Chapter 3.95
PROPERTY TAX ABATEMENT PROGRAM FOR QUALIFIED MULTIFAMILY RESIDENTIAL DEVELOPMENT

Sections:

3.95.010    Purpose and authorization.

3.95.020    Definitions.

3.95.030    Residential targeted areas.

3.95.040    Tax exemption – Duration – Valuation.

3.95.050    Project eligibility.

3.95.060    Application procedures.

3.95.070    Application review – Conditional certificate – Contract.

3.95.080    Final certificate.

3.95.090    Fees.

3.95.100    Cancellation of tax exemption.

3.95.110    Annual reporting.

3.95.120    Appeals.

3.95.130    Program termination.

Code reviser’s note: Section 2 of Ord. 2645 provides: “Ordinance No. 2577 § 6 Expiration, is amended to read as follows: ‘Section 6. Expiration. This Ordinance (No. 2577) shall expire October 2, 2029 unless it is extended by the City Council following a public hearing.’”

3.95.010 Purpose and authorization.

A. The purpose of the property tax abatement program for qualified multifamily residential development is to encourage high-quality development in urban centers, consistent with the Growth Management Act, and to increase multifamily residential opportunities within targeted areas, as authorized under Chapter 84.14 RCW.

B. The City Council authorizes the City Manager to execute contracts pursuant to this chapter and authorizes the Director to provide forms and carry out other activities to implement the property tax abatement program as provided in this chapter. The City Council authorizes the Hearing Examiner to consider and make decisions on appeals pursuant to this chapter. (Ord. 2577 § 2, 2011).

3.95.020 Definitions.

In construing the provisions of the chapter, the following definitions shall apply.

“City” means the City of Mountlake Terrace.

“City Clerk” means the Mountlake Terrace City Clerk.

“City Manager” means the Mountlake Terrace City Manager.

“Comprehensive Plan” means the Mountlake Terrace Comprehensive Plan adopted under Chapter 18.10 MTMC.

“Conversion” means the conversion of a building from a nonresidential use to a multifamily residential use in conformance with the City’s building and zoning codes.

“Director” means the Mountlake Terrace Community and Economic Development Director.

“Growth Management Act” means Chapter 36.70A RCW.

“Hearing Examiner” means the Hearing Examiner as authorized under Chapter 2.120 MTMC.

“Multifamily residential housing” means a building having multiple dwelling units designed for permanent residential occupancy.

“Multiple-unit housing” means the same as multifamily residential housing.

“New units” means multifamily residential housing within a building constructed after October 1, 2011, and not within a building that exists on or prior to October 1, 2011.

“Owner” means the property owner of record.

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

“RCW” means the Revised Code of Washington.

“Rehabilitation improvements” means modifications to existing structures that are vacant for 12 months or longer and that achieve the required level of compliance with the City’s building and zoning codes.

“Residential targeted area” means an area within an urban center that has been designated by the Mountlake Terrace City Council as a residential targeted area in accordance with RCW 84.14.040.

“Urban center” means urban center as defined in RCW 84.14.010. (Ord. 2577 § 2, 2011).

3.95.030 Residential targeted areas.

A. The following areas are designated by the City Council as residential targeted areas, consistent with requirements of RCW 84.14.040:

1. Town center, as designated in the Comprehensive Plan.

2. Freeway/tourist area, as designated in the Comprehensive Plan.

3. Area north of 216th Street SW that is zoned under the City’s zoning code to allow multifamily residential housing and excluding any parcels within a zoning district that does not allow multifamily residential housing.

B. If part of any legal lot is within a residential targeted area, the entire lot shall be deemed to lie within the residential targeted area.

C. The areas designated in subsection A of this section may be amended by action of the City Council, consistent with requirements of RCW 84.14.040. Any amendment to the residential targeted areas shall not affect the status of a project for which the City has received a complete application for property tax exemption under this chapter. (Ord. 2577 § 2, 2011).

3.95.040 Tax exemption – Duration – Valuation.

A. The value of new multifamily residential 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 final certificate of limited property tax exemption.

B. The property tax exemption does not apply to the value of land or to the value of nonhousing improvements, nor does the exemption apply to increases in assessed valuation of land and nonqualifying improvements.

C. Chapter 84.14 RCW does not apply to increases in assessed valuation made by the assessor on nonqualifying portions of building and value of land nor to increases made by lawful order of a county board of equalization, the state department of revenue, or Snohomish County to a class of property through the county or specific area of the county to achieve the uniformity of assessment or appraisal required by law.

D. 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. 2577 § 2, 2011).

3.95.050 Project eligibility.

To qualify for temporary 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 as designated in MTMC 3.95.030.

