Snohomish Council rejects tax break on housing for low-income families

A divided City Council worried an exemption for developers would boost property tax bills of homeowners.

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SNOHOMISH — A divided City Council has ditched a controversial tax policy aimed at encouraging building of new affordable housing in the Midtown district.

Following a nearly 2½ hour hearing Tuesday night, council members voted 4-3 to reject an ordinance offering developers a break on their property taxes for up to 12 years if they construct multi-family housing projects in Midtown, with units set aside for those with low incomes.

The decision effectively ends a monthslong debate on use of the multi-family tax exemption in the district, which runs along a stretch of Avenue D from Sixth Street to roughly Highway 9.

Council Member David Flynn made the motion to drop the ordinance. Council members Donna Ray, Tom Merrill and Lea Anne Burke supported it. Council members Karen Guzak, Felix Neals and Judith Kuleta dissented.

“Midtown does not need an incentive.” he said, because affordable housing “is what is being built everywhere.”

As part of the motion, city staff will research other potential means for encouraging commercial and residential development to make Midtown a vibrant place for residents and businesses.

“I know there are other levers we can pull,” Ray said. “I would like to see us explore other options.”

Merrill said developers told him “we don’t need incentives.”

The final vote came moments after Guzak put forth a motion to approve the ordinance. It failed to get a second and died.

“I am extremely disappointed. This was the most powerful way for the council to provide affordable housing. We dropped the opportunity,” Guzak said Wednesday. “I don’t think we are going to get what we want in that area and may have to bring it back up.”

In Snohomish, the conversation on how to grow has for years been a tug of war between those desiring to maintain the city’s small town flavor and those seeking to provide more affordable housing, viewed by some as code for high density developments like apartment complexes.

In February, City Council members established the Midtown district as a special zone for housing and commercial growth. They adopted guidelines for use of architectural and urban design standards to preserve the “Snohomish Character.” Building heights were limited to 45 feet in the south, from Sixth Street to Tenth Street; and 55 feet in the north, from Tenth Street to Highway 9.

Two months later, council members began debating various ways to encourage developers to build affordable housing in the district, zeroing in on the multi-family tax exemption as the best lure.

This specific exemption, created by the state Legislature in 1995, allows developers of qualifying projects to avoid paying property taxes for eight or 12 years depending on how many affordable units are in the project.

Opposition arose almost immediately from residents concerned about higher property tax bills as the tax burden would be shifted from developers onto them.

Tuesday night more than a dozen people urged the council to either reject the ordinance, or delay action in order to look for other means of accomplishing their goals.

“When you give developers a free ride on property taxes, everybody else’s tax goes up,” former mayor John Kartak said. “This isn’t about anything but redistribution of wealth. This is not about affordable housing.”

Foes also voiced concerns about increased traffic and building of multi-story apartment complexes in the district.

One resident, testifying virtually, said he was “a fan of multi-family development, just not here.”

Morgan Davis was one of the first to publicly challenge city reports that the exemption would only add a few more dollars a year on most homeowners’ property tax bills. His stinging critiques of the policy at council meetings and in emails helped catalyze the opposition.

“I’m happy … but I’m not celebrating,” he said Wednesday. “It was only public opinion and a large turnout of attendees last night that prevented the council from giving developers a blank check for millions of dollars in annual tax exemptions for up to 12 years and a corresponding property tax increase for all Snohomish area taxpayers.”

Supporters contended the exemption was a small step to help Snohomish meet the demands of the growth management act and those of the community.

The city expects the population to rise from 10,000 to 12,000 people by 2035, meaning possibly over 1,000 homes — a mix of single- and multi-family — need to be built, according to city planning officials.

City staff and council members tackled the concern about potential costs to taxpayers in August. They hoped to clear up what they said was misinformation spread by opponents.

Snohomish County Assessor Linda Hjelle told them if a developer gets a tax break for a $2 million undertaking it would probably add about 95 cents to the property tax bill of the owner of an average-priced home in Snohomish. If it is a larger and more expensive project, like a big apartment complex, the sum could be several hundred dollars — a point Davis has repeatedly made.

“They say you can’t beat City Hall,” Davis mused. “But we won that one last night.”

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com; Twitter: @dospueblos.

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