Council approves multifamily tax exemption program for developers in Town Center

The City of Mountlake Terrace will move forward with a multifamily property tax exemption (MFTE) program for the city’s Town Center. The council voted unanimously at its Monday, Oct. 3 business meeting to approve a resolution of intent to designate the Town Center subarea for the program, which offers a tax exemption for developers of multifamily properties.

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 being priced at 80% or greater of area median income (AMI).

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

Paige asked what type of penalty developers would face if they chose to offer fewer units at a reduced rent — for example 10% instead of 20% — and what the city would do to prevent that from happening. Acting City Manager Stephen Clifton replied that the percentage of units to be set aside for tax exemption is required by state law. “The code states that if the developer or owner violates the MFTE chapter, then we can rescind the eligibility of that project and then they will have to be taxed,” Clifton replied. The developer has to certify on an annual basis that they are still renting out 20% of units priced at 80% or greater of area median income, Clifton added.

Paige then asked a followup question: How the city would deal with a developer who chooses to pay the tax rather than offer units at a reduced rent? “That’s very difficult to respond to, only because we don’t know at any given time what the financial situation is for any developer and what pencils and what does not pencil,” Clifton replied.

Earlier this year, the city hired the Concord Group, a real estate advisory firm, to assess various ways the city might apply the MFTE program for residential and commercial uses within the Town Center subarea, while also identifying ways to develop more affordable residential housing.

Acting City Manager Stephen Clifton talks about next steps for the multifamily tax exemption program.

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

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

Volunteers of America Western Washington Chief Financial Officer Brian Smith, right, speaks to the Mountlake Terrace City Council Monday night.

In other business Monday night, the council heard a presentation from Volunteers of America Western Washington (VOAWW) on its plans to build the 40,000-square-foot multigenerational, multicultural Lynnwood Neighborhood Center next to Trinity Lutheran Church on 196th Street Southwest. The goal is to provide services and programs — including free medical and dental care and early childhood education — for the South Snohomish County area 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 be serving Mountlake Terrace residents, VOAWW Chief Operating Officer Brian Smith asked the council to consider providing $500,000 in financial support.

The city is receiving $6 million in federal American Rescue Plan Act (ARPA) funds by the end of 2022 to respond to the COVID-19 pandemic, and during 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 past-due utility bills, which VOAWW administers under a contract with the city, as well as matching funds for a state grant to assist with recruitment and retention of child care and other employees at the city’s Recreation Pavilion.

Now councilmembers are looking at a range of ideas for using the remaining funds, including the possibility of funding nonprofits that do good works both locally and regionally.

In other business, the council heard from DEIC Commissioner Paige on another matter. During public comment, Paige noted the council’s recent decision to proclaim Sept. 15-Oct. 15 Hispanic Heritage Month in Mountlake Terrace. He asked councilmembers to partner with DEIC commissioners in going to the city’s six Hispanic-owned storefront businesses and presenting each of them with a Hispanic Heritage Month proclamation. This would let the business owners know “that we are about them and that this proclamation isn’t just a statement, it is a happening. It is a reason why we did this because they are important,” Paige added.

Councilmembers agreed to participate in delivering the proclamations between now and Oct. 15.

Finally, the council learned from Mayor Kyoko Matsumoto Wright that City Manager Scott Hugill submitted his resignation Oct. 3 due to medical reasons. You can read more about that in our earlier story.

— By Teresa Wippel


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