B. The project must consist of at least 20 dwelling units of multifamily housing that are being added, or in the case of occupied rehabilitation or conversion a minimum of 20 additional multifamily units that are being developed within a residential structure or 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; provided, that the minimum number of units are in addition to any residential units that have been occupied on the site at any time during the 12-month period preceding the submittal of an application for property tax abatement.

C. The property must be used or developed in a way that increases or preserves property valuation, and the use or development of the property must represent an increased investment in the property and property maintenance that results in an increase in the overall property values in the target area.

D. Demolition of existing structures as necessary to proceed with the project must be completed, consistent with applicable state and local requirements.

E. The project must comply with all applicable requirements of the Mountlake Terrace Municipal Code, including but not limited to land use, zoning, site utilization, design, and building requirements.

F. For any project for which property tax abatement under this chapter has been applied after January 1, 2012, all of the proposed multifamily residential units must be constructed to condominium standards.

G. For any project in the town center for which property tax abatement under this chapter has been applied after January 1, 2012, the owner must agree to provide as part of the development a connection to such common heating and/or cooling system that the City may provide. Provided, however, if the Director determines that such system will not be available within a reasonable timeframe, this requirement may be waived.

H. New construction, conversion, or rehabilitation improvement of multifamily housing must be completed within three years from the date of approval of the application or by any extended deadline granted by the Director pursuant to MTMC 3.95.070(E).

I. The owner must submit an application and enter into a written agreement with the City, which has been substantively approved by the Director and signed by the City Manager, consistent with the requirements of MTMC 3.95.060 and 3.95.070. (Ord. 2577 § 2, 2011).

3.95.060 Application procedures.

An owner seeking tax incentives under this chapter shall complete the following application procedures; provided, that after January 1, 2012, any application must be submitted prior to the submittal of a building permit for construction of new units, conversions, or rehabilitation improvements under this chapter; and provided, that no new applications for property tax exemption shall be accepted by the City after October 1, 2017:

A. The owner shall apply to the City on forms provided by the Director. The application shall contain such information as deemed useful by the Director, and in the case of new and rehabilitated multifamily housing, the owner shall provide information that includes, but not limited to:

1. Information setting forth the grounds supporting the requested exemption; and

2. A brief description of the project, including the number and composition of proposed new units, conversions, and rehabilitation improvements, a preliminary site plan, and a preliminary floor plan of units; provided, that such plans may be later revised in a manner that does not, in the Director’s opinion, materially alter the nature of the project or the rationale substantiating the tax exemption application; and

3. A statement that the applicant is aware of the potential tax liability involved when the property ceases to be eligible for the incentive provided under this chapter.

B. The applicant shall verify the application by oath or affirmation.

C. In the case of rehabilitation or where demolition or new construction is required, the owner shall secure from the City, before commencement of rehabilitation improvements or new construction, verification of property noncompliance with applicable building and housing codes.

D. The application shall be accompanied by the application fee required under MTMC 3.95.090.

E. The applicant may revise an application prior to a contract being approved under this chapter. (Ord. 2645 § 3, 2014; Ord. 2577 § 2, 2011).

3.95.070 Application review – Conditional certificate – Contract.

A. The Director may approve an application for a conditional certificate of acceptance of temporary property tax exemption if she/he finds that:

1. A minimum of 20 new multifamily residential units are being constructed, converted or rehabilitated.

2. The proposed project is or will be, at the time of completion, in conformance with all approved plans and all applicable requirements of the City’s Municipal Code and adopted standards.

3. The project site is planned and located to meet the project eligibility requirements contained in MTMC 3.95.050.

4. If applicable, the proposed multi-unit housing project meets the affordable housing requirements as described in RCW 84.14.020.

5. The owner has complied with applicable requirements of this chapter, including but not limited to application requirements contained in MTMC 3.95.060.

6. The application was received on or before October 1, 2017, or, if applicable, by another date that has been established by ordinance of the City Council.

B. The Director shall deny an application if any of the criteria in subsection A of this section is not met or if any part of the proposed project site is within a campus facilities master plan. The Director shall state in writing the reasons for denial. Notice of the denial decision shall be sent to the owner’s last known address within 10 days of the denial. The owner may appeal the decision of denial to the Hearing Examiner within 30 days after receipt of the denial notice under the provisions of MTMC 3.95.120.

C. If the application is approved, the owner shall enter into a contract with the City in order to establish the property tax exemption. When the contract is executed, the Director shall issue the owner a conditional certificate of acceptance of property tax exemption.

D. The conditional certificate of acceptance must contain a statement by the Director that the property has been found to meet each of the criteria in subsection A of this section and has complied with the relevant requirements of MTMC 3.95.050 and 3.95.060. The certificate shall expire in three years unless the Director extends the time period pursuant to subsection E of this section.

