5387-S

AN ACT Relating to taxation of new and rehabilitated multiple-unit housing in urban centers; and adding a new chapter to Title 84 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds:

(1) That in many of Washington's urban centers there is insufficient availability of desirable and convenient residential units to meet the needs of a growing number of the public who would live in these urban centers if these desirable, convenient, attractive, and livable places to live were available;

(2) That the lack of these sufficient residential opportunities has resulted in an underutilization of these areas as a place to live by permanent residents and such absence of permanent residents has contributed to the existence of vandalism, juvenile delinquency, the proclivity by some to commit crimes, unreported crimes, and a perception by a large segment of the public that some urban centers are unsafe or undesirable areas to visit or to inhabit after normal working hours;

(3) That the development of additional and desirable residential units in these urban centers that will attract and maintain a significant increase in the number of permanent residents in these areas will help to alleviate the detrimental conditions and social liability that tend to exist in the absence of a viable residential population and will help to achieve the planning goals mandated by the growth management act under RCW 36.70A.020, including, but not limited to, the encouragement of development in urban areas where adequate public facilities and services exist or can be provided in an efficient manner, the reduction of sprawl, the efficient utilization of multimode transportation systems, and the increased availability of housing to all economic segments of the population of this state;

(4) That planning solutions to solve the problems of urban sprawl often lack incentive and implementation techniques needed to encourage residential redevelopment in those urban centers lacking sufficient residential opportunities, and it is in the public interest and will benefit, provide, and promote the public health, safety, and welfare to stimulate new or enhanced residential opportunities within urban centers through a tax incentive as provided by this chapter; and

(5) That in order to maximize the purpose of this chapter to provide needed livable and attractive places to live in urban centers and to achieve the objectives of the growth management act, it is necessary to allow for the maximum participation by cities in determining where the greatest need for increased residential opportunity exists within urban centers and the location, configuration, and amenities of such residential redevelopment which will best meet the objectives of this chapter and the growth management plan of a city adopted in conformance with the growth management act.

NEW SECTION. Sec. 2. It is the purpose of this chapter to encourage increased residential opportunities for individuals of all income levels in cities that are required to plan or choose to plan under the growth management act within urban centers where the legislative body of the affected city has found there is insufficient housing opportunities, and that a particular residential development or redevelopment is needed to properly advance the intent and purposes of this chapter. It is further the purpose of this chapter to stimulate the construction of new multifamily housing and the rehabilitation of existing vacant and underutilized buildings for multifamily housing in urban centers having insufficient housing opportunities that will increase and improve residential opportunities within these urban centers and that will assist in reducing urban sprawl, locating housing close to work locations, promoting land use patterns that support and encourage the use of public transit or other alternatives to automobile use and in making these urban centers a place where more people can, and will, live. To achieve these purposes, this chapter provides for special valuations for eligible improvements associated with multiunit housing in residentially deficient urban centers.

NEW SECTION. Sec. 3. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "City" means a city or town located in a county planning under the growth management act.

(2) "Governing authority" means the local legislative authority of a city having jurisdiction over the property for which an exemption may be applied for under this chapter.

(3) "Growth management act" means chapter 36.70A RCW.

(4) "Multiple-unit housing" or "multifamily housing" means a building having four or more dwelling units not designed or used as transient accommodations and not including hotels and motels. Multifamily units may result from new construction or rehabilitated or conversion of vacant, underutilized, or substandard buildings to multifamily housing. At least twenty percent of the units must be set aside for households that earn no more than fifty percent of the median income or forty percent of the units must be set aside for households who earn no more than sixty percent of the median income, adjusted for household size.

(5) "Owner" means the property owner of record.

(6) "Permanent residential occupancy" means multiunit housing that provides either rental or owner occupancy on a nontransient basis. This includes owner-occupied or rental accommodation that is leased for a period of at least one month. This excludes hotels and motels that predominately offer rental accommodation on a daily or weekly basis.

