BILL REQ. #:  H-1690.2 

READ FIRST TIME 02/28/07.   

     AN ACT Relating to tax incentives for certain multiple-unit dwellings in urban centers that provide affordable housing; amending RCW 84.14.005, 84.14.007, 84.14.010, 84.14.020, 84.14.030, 84.14.040, 84.14.050, 84.14.060, 84.14.090, 84.14.100, and 84.14.110; adding a new section to chapter 84.14 RCW; and creating a new section.

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

Sec. 1   RCW 84.14.005 and 1995 c 375 s 1 are each amended to read as follows:
     The legislature finds:
     (1) That in many of Washington's urban centers there is insufficient availability of desirable and convenient residential units, including affordable housing units, to meet the needs of a growing number of the public who would live in these urban centers if these desirable, convenient, attractive, affordable, and livable places to live were available;
     (2) That the development of additional and desirable residential units, including affordable housing 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 mixed income 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 a sufficient variety of 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, including affordable housing opportunities, within urban centers through a tax incentive as provided by this chapter.

Sec. 2   RCW 84.14.007 and 1995 c 375 s 2 are each amended to read as follows:
     It is the purpose of this chapter to encourage increased residential opportunities, including affordable housing opportunities, in cities that are required to plan or choose to plan under the growth management act within urban centers where the ((legislative body)) governing authority of the affected city has found there is insufficient housing opportunities, including affordable 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, including affordable housing opportunities, within these urban centers. To achieve these purposes, this chapter provides for special valuations in residentially deficient urban centers for eligible improvements associated with multiunit housing ((in residentially deficient urban centers)), which includes affordable housing.

Sec. 3   RCW 84.14.010 and 2002 c 146 s 1 are each amended to read as follows:
     Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "City" means either (a) a city or town with a population of at least ((thirty)) fifteen thousand or (b) the largest city or town, if there is no city or town with a population of at least ((thirty)) fifteen thousand, located in a county planning under the growth management act.
     (2) "Affordable housing" means residential housing that is rented or owned by a person or household whose monthly housing costs, including utilities other than telephone, do not exceed thirty percent of the household's monthly income.
     (3) "Household" means a single person, family, or unrelated persons living together.
     (4) "Low-income household" means a single person, family, or unrelated persons living together whose adjusted income is less than eighty percent of the median family income, adjusted for family size, for the county where the project is located.
     (5) "Moderate-income household" means a single person, family, or unrelated persons living together whose income is more than eighty percent but is at or below one hundred fifteen percent of the median income where the affordable housing is located.
     (6) "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))) (7) "Growth management act" means chapter 36.70A RCW.
     (((4))) (8) "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))) (9) "Owner" means the property owner of record.
     (((6))) (10) "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))) (11) "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))) (12) "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))) (13) "Substantial compliance" means compliance with local building or housing code requirements that are typically required for rehabilitation as opposed to new construction.
     (((10))) (14) "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.

Sec. 4   RCW 84.14.020 and 2002 c 146 s 2 are each amended to read as follows:
     (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 of 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. When a local ((government adopts)) government's guidelines adopted pursuant to RCW 84.14.030(2) ((and the qualifying dwelling units are each on separate parcels for the purpose of property taxation)) include conditions that must be satisfied with respect to individual dwelling units, rather than with respect to the multiple-unit housing as a whole or some minimum portion thereof, the exemption ((may, at the local government's discretion, be)) is limited to the value of the qualifying improvements allocable to those dwelling units that meet the local guidelines.
     (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.
     (4) At the conclusion of the ten-year exemption period, the new or rehabilitated housing cost shall be considered as new construction for the purposes of chapter 84.55 RCW.

Sec. 5   RCW 84.14.030 and 2005 c 80 s 1 are each amended to read as follows:
     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 must include, for each city, affordable housing requirements established by the governing authority as required by RCW 84.14.040. Other guidelines may include height, density, public benefit features, number and size of proposed development, parking, ((low-income or moderate-income occupancy requirements,)) 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 fail to comply with one or more standards of the applicable state or local building or housing codes on or after July 23, 1995. If the property proposed to be rehabilitated is not vacant, an applicant shall provide each existing tenant housing of comparable size, quality, and price and a reasonable opportunity to relocate; and
     (6) The applicant must enter into a contract with the city approved by the governing ((body)) authority, or an administrative official or commission authorized by the governing authority, under which the applicant has agreed to the implementation of the development on terms and conditions satisfactory to the governing authority.

Sec. 6   RCW 84.14.040 and 1995 c 375 s 7 are each amended to read as follows:
     (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, including affordable housing, to meet the needs of the public who would be likely to live in the urban center, if the affordable, desirable, attractive, and livable places to live were available; and
     (c) The providing of additional housing opportunity, including affordable housing, 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)) must adopt and implement standards and guidelines to be utilized in considering applications and making the determinations required under RCW 84.14.060. The standards and guidelines must establish basic requirements for both new construction and rehabilitation ((including)), which must include:
     (a) Application process and procedures; and
     (b) By December 1, 2007, affordable housing requirements to ensure that each project receiving a tax exemption provides for mixed income housing that includes a percentage of units that are affordable to low and moderate-income households. These guidelines may also include the following:
     (((a))) (i) Requirements that address demolition of existing structures and site utilization; and
     (((b))) (ii) 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.

