exhibits A and B to Ordinance No. 4360 for maps of the greater Downtown Kent residential targeted area and Midway residential targeted area, respectively.

(Ord. No. 4360, § 2, 5-19-20)

3.25.030 General terms of the tax exemptions.

A. Duration of exemption. The value of improvements qualifying under this chapter is exempt from ad valorem property taxation beginning January 1st of the year immediately following the calendar year after issuance of the final certificate of tax exemption.

B. Limits on exemption. The exemption does not apply to the value of land or to the value of improvements not qualifying under this chapter, nor does the exemption apply to increases in assessed valuation of land and nonqualifying improvements. This chapter does not apply to increases in assessed valuation made by the assessor on nonqualifying portions of buildings and value of land nor to increases made by lawful order of a county board of equalization, the Department of Revenue, or a county, to a class of property throughout the county or specific area of the county to achieve the uniformity of assessment or appraisal required by law. At the conclusion of the exemption period, the new housing cost shall be considered as new construction for the purposes of Chapter 84.55 RCW.

(Ord. No. 4360, § 2, 5-19-20)

3.25.040 General project eligibility.

A proposed project must meet the specific project eligibility requirements of the residential targeted area provided in this chapter and the following general requirements in order to be considered for a property tax exemption:

A. Location. The project must be located within a designated residential targeted area as defined in KCC 3.25.020. If any portion of a legally created lot is within the residential targeted area, then the entire lot shall be deemed to lie within the residential targeted area.

B. Tenant displacement. Prior to approval of an application under KCC 3.25.080, the applicant shall provide the administrator with documentation satisfactory to the administrator that RCW 84.14.030 has been complied with, including, but not limited to, the following:

1. All tenants of residential rental structures on the project site have been notified per state statute of the termination of their tenancy;

2. The applicant’s efforts to refer tenants to similar, alternative housing resources; and

3. Any other actions the applicant has taken to minimize the hardship on tenants whose tenancies will be terminated by the proposed project.

C. Size. The project must include at least four units of multifamily housing. At least 50 percent of the space within the proposed project shall be intended for permanent residential occupancy.

D. Proposed completion date. New construction or rehabilitation of multifamily housing must be completed within three years from the date of approval of the application.

E. Compliance with guidelines and standards. The project must be designed to comply with the city’s comprehensive plan, building, fire, housing, and zoning codes, downtown design review guidelines, multifamily design review, mixed use design review as applicable, and any other applicable regulations. The project must comply with any other standards and guidelines adopted by the city council for the residential targeted area.

F. Parking. Parking shall be located in structured parking garages, under buildings, or underground.

G. Onsite management. Projects creating 100 or more rental units under this section must include 24-hour, seven-day-per-week onsite management by a company with at least five years of experience in rental management.

H. Use of existing financial incentive programs. The project shall not be eligible for exemption under this chapter if its construction is being aided in whole or in part by any local, state or federal financial incentives, tax credits, or other grant funding programs.

(Ord. No. 4360, § 2, 5-19-20)

3.25.050 Midway residential targeted area guidelines.

In the Midway residential targeted area, only new construction projects shall be eligible for tax exemptions under this chapter as follows:

A. Eight-year exemption. The value of new housing construction improvements qualifying under this chapter is exempt from ad valorem property taxation for eight successive years beginning January 1st of the year immediately following the calendar year of issuance of the certificate.

B. Twelve-year exemption. The value of new housing construction improvements qualifying under this chapter is exempt from ad valorem property taxation for 12 successive years beginning January 1st of the year immediately following the calendar year of issuance of the certificate, if 20 percent of the residential units will be rented or sold as affordable housing units to low-income households. For purposes of this subsection, low-income household means a single person, family, or unrelated persons living together whose adjusted income is at or below 30 percent of the median family income adjusted for family size for King County, as reported by the United States Department of Housing and Urban Development. For the purposes of housing intended for owner occupancy, affordable housing means residential housing that is within the means of low-income households.