(7) "Public benefit features" means amenities, uses, and other features of benefit to the public as may be locally designated. Examples include, but are not limited to, plazas, public open spaces, sidewalk surfacing, midblock connections, light standards, street level awnings, canopies or other weather protection features, street level retail uses, street furniture, pedestrian amenities, miniparks, tot lots, daycare centers, common meeting rooms, and other public amenities.

(8) "Rehabilitation improvements" means modifications made to existing structures that have been vacant for at least twelve months and failed to comply with one or more standards of the applicable state or local building or housing codes on or after the effective date of this section.

(9) "Residential targeted area" means an area within an urban center that has been designated by the governing authority as a residential targeted area in accordance with this chapter.

(10) "Substantial compliance" means compliance with local building or housing code requirements that are typically required for rehabilitation as opposed to new construction.

(11) "Urban center" means a compact identifiable district where urban residents may obtain a variety of products and services. An urban center must contain:

(a) Several existing or previous, or both, business establishments that may include but are not limited to shops, offices, banks, restaurants, governmental agencies;

(b) Adequate public facilities including streets, sidewalks, lighting, transit, domestic water, and sanitary sewer systems; and

(c) A mixture of uses and activities that may include housing, recreation, and cultural activities in association with either commercial or office, or both, use.

NEW SECTION. Sec. 4. The provisions of this chapter relating to special valuation apply only to locally designated residential targeted areas of those cities planning under the growth management act.

NEW SECTION. Sec. 5. (1) The appraised value of new housing construction, conversion, rehabilitation improvements, and public benefit features qualifying under this chapter is exempt from ad valorem property taxation, for ten successive years beginning January 1 of the year immediately following the calendar year after issuance of the certificate of tax exemption eligibility. However, the exemption does not include the value of land or nonhousing-related improvements not qualifying under this chapter.

(2) In the case of rehabilitation of existing buildings, the exemption does not include the value of improvements constructed prior to the submission of the application required under this chapter. The incentive provided by this chapter is in addition to any other incentives, tax credits, grants, or other incentives provided by law.

(3) This chapter 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 department of revenue, or a county, to a class of property throughout the county or specific area of the county to achieve the uniformity of assessment or appraisal required by law.

NEW SECTION. Sec. 6. An owner of property making application under this chapter must meet the following requirements:

(1) The new or rehabilitated multiple-unit housing must be located in a residential targeted area as designated by the city;

(2) The multiple-unit housing must meet the guidelines as adopted by the governing authority that may include height, density, public benefit features, number and size of proposed development, parking, design, and other adopted requirements indicated necessary by the city. The required amenities should be relative to the size of the project and tax benefit to be obtained. The governing authority may determine design and other criteria necessary for the new or rehabilitated multihousing unit to attract and keep permanent residents and to properly enhance the appearance and livability of the residential targeted area in which it is to be located;

(3) The new, converted, or rehabilitated multiple-unit housing must provide for a minimum of fifty percent of the space for permanent residential occupancy. At least twenty percent of the units must be set aside for households that earn no more than fifty percent of the median income or forty percent of the units must be set aside for households who earn no more than sixty percent of the median income, adjusted for household size;

(4) New construction of multifamily housing and rehabilitation improvements must be completed within three years from the date of approval of the application;

(5) Property proposed to be rehabilitated must be vacant at least twelve months before submitting an application and fail to comply with one or more standards of the applicable state or local building or housing codes on or after the effective date of this section;

(6) The applicant must enter into a contract with the city approved by the governing body under which the applicant has agreed to the implementation of the development on terms and conditions satisfactory to the governing authority; and

(7) The applicant must not have received an exemption under this chapter for this multiunit housing project.