Sec. 7   RCW 84.14.050 and 1999 c 132 s 2 are each amended to read as follows:
     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)) representative, 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 accompanied by the application fee, if any, required under RCW 84.14.080. The governing authority may permit the applicant to revise an application before final action by the governing authority.

Sec. 8   RCW 84.14.060 and 1995 c 375 s 9 are each amended to read as follows:
     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 multiunit housing project meets the housing affordability requirements as established by the governing authority as required in RCW 84.14.040.
     (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;
     (((3))) (4) The owner has complied with all standards and guidelines adopted by the city under this chapter; and
     (((4))) (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 RCW 84.14.040.

Sec. 9   RCW 84.14.090 and 1995 c 375 s 12 are each amended to read as follows:
     (1) Upon completion of rehabilitation or new construction for which an application for a limited tax 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 project meets the housing affordability requirements established by the governing authority as required in RCW 84.14.040; and
     (d) 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, and the affordability of the units, is consistent with the application and the contract approved by the ((governing authority)) city and is qualified for a limited tax 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 a limited tax 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, including affordable housing requirements, and the owner's property is qualified for a limited tax 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 authorized 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 affordable housing requirements established by the governing authority as required in RCW 84.14.040 were not met; or
     (d) 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.

Sec. 10   RCW 84.14.100 and 1995 c 375 s 13 are each amended to read as follows:
     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)) authorized representative 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) The total number of units produced and the number and percentage of units affordable to low and moderate-income households;
     (3) The actual development cost of each unit receiving a tax exemption;
     (4) The total monthly rent or sale amount of each unit receiving a tax exemption;
     (5) The income of each renter household at the time of initial occupancy and the income of each initial purchaser of owner-occupied units at the time of purchase for each of the units receiving a tax exemption;
     (6) A certification by the owner that the property has not changed use and that the property has been in compliance with the affordable housing requirements established by the governing authority as required in RCW 84.14.040 since the date of the certificate approved by the city; ((and
     (3))) (7) A description of changes or improvements constructed after issuance of the certificate of tax exemption; and
     (8) Any additional information requested by the city in regards to the units receiving a tax exemption.

Sec. 11   RCW 84.14.110 and 2002 c 146 s 3 are each amended to read as follows:
     (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, or if the owner intends to discontinue compliance with the affordable housing requirements established by the governing authority as required in RCW 84.14.040, 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)) authorized representative of the governing authority 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, including affordable housing requirements, as previously approved or agreed upon by contract between the ((governing authority)) city 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 or authorized representative 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 or authorized representative, 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 value of the new housing construction, conversion, and rehabilitation improvements added to the rolls shall be considered as new construction for the purposes of chapter 84.55 RCW. The owner may appeal the valuation to the county board of equalization under chapter 84.48 RCW and according to the provisions of RCW 84.40.038. 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. 12   A new section is added to chapter 84.14 RCW to read as follows:
     (1) All cities, which issue certificates of tax exemption for multiunit housing that conform to the requirements of this chapter, shall report annually by December 31st of each year, beginning in 2007, to the department of community, trade, and economic development. The report must include the following information:
     (a) A statement of the city affordable housing requirements established by the governing authority as required in RCW 84.14.040 and the rationale used in determining those requirements;
     (b) The number of tax exemption certificates granted;
     (c) The total number and type of units produced or to be produced;
     (d) The number and type of units produced or to be produced meeting the city affordable housing requirements;
     (e) The actual development cost of each unit produced;
     (f) The total monthly rent or total sale amount of each unit produced;
     (g) The income of each renter household at the time of initial occupancy and the income of each initial purchaser of owner-occupied units at the time of purchase for each of the units receiving a tax exemption and a summary of these figures for the city; and
     (h) The value of the tax exemption for each project receiving a tax exemption and the total value of tax exemptions granted.
     (2) The department of community, trade, and economic development may also establish performance measures specifically for the tax exemption program upon which the participating cities shall annually report or may require cities to report upon existing affordable housing performance measures related to the tax exemption program.
     (3) Cities must include this report in all local housing plans and the department of community, trade, and economic development must include a consolidated summary of program reports in all state housing plans.
     (4) Beginning in 2009, all cities, which issue certificates of tax exemption for multiunit housing that conform to the requirements of this chapter and which receive over five hundred thousand dollars a year during the previous calendar year from: State housing-related funding sources, including the housing trust fund; Washington state housing finance commission programs; and the ending homelessness program surcharge in RCW 36.22.179 and the surcharges in RCW 36.22.178, shall apply to the full examination Washington state quality award program once every three years beginning by January 1, 2010.

NEW SECTION.  Sec. 13   This act is applicable only to cities that issue certificates of tax exemption for multiunit housing under this chapter and applications for tax exemption certificates submitted under this chapter, after the effective date of this act.