E. The conditional certificate of acceptance may be extended by the Director for a single period not to exceed 12 months after an applicant has submitted a written request stating the grounds for the extension. The request shall be accompanied by the fee required under MTMC 3.95.090. An extension may be granted if the Director determines that:

1. The anticipated failure to complete construction with the required time period is due to circumstances beyond the control of the owner;

2. The owner has been acting and can be reasonably expected to continue acting in good faith and with due diligence; and

3. All the conditions of the contract between the applicant and the City will be satisfied upon completion of the project.

F. The applicant may request an amendment to the executed contract by filing a request with the Director. The contract amendment request shall contain such information as deemed necessary by the Director and at a minimum shall include a description of the status of the project, proposed language for a contract amendment, and the reason(s) for amending the contract. The request shall be accompanied by the fee required under MTMC 3.95.090. After consultation with the Director, the City Manager may at his/her sole discretion agree to execute a contract amendment; provided, that the contract amendment is in accordance with Chapter 84.14 RCW and this chapter.

G. The City Council shall be provided periodic reports on the issuance of conditional certificates and any time extensions for such certificates and on the execution of contracts and any contract amendments. (Ord. 2645 § 4, 2014; Ord. 2577 § 2, 2011).

3.95.080 Final certificate.

A. Upon completion of the new units for which a limited tax exemption under this chapter has been provided and after issuance of a certificate of occupancy, the owner shall file with the Director an application for the final certificate of limited property tax exemption. The application shall contain information deemed necessary or useful by the Director, including but not limited to the following:

1. A statement of the construction, conversion, or rehabilitation improvement expenditures made with respect to each housing unit and the composite expenditures made for associated construction on the entire property;

2. A description of the work that has been completed and a statement that the construction of new, converted or rehabilitated units on the owner’s property qualify the property for limited property tax exemption under this chapter and Chapter 84.14 RCW; and

3. A statement that the work has been completed within three years of the issuance of the conditional certificate of tax exemption or an approved time extension.

B. Within 30 days after receipt of the application required under subsection A of this section, the Director in consultation with the Building Official shall determine whether the work completed is consistent with the application and the contract approved by the City and is qualified for a limited tax exemption under this chapter. The City shall also determine which specific improvements completed meet the requirements and required findings.

C. If the construction of the new units is completed within three years of the date the application for a limited tax exemption under this chapter is submitted or within an authorized extension of this time limit and the Director determines that the improvements were constructed consistent with the application and other applicable requirements and that the owner’s property is qualified for a limited tax exemption under Chapter 84.14 RCW, the Director or Director’s representative shall file the certificate of tax exemption with the Snohomish County assessor within 10 days of the expiration of the 30-day period provided under subsection A of this section and shall provide a copy of the certificate to the owner.

D. The Director shall notify the applicant that a certificate of tax exemption is not going to be filed if the Director determines that:

1. The new, converted, or rehabilitated construction was not completed within three years of the application date or within any authorized extension of the time limit;

2. The improvements were not constructed consistent with the application or other applicable requirements; or

3. The owner’s property is otherwise not qualified for limited exemption under this chapter.

E. If the Director finds that construction of the new units was not completed within the required time period due to circumstances beyond the control of the owner and that the owner has been acting and could reasonably be expected to act in good faith and with due diligence, the Director may extend the deadline for completion of construction for a period not to exceed 12 consecutive months.

F. The Director’s determination that the owner is not entitled to a certificate of tax exemption may be appealed to the Hearing Examiner under the provisions of MTMC 3.95.120. (Ord. 2577 § 2, 2011).

3.95.090 Fees.

A. Fees are established under this chapter to cover the City’s administrative costs in implementing the necessary steps of the property tax abatement program for each applicant.

B. The application for a property tax exemption shall be accompanied by a fee of $1,000 plus any amount necessary to cover recording fees.

C. The application for an extension of a conditional certificate of acceptance shall be accompanied by a fee of $500.00.

D. The request for a contract amendment shall be accompanied by a fee of $500.00 plus any amount necessary to cover recording fees.

E. The application for a final certificate shall be accompanied by a fee of $500.00 plus any amount necessary to cover recording fees.

F. An appeal of a decision under this chapter shall be accompanied by an initial fee of $3,000 plus a deposit of $2,000 against which any Hearing Examiner costs not covered by the initial fee and any administrative time in excess of 15 hours shall be billed. Within 10 days after the appeal process has been completed, the City will refund to the applicant any amount of the deposit for which City costs have not been billed. (Ord. 2577 § 2, 2011).

3.95.100 Cancellation of tax exemption.

A. For any improvements exempted under this chapter, the improvements shall continue to be exempted for eight years, provided they are not converted to another use and continue to satisfy all applicable conditions.

