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Council awaits clearer figures on developer exemption

SNOHOMISH — The City Council has placed a time-out on a proposal to introduce a temporary property tax waiver for developers to build multimillion-dollar residential buildings in the Midtown District, the city’s zoning area along Avenue D.
Last week, they voted 5-1 to table it. Public confusion on the true cost to everyday people factored into some council members’ decision to pause.
Councilmembers want experts from the County Assessor’s Office to present them with clear calculations of the tax cost impacts. They said they also want city staff to do more public outreach.
The topic could return in September, Council President Tom Merrill said.
The proposal would give a short-term waiver on all property taxes, such as the portions of school and fire district taxes on a property tax bill, not just city taxes. Developers could apply for tax exemption on the residential part of a building’s value, but not the underlying land or any commercial part.
Exemption options would be for eight or 12 years.
How much? It’s not clear-cut
The exemption system shifts part of the developer’s exempted property tax bill to the rest of property owners through an increase.
Only one property citywide has been developed with this tax exemption: 161 Lincoln Ave., a building with seven residential units. This exemption’s cost that shifted to each residents’ property taxes will be approximately $2.08 in 2023, from calculations published by the city.
Concerned residents extrapolate this figure for seven units to say that any large project that gets an exemption would increase every individual’s property tax bill by a greater magnitude. Front and center is the 9-acre County yard site at 10th and Avenue D, which the county wants to sell. The Tribune thinks the site has the land to fit at least 300 apartment units, assuming no wetlands. A fuzzier presumption is the Snohomish Square shopping plaza will redevelop taller.
The county and the plaza’s owner Craig Skotdal both have recorded comments to the city for the exemption.
City officials emphasize the tax impact of the Midtown exemption can’t be calculated precisely. The reasons why are primarily because there is no surefire formula to predict how many residential units might be built at any single site, and the baseline property tax rate changes every year so the impact does, too.
“Anybody giving you precise numbers is fooling themselves and you,” Pickus told the council last week.
The exemption in the Pilchuck waives property taxes for eight years for building multi-family residential, and adds four more if some units are rent-restricted to be classified as “affordable” housing.
Snohomish’s new proposal would alter this for Pilchuck and add it to Midtown. The suggested change adds a requirement that a small percent of the units are price-limited as “affordable” housing to even qualify for the eight-year exemption. Another change would allow the expanded 12-year exemption only if developers allocate 25% of the units for affordable housing or if 20% of the units are “affordable,” with 10% of those units price-restricted for “very low-income” housing.
Public comments opposed
An