(Ord. No. 4360, § 2, 5-19-20)

3.25.060 Downtown residential targeted area guidelines.

In the downtown residential targeted area, new construction, conversion, and rehabilitation projects shall be eligible for tax exemptions under this chapter as follows:

A. Eight-year exemption. The value of new housing construction, conversion, and rehabilitation improvements qualifying under this chapter is exempt from ad valorem property taxation for eight successive years beginning January 1st of the year immediately following the calendar year of issuance of the certificate.

B. Twelve-year exemption. The value of new housing construction, conversion, and rehabilitation improvements qualifying under this chapter is exempt from ad valorem property taxation for 12 successive years beginning January 1st of the year immediately following the calendar year of issuance of the certificate, if all of the residential units will be sold as affordable housing units for owner occupancy to moderate-income households. For purposes of this subsection, moderate-income household means a single person, family, or unrelated persons living together whose adjusted income is between 100 and 120 percent of the median family income adjusted for family size for King County, as reported by the United States Department of Housing and Urban Development. For the purposes of housing intended for owner occupancy, affordable housing means residential housing that is within the means of moderate-income households.

(Ord. No. 4360, § 2, 5-19-20)

3.25.070 Application procedure.

A property owner who wishes to propose a project for a tax exemption shall complete the following procedures:

A. The application provided by the city shall be filed with the administrator along with the required initial application fee of $1,000. The application shall be filed prior to the issuance of the building permit for the project.

B. A complete application shall include:

1. A completed city of Kent application form setting forth the grounds for the exemption.

2. A brief written description of the project, and floor and site plans of the proposed project, which may be revised by the owner, provided such revisions are made and presented to the administrator prior to the city’s final action on the exemption application.

3. A statement from the owner acknowledging the potential tax liability when the project ceases to be eligible for exemption 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. No. 4360, § 2, 5-19-20)

3.25.080 Application review and issuance of conditional certificate.

The administrator may certify as eligible an application which is determined to comply with the requirements of this chapter. A decision to approve or deny an application shall be made within 90 calendar days of receipt of a complete application.

A. Approval. The administrator may approve the application if he/she finds that:

1. The proposed project is or will be, at the time of completion, in conformance with all applicable local plans, regulations, and design guidelines.

2. The owner has complied with all standards and guidelines adopted by the city under this chapter, including but not limited to the project eligibility and application requirements.

B. Contract required. If an application is approved, the applicant shall enter into a contract with the city, approved by the city council, regarding the terms and conditions of the project under this chapter.

C. Issuance of conditional certificate. Following approval of the contract, the administrator 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.

D. Application denial. If an application is denied, the administrator 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 the denial. Per 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 council appeal fee with the city clerk. The appeal before the city council will be based on the record made before the administrator. The administrator’s decision will be upheld unless the applicant can show that there is no substantial evidence on the record to support the administrator’s decision. The city council’s decision on appeal will be final.

E. Amendment of contract. An owner may request an amendment(s) to the contract by submitting a request in writing to the administrator, together with a fee of $500, at any time within three years of the date of the approval of the contract. The date for expiration of the conditional certificate shall not be extended by contract amendment unless all the conditions for extension set forth in KCC 3.25.090 are met.

(Ord. No. 4360, § 2, 5-19-20)

3.25.090 Extension of conditional certificate.

A. The conditional certificate and time for completion of the project may be extended by the administrator for a period not to exceed a total of 24 consecutive months. To obtain an extension, the applicant must submit a written request, along with a processing fee of $50, stating the grounds for the extension. An extension may be granted if the administrator 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;

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 between the applicant and the city will be satisfied upon completion of the project.

B. If an extension is denied, the administrator shall state in writing the reason for denial and shall send notice to the applicant’s last known address within 10 calendar days of the denial. 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 of administrative decision fee with the administrator. The appeal before the hearing examiner shall be as provided in Chapter 12.01 KCC for a Process I action. No appeal to the city council is provided from the hearing examiner’s decision.

