Kent City Council approves property tax waiver for multifamily residential developers

Future multifamily residential developers in the downtown Kent and Midway areas may apply for eight-or 12-year property tax exemptions under an ordinance adopted by the Kent City Council.

After a contentious debate, the council voted 5-2 in favor of the waiver during its May 19 virtual meeting in an effort to bring developers to downtown and Midway, on the West Hill, where Sound Transit plans to open a light rail line and station in 2024. The city calls the measure a targeted residential area investment program.

Council members Toni Troutner, Bill Boyce, Marli Larimer, Zandria Michaud and Les Thomas voted for the new ordinance. Brenda Fincher and Satwinder Kaur voted against it. All but a few council votes have been unanimous since Dana Ralph became mayor in 2018.

“We talked about this at a workshop earlier this year, so I’m a little surprised we are still talking about it,” Boyce said during a debate with Fincher and Kaur. “The (income and housing) chart tells us what we need in this community. We need to balance this out. We want people to find a place to work in Kent, live in Kent and shop in Kent. …This is what we need to move this city forward at this time.”

A chart presented to the council by Hayley Bonsteel, city long range planning manager, showed Kent has ample housing for household incomes between $25,000 and $100,000 per year but lacks housing for households earning above $100,000 and those earning less than $25,000.

City leaders want more housing that appeals to higher-income workers in an effort to support local businesses and because they say Kent lacks enough higher-end apartments. The council used a similar argument when it supported a property tax break for the developer of the large apartment complex on West Meeker Street on the former city-owned par 3 golf course and across from the Riverbend Golf Complex 18-hole course.

But that property tax break ordinance expired last June so city staff brought forward a new ordinance to apply to new multifamily developments in the Midway area and to new developments, conversion and rehabilitation projects downtown. If granted the tax break by the city, developers would still pay taxes on the land but not on the residential buildings.

Two developers are using the previous property tax waiver and saving millions of dollars.

The council agreed in 2017 to give the tax break for the 492-unit Marquee on Meeker project (now known as Ethos Community Apartments) as part of a deal to sell the city-owned Riverbend par 3 property to Auburn-based FNW, Inc./Landmark Development Group for $10.5 million. Seattle-based Tarragon received the tax exemption from the council when the company opened the 154-unit Dwell at Kent Station in 2016.

The developers still pay taxes on the land value but not on the building value, so no additional property taxes from the building value are paid to the city, schools, the Puget Sound Regional Fire Authority, King County and other taxing districts.

Seattle-based Goodman Real Estate didn’t apply for the property tax waiver when it built The Platform Apartments that opened downtown in 2014 or the apartments it is building at 64th Avenue South and West Meeker Street, each considered upscale complexes.

Fincher and Kaur each voiced concerns about a measure that targets higher-income earners over low-income households.

“People have been moving from Seattle to Kent and from Kent further south, and a lot of the people moving are in lower incomes,” Fincher said. “Seattle is losing a lot of diversity. People are forced to move because they are priced out. I don’t think we should be forcing people out, we need to be sure to look ahead to the outcome later on.”

Boyce disagreed that the property tax exemption will change Kent.

“People need to understand Kent is one of the most diverse cities in the country and I don’t think what we are doing will change that,” Boyce said. “We are not Seattle, Kent will always be Kent.”

If a developer wants the longer 12-year exemption in the Midway area, they must make 20 percent of the residential units available to low-income households, which means a single person, family, or unrelated persons living together whose adjusted income is at or below 30% of the median family income adjusted for family size in King County. The median household income in King County is $95,009, according to county documents.

Midway is roughly bordered by Interstate 5 to the east, Pacific Highway South to the west, Kent Des Moines Road to the north and South 272nd Street to the south.

Fincher and Kaur wanted a requirement for low-income units added to the eight-year exemption. The eight-year tax break for downtown also includes no requirements for low-income units. To get a 12-year property tax exemption downtown, all of the residential units must be built as units to sell to moderate-income households, which means between 100% and 120% of the median family income in the county.

“I would like to see something for eight years as well,” Kaur said. “I know we are targeting higher income but because of COVID-19 people are struggling. The eight-year plan with a percentage (for low income) as well will show the community we care for all residents when we bring developers into our community.”

Councilmember Larimer said it’s difficult to find developers interested in building apartments for people in lower incomes.

“This program isn’t to make that happen,” Larimer said about building affordable housing. “That needs to come from state and federal programs.”

Larimer said Kent needs more housing for higher-income households.

‘We need high-end development,” Larimer said. “This program addresses needs. I like what I see.”

City staff pointed out that other neighboring cities use similar property tax exemption measures in efforts to attract residential developers. Without the tax break, developers might not build at all.

“It brings long-term benefits,” city planner Bonsteel said. “You forego the short term for better long-term benefits and discretionary income and tax benefits in eight to 12 years.”

Council President Troutner said Kent needs to provide more housing for higher-income households.

“We are looking to build this area into a vision of young people, people looking for transit and places to eat and shop in an area that we are trying to create for them,” Troutner said.

Any developer that applies for the property tax waiver would have to agree to construct structured parking underneath the building to help maximize density rather than building surface parking lots that take up so much land. A few people representing developers asked the council in emails to remove the parking structure requirement, but the council kept it.

Editor’s note: This story has been corrected from an earlier version.