NEW SECTION. Sec. 7. (1) The following criteria must be met before an area may be designated as a residential targeted area:

(a) The area must be within an urban center, as determined by the governing authority;

(b) The area must lack, as determined by the governing authority, sufficient available, desirable, and convenient residential housing for persons of all incomes to meet the needs of the public who would be likely to live in the urban center, if the desirable, attractive, and livable places to live were available; and

(c) The providing of additional housing opportunity in the area, as determined by the governing authority, will assist in achieving one or more of the stated purposes of this chapter.

(2) For the purpose of designating a residential targeted area or areas, the governing authority may adopt a resolution of intention to so designate an area as generally described in the resolution. The resolution must state the time and place of a hearing to be held by the governing authority to consider the designation of the area and may include such other information pertaining to the designation of the area as the governing authority determines to be appropriate to apprise the public of the action intended.

(3) The governing authority shall give notice of a hearing held under this chapter by publication of the notice once each week for two consecutive weeks, not less than seven days, nor more than thirty days before the date of the hearing in a paper having a general circulation in the city where the proposed residential targeted area is located. The notice must state the time, date, place, and purpose of the hearing and generally identify the area proposed to be designated as a residential targeted area.

(4) Following the hearing, or a continuance of the hearing, the governing authority may designate by resolution, all or a portion of the area described in the resolution of intent as a residential targeted area if it finds, in its sole discretion, that the criteria in subsections (1) through (3) of this section have been met.

(5) After designation of a residential targeted area, the governing authority shall adopt standards and guidelines to be utilized in considering applications and making the determinations required under section 9 of this act. The standards and guidelines must establish basic requirements for both new construction and rehabilitation including application process and procedures. These guidelines may include the following:

(a) Requirements that address demolition of existing structures and site utilization;

(b) Building design requirements that may include elements addressing aesthetics, parking, height, density, environmental impact, public benefit features, and compatibility with the existing surrounding property and such other amenities as will attract and keep permanent residents and that will properly enhance the appearance and livability of the residential targeted area in which they are to be located; and

NEW SECTION. Sec. 8. An owner of property seeking tax incentives under this chapter must complete the following procedures:

(1) In the case of rehabilitation or where demolition or new construction is required, the owner shall secure from the governing authority or duly authorized agent, before commencement of rehabilitation improvements or new construction, verification of property noncompliance with applicable building and housing codes;

(2) In the case of new and rehabilitated multifamily housing, the owner shall apply to the city on forms adopted by the governing authority. The application must contain the following:

(a) Information setting forth the grounds supporting the requested exemption including information indicated on the application form or in the guidelines;

(b) A description of the project and site plan, including location of public facilities, floor plan of units, and other information requested;

(c) 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;

(3) The applicant must verify the application by oath or affirmation; and

(4) The application must be made on or before April 1 and must be accompanied by the application fee, if any, required under section 10 of this act. The governing authority may permit the applicant to revise an application before final action by the governing authority.

NEW SECTION. Sec. 9. The duly authorized administrative official or committee of the city may approve the application if it finds that:

(1) The owner has agreed to include in the new construction or rehabilitation of housing one or more public benefit features;

(2) A minimum of four units are being constructed or rehabilitated;

(3) The proposed project is or will be, at the time of completion, in conformance with all local plans and regulations that apply at the time the application is approved;

(4) The owner has complied with all standards and guidelines adopted by the city under this chapter; and

(5) The site is located in a residential targeted area of an urban center that has been designated by the governing authority in accordance with procedures and guidelines indicated in section 7 of this act.

NEW SECTION. Sec. 10. (1) The governing authority or an administrative official or commission authorized by the governing authority shall approve or deny an application filed under this chapter within ninety days after receipt of the application.

(2) If the application is approved, the city shall issue the owner of the property a conditional certificate of acceptance of tax exemption. The certificate must contain a statement by a duly authorized administrative official of the governing authority that the property has complied with the required findings indicated in section 8 of this act.

