Council approves multi-family tax exemption program for downtown developers

The City of Mountlake Terrace will move forward with a Multifamily Property Tax (MTTE) Exemption Program for the city’s downtown area. Council voted unanimously at its Monday, Oct. 3 business meeting to approve a resolution of intent to designate the downtown subzone for the program, which provides a tax exemption for property developers multifamily.

The city plans to offer two MFTE programs: an eight-year program with no affordability requirement and a 12-year program that requires developers to offer some of the apartments at a reduced rent – the resolution calls for 20% of units to be at price of 80% or more of the regional median income (AMI).

Prior to the vote, the council held a public hearing on the matter, which prompted a comment from resident William Paige, Jr., who serves on the Diversity, Equity and Inclusion Commission (DEIC) of the city. Paige noted that the commission hosted a speaker earlier this year who touched on the topic of housing affordability and multifamily tax exemptions. The speaker pointed out that because of the profit margin the developers receive, “they would be giving up the tax exemptions instead of the profit they were going to make on those units,” Paige said.

Paige asked what kind of penalty developers would face if they chose to offer fewer units at a reduced rent — say 10% instead of 20% — and what the city would do to prevent that from happening. produce. Acting City Manager Stephen Clifton responded that the percentage of units to be set aside for the tax exemption is required by state law. “The code states that if the developer or owner violates the MFTE chapter, we can revoke the eligibility of that project and then they will have to be taxed,” Clifton replied. The developer must certify annually that it still rents 20% of units priced at or above 80% of the area’s median income, Clifton added.

Paige then posed a follow-up question: How would the city treat a developer who chooses to pay the tax rather than offer reduced-rent housing? “It’s very difficult to answer that, only because we don’t know at any given time what a developer’s financial situation is and what pencils and what doesn’t pencil,” Clifton replied.

Earlier this year, the city hired the Concord Group, a real estate consulting firm, to evaluate various ways the city could apply the MFTE program to residential and commercial uses in the downtown sub-area, while identifying ways to develop more affordable residential housing.

Acting City Manager Stephen Clifton talks about the next steps for the Multi-Family Tax Exemption Program.

The City of Mountlake Terrace previously had an MFTE program that offered an eight-year exemption with no affordability requirements. Under this program, four projects totaling nearly 1,000 units were developed or are still under development before the exemption expired in October 2017. These projects include Arbor Village, with 123 rental units, Vineyard Park with 104 rental units for seniors, Atlas 236 with 151 rental units. units and Terrace Station, which will have approximately 636 units in total when its three phases are fully built.

One of the reasons for focusing this MFTE program on the city center is that the Lynnwood Link light rail extension is scheduled to come to Mountlake Terrace in 2024, “and we’re trying to get as many units as possible near the light rail to give people more transportation options, Clifton said.

Brian Smith, CFO of Volunteers of America Western Washington, right, addresses the Mountlake Terrace City Council Monday evening.

In other matters on Monday evening, counsel heard a presentation from Volunteers of America Western Washington (VOAWW) on its plans to build the 40,000 square foot multi-generational and multicultural neighborhood center of Lynnwood next to Trinity Lutheran Church on Southwest 196th Street. The goal is to provide services and programs – including free medical and dental care and early childhood education – for the area of ​​South Snohomish County served by the Edmonds School District.

Construction is expected to begin in March 2023 with building completion by the second quarter of 2024.

Noting that the center will serve residents of Mountlake Terrace, VOAWW chief operating officer Brian Smith asked the council to consider providing financial support of $500,000.

The city is receiving $6 million in federal funds from the American Rescue Plan Act (ARPA) by the end of 2022 to respond to the COVID-19 pandemic, and over the past year the council has discussed various ways to use the funds. The money must be committed by the end of 2024 and fully spent by the end of 2026.

The council has already allocated up to $500,000 to help residents and business owners with overdue utility bills, which VOAWW administers under contract with the city, along with matching funds. for a state grant to assist in the recruitment and retention of child care and other City Recreation Pavilion employees.

Now board members are exploring a range of ideas for using the remaining funds, including the possibility of funding nonprofits that are doing good work both locally and regionally.

In other cases, the board heard from DEIC Commissioner Paige on a different topic. During public comments, Paige noted the council’s recent decision to proclaim September 15 to October 15. 15 Hispanic Heritage Month at Mountlake Terrace. He asked council members to join forces with DEIC commissioners to visit the city’s six Hispanic businesses and present each of them with a Hispanic Heritage Month proclamation. This would let business owners know “we are about them and this proclamation is not just a statement, it is an event. That’s one reason we did this because they matter,” Paige added.

Council members have agreed to participate in delivering proclamations by October 15th.

Finally, council learned from Mayor Kyoko Matsumoto Wright that City Manager Scott Hugill had tendered his resignation on October 3 for medical reasons. You can read more about this in our previous story.

— By Teresa Wippel

Ryan H. Bowman