(Ord. No. 4360, § 2, 5-19-20)

3.25.100 Application for 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 administrator the following, in accordance with RCW 84.14.090, along with a $1,000 fee:

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. Any additional information requested by the city pursuant to meeting any reporting requirements under Chapter 84.14 RCW; and

E. A statement that the work was completed within the required three-year period or any authorized extension.

(Ord. No. 4360, § 2, 5-19-20)

3.25.110 Issuance of final certificate.

Within 30 calendar days of receipt of all materials required for a final certificate, the administrator shall determine whether the specific improvements satisfy the requirements of the contract, application, and this chapter.

A. Granting of final certificate. If the administrator determines that the project has been completed in accordance with this chapter and the contract between the applicant and the city has been completed within the authorized time period, the city shall, within 10 calendar days of the expiration of the 30-day review period above, file a final certificate of tax exemption with the King County assessor.

B. Recording. The administrator is authorized to cause to be recorded, at the owner’s expense, in the real property records of the King County department of records and elections, 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 administrator deems appropriate for recording.

C. Denial and appeal. The administrator shall notify the applicant in writing that a final certificate will not be filed if the administrator 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.

An applicant may appeal a denial 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 of administrative decision fee with the administrator. The appeal before the hearing examiner shall be as provided in Chapter 12.01 KCC for a Process I action. No appeal to the city council is provided from the hearing examiner’s decision. The applicant may appeal the hearing examiner’s decision to the King County superior court, under RCW 34.05.510 through 34.05.598, if the appeal is filed within 30 calendar days of receiving notice of that decision.

(Ord. No. 4360, § 2, 5-19-20)

3.25.120 Annual certification and report.

Within 30 calendar days after the first anniversary of the date the city issued the final certificate of tax exemption and each year thereafter for the duration of the tax exemption period, the property owner shall file a notarized declaration and annual report with the administrator indicating the following:

A. A statement of occupancy and vacancy of the multifamily units during the previous 12 months;

B. A certification that the property has not changed use and continues to be in compliance with the contract with the city and this chapter;

C. A description of any subsequent improvements or changes to the property made after the city issued the final certificate of tax exemption;

D. The total monthly rent of each multifamily housing unit rented or the total sale amount of each multifamily housing unit sold to an initial purchaser during the 12 months ending with the anniversary date;

E. A breakdown of the number, type, and specific multifamily housing units rented or sold during the 12 months ending with the anniversary date; and

F. Any additional information requested by the city pursuant to meeting any reporting requirements under Chapter 84.14 RCW.

City staff may also conduct onsite verification of the declaration and reporting. Failure to submit the annual declaration and report shall result in a review of the exemption per RCW 84.14.110.

(Ord. No. 4360, § 2, 5-19-20)

3.25.130 Cancellation of tax exemption.

A. If the administrator determines (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 property for any reason no longer qualifies for the tax exemption, the tax exemption shall be canceled and additional taxes, interest, and penalties imposed pursuant to state law. This cancellation may occur in conjunction with the annual review or at any other time when noncompliance has been determined. If the owner intends to convert the multifamily housing to another use, the owner shall notify the administrator and the King County assessor in writing within 60 calendar days of the change in use. Upon such change in use, the tax exemption shall be canceled and additional taxes, interest, and penalties imposed pursuant to state law.

B. Notice and appeal. Upon determining that a tax exemption is to be canceled, the administrator shall notify the owner by mail, return receipt requested. The property owner may appeal the determination by filing a notice of appeal and appeal of administrative decision fee with the city clerk within 30 calendar days, specifying the factual and legal basis for the appeal. The hearing examiner will conduct a hearing under Chapter 12.01 KCC for a Process I action. An aggrieved party may appeal the hearing examiner’s decision to the King County superior court under RCW 34.05.510 through 34.05.598.

(Ord. No. 4360, § 2, 5-19-20)