(3) If the application is denied by the authorized administrative official or commission authorized by the governing authority, the deciding administrative official or commission shall state in writing the reasons for denial and send the notice to the applicant at the applicant's last known address within ten days of the denial.

(4) Upon denial by a duly authorized administrative official or commission, an applicant may appeal the denial to the governing authority within thirty days after receipt of the denial. The appeal before the governing authority will be based upon the record made before the administrative official with the burden of proof on the applicant to show that there was no substantial evidence to support the administrative official's decision. The decision of the governing body in denying or approving the application is final.

NEW SECTION. Sec. 11. The governing authority may establish an application fee. This fee may not exceed an amount determined to be required to cover the cost to be incurred by the governing authority and the assessor in administering this chapter. The application fee must be paid at the time the application for limited exemption is filed. If the application is approved, the governing authority shall pay the application fee to the county assessor for deposit in the county current expense fund, after first deducting that portion of the fee attributable to its own administrative costs in processing the application. If the application is denied, the governing authority shall retain that portion of the application fee attributable to its own administrative costs and refund the balance to the applicant.

NEW SECTION. Sec. 12. (1) Upon completion of rehabilitation or new construction for which an application for limited exemption under this chapter has been approved and after issuance of the certificate of occupancy, the owner shall file with the city the following:

(a) A statement of the amount of rehabilitation or construction expenditures made with respect to each housing unit and the composite expenditures made in the rehabilitation or construction of the entire property;

(b) A description of the work that has been completed and a statement that the rehabilitation improvements or new construction on the owner's property qualify the property for limited exemption under this chapter; and

(c) A statement that the work has been completed within three years of the issuance of the conditional certificate of tax exemption.

(2) Within thirty days after receipt of the statements required under subsection (1) of this section, the authorized representative of the city shall determine whether the work completed is consistent with the application and the contract approved by the governing authority and is qualified for limited exemption under this chapter. The city shall also determine which specific improvements completed meet the requirements and required findings.

(3) If the rehabilitation, conversion, or construction is completed within three years of the date the application for limited exemption is filed under this chapter, or within an authorized extension of this time limit, and the authorized representative of the city determines that improvements were constructed consistent with the application and other applicable requirements and the owner's property is qualified for limited exemption under this chapter, the city shall file the certificate of tax exemption with the county assessor within ten days of the expiration of the thirty-day period provided under subsection (2) of this section. The county assessor shall determine the appraised value of the improvements eligible for the tax exemption under this chapter.

(4) The authorized representative of the city shall notify the applicant that a certificate of tax exemption is not going to be filed if the representative determines that:

(a) The rehabilitation or new construction was not completed within three years of the application date, or within any authorized extension of the time limit;

(b) The improvements were not constructed consistent with the application or other applicable requirements; or

(5) If the authorized representative of the city finds that construction or rehabilitation of multiple-unit housing 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 governing authority or the city official authorized by the governing authority may extend the deadline for completion of construction or rehabilitation for a period not to exceed twenty-four consecutive months.

(6) The governing authority may provide by ordinance for an appeal of a decision by the deciding officer or authority that an owner is not entitled to a certificate of tax exemption to the governing authority, a hearing examiner, or other city officer authorized by the governing authority to hear the appeal in accordance with such reasonable procedures and time periods as provided by ordinance of the governing authority. The owner may appeal a decision by the deciding officer or authority that is not subject to local appeal or a decision by the local appeal authority that the owner is not entitled to a certificate of tax exemption in superior court under RCW 34.05.510 through 34.05.598, if the appeal is filed within thirty days of notification by the city to the owner of the decision being challenged.

NEW SECTION. Sec. 13. (1) Within thirty days of the anniversary of the date of the certificate of tax exemption and each year for a period of ten years, the owner of the rehabilitated or newly constructed property shall file with a designated agent of the city an annual report indicating the following:

(a) A statement of occupancy and vacancy of the rehabilitated or newly constructed property during the previous twelve months ending with the anniversary date;

(b) A certification by the owner that the property has not changed use since the date of the certificate approved by the city;

(d) A description of changes or improvements constructed after issuance of the certificate of tax exemption; and

(e) A certification of income eligibility for low-income tenants inhabiting the rehabilitated or newly constructed housing units during the previous twelve months.

