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
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; and
(3) 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.
NEW SECTION. Sec.
2. It is the purpose of this
chapter to encourage increased residential opportunities 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. 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. 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 with a population of at least one hundred fifty thousand
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" 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.
(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)
"Rehabilitation improvements" means modifications to existing
structures, that are vacant for twelve months or longer, that are made to
achieve a condition of substantial compliance with existing building codes or
modification to existing occupied structures which increase the number of
multifamily housing units.
(8) "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.
(9) "Substantial
compliance" means compliance with local building or housing code
requirements that are typically required for rehabilitation as opposed to new
construction.
(10) "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 value of new
housing construction, conversion, and rehabilitation improvements 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, 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;
(3) The new, converted,
or rehabilitated multiple-unit housing must provide for a minimum of fifty
percent of the space for permanent residential occupancy. In the case of
existing occupied multifamily development, the multifamily housing must also
provide for a minimum of four additional multifamily units. Existing
multifamily vacant housing that has been vacant for twelve months or more does
not have to provide additional multifamily units;
(4) New construction
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; and
(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.
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 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
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; and
(b) Building
requirements that may include elements addressing parking, height, density,
environmental impact, and compatibility with the existing surrounding property
and such other amenities as will attract and keep permanent residents and that
will properly enhance the livability of the residential targeted area in which
they are to be located.
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 the 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 of each year, 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) A minimum of four
new units are being constructed or in the case of occupied rehabilitation or
conversion a minimum of four additional multifamily units are being developed;
(2) 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;
(3) The owner has
complied with all standards and guidelines adopted by the city under this
chapter; and
(4) 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 may 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.
(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
(c) The owner's
property is otherwise not qualified for limited exemption under this chapter.
(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. Thirty days after 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:
(1) A statement of
occupancy and vacancy of the rehabilitated or newly constructed property during
the twelve months ending with the anniversary date;
(2) A certification by
the owner that the property has not changed use since the date of the
certificate approved by the city; and
(3) A description of
changes or improvements constructed after issuance of the certificate of tax
exemption.
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 must be imposed
amounting to twenty percent. 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
affected 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.