B. If the owner intends to or does convert one or more multifamily residential units to another use or intends to or does discontinue compliance with any other conditions of property tax exemption under this chapter, the owner shall notify both the Director and the county assessor within 60 days of the conversion or discontinuance.

C. Conversion or discontinuance makes the property subject to cancellation of the tax exemption.

D. Upon a determination that a property tax exemption is to be canceled for any reason, the Director shall notify the Snohomish County assessor of the determination. The Director shall also notify the record owner of the property, as shown by the tax rolls, by mail, with return receipt requested, of the determination. The owner may appeal the determination to the Hearing Examiner under the provisions of MTMC 3.95.120.

E. Upon determination by the Director to terminate an exemption, the owner and the county officials having possession of the assessment and tax rolls are subject to the requirements of RCW 84.14.110. (Ord. 2577 § 2, 2011).

3.95.110 Annual reporting.

A. Within 30 days after the anniversary of the date of the certificate of property tax exemption and each year thereafter during the tax exemption period, the owner of the newly constructed, converted, or rehabilitated property shall file with the Director an annual report, verified upon signed affirmation under penalty of perjury under the laws of the state of Washington. The owner’s report shall contain such information as the Director may deem necessary or useful, and shall at a minimum include the following information:

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

2. A certification by the owner that the property has not changed use since the date of the certificate approved by the City;

3. A description of changes or improvements constructed after issuance of the certificate of tax exemption or most recent annual report, as applicable; and

4. Any additional information requested by the Director in regard to the units receiving a tax exemption.

B. The owner’s failure to file a timely annual report may result in the termination of the property tax abatement.

C. For any properties that have been issued a certificate of property tax exemption, the Director shall report annually by December 31st of each year to the state Department of Commerce or its assigns. A copy of the report shall be provided to the City Council. The report must include the following information:

1. The number of property tax exemption certificates granted;

2. The total number and type of units produced or to be produced;

3. The actual development cost of each unit produced;

4. The total monthly rent or total sale amount of each unit produced;

5. If applicable, 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 a summary of these figures; and

6. The value of the tax exemption for each project receiving a tax exemption and the total value of tax exemptions granted. (Ord. 2577 § 2, 2011).

3.95.120 Appeals.

The Hearing Examiner is authorized to hear appeals as provided in this section in accordance with and pursuant to the provisions of this chapter and Chapter 2.120 MTMC.

A. An owner may appeal to the Hearing Examiner a decision of denial made under MTMC 3.95.080 within 30 days of receipt of the notice of denial.

1. Appeals shall be filed with the Director and shall contain a written statement about the reasons the denial should be overturned, consistent with the requirements of this chapter.

2. The appeal before the Hearing Examiner shall be based upon the record made before the Director with the burden of proof on the applicant to show that there was no substantial evidence to support the Director’s decision.

3. The decision of the Hearing Examiner in denying or approving the application is final.

B. An owner may appeal to the Hearing Examiner a determination of cancellation of exemption within 30 days by filing a notice of appeal with the City Clerk.

1. The notice of appeal shall specify the factual and legal basis on which the determination of cancellation is alleged to be erroneous.

2. At the hearing, all affected parties may be heard and all competent evidence received.

3. After the hearing, the Hearing Examiner shall affirm, modify, or repeal the decision of cancellation of exemption based on the evidence received.

4. Within 10 days of the Hearing Examiner’s written decision, an aggrieved party may appeal to the superior court in accordance with Chapter 34.05 RCW.

C. An owner may appeal to the Hearing Examiner a determination that the property does not qualify for a certificate of tax exemption per MTMC 3.95.080 by filing a notice of appeal with the Director.

1. The notice of appeal shall specify the factual and legal basis on which the determination is alleged to be erroneous.

2. At the hearing, all affected parties may be heard and all competent evidence received.

3. After the hearing, the Hearing Examiner shall affirm, modify, or repeal the determination based on the evidence received.

D. Within 10 days of a Hearing Examiner’s written decision, an aggrieved party may appeal to the superior court in accordance with Chapter 34.05 RCW. (Ord. 2577 § 2, 2011).

3.95.130 Program termination.

A. No new applications for property tax exemption under this chapter shall be accepted after October 1, 2017. Complete applications that are submitted on or before October 1, 2017, shall be processed under this chapter.

B. After such date that new applications are no longer accepted for tax exemption, all other provisions of this chapter shall remain in effect. For any project that has an executed contract under this chapter, the owner shall be allowed to retain the property tax exemption for the full eight-year period; provided, that the owner meets the terms of the contract and this chapter. (Ord. 2645 § 5, 2014; Ord. 2577 § 2, 2011).