(2) The designated agent of the city shall forward a copy of the annual report to the county assessor.

NEW SECTION. Sec. 14. (1) If improvements have been exempted under this chapter, the improvements continue to be exempted and not be converted to another use for at least ten years from date of issuance of the certificate of tax exemption. If the owner intends to convert the multifamily development to another use, the owner shall notify the assessor within sixty days of the change in use. If, after a certificate of tax exemption has been filed with the county assessor the city or assessor or agent discovers that a portion of the property is changed or will be changed to a use that is other than residential or that housing or amenities no longer meet the requirements as previously approved or agreed upon by contract between the governing authority and the owner and that the multifamily housing, or a portion of the housing, no longer qualifies for the exemption, the tax exemption must be canceled and the following must occur:

(a) Additional real property tax must be imposed upon the value of the nonqualifying improvements in the amount that would normally be imposed, plus a penalty amounting to twenty percent. The tax shall be imposed on the value of the improvement at the time the tax exemption certificate was issued. This additional tax is calculated based upon the difference between the property tax paid and the property tax that would have been paid if it had included the value of the nonqualifying improvements dated back to the date that the improvements were converted to a nonmultifamily use;

(b) The tax must include interest upon the amounts of the additional tax at the same statutory rate charged on delinquent property taxes from the dates on which the additional tax could have been paid without penalty if the improvements had been assessed at a value without regard to this chapter; and

(c) The additional tax owed together with interest and penalty must become a lien on the land and attach at the time the property or portion of the property is removed from multifamily use or the amenities no longer meet applicable requirements, and has priority to and must be fully paid and satisfied before a recognizance, mortgage, judgment, debt, obligation, or responsibility to or with which the land may become charged or liable. The lien may be foreclosed upon expiration of the same period after delinquency and in the same manner provided by law for foreclosure of liens for delinquent real property taxes. An additional tax unpaid on its due date is delinquent. From the date of delinquency until paid, interest must be charged at the same rate applied by law to delinquent ad valorem property taxes.

(2) Upon a determination that a tax exemption is to be canceled for a reason stated in this section, the governing authority shall notify the record owner of the property as shown by the tax rolls by mail, return receipt requested, of the determination to cancel the exemption. The owner may appeal the determination to the governing authority within thirty days by filing a notice of appeal with the clerk of the governing authority, which notice must specify the factual and legal basis on which the determination of cancellation is alleged to be erroneous. The governing authority or a hearing examiner or other official authorized by the governing authority may hear the appeal. At the hearing, all interested parties may be heard and all competent evidence received. After the hearing, the deciding body or officer shall either affirm, modify, or repeal the decision of cancellation of exemption based on the evidence received. An aggrieved party may appeal the decision of the deciding body or officer to the superior court under RCW 34.05.510 through 34.05.598.

(3) Upon determination by the governing authority or authorized representative to terminate an exemption, the county officials having possession of the assessment and tax rolls shall correct the rolls in the manner provided for omitted property under RCW 84.40.080. The county assessor shall make such a valuation of the property and improvements as is necessary to permit the correction of the rolls. The owner may appeal the valuation to the county board of equalization under chapter 84.48 RCW. If there has been a failure to comply with this chapter, the property must be listed as an omitted assessment for assessment years beginning January 1 of the calendar year in which the noncompliance first occurred, but the listing as an omitted assessment may not be for a period more than three calendar years preceding the year in which the failure to comply was discovered.

NEW SECTION. Sec. 15. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 16. Sections 1 through 15 of this act shall constitute a new chapter in Title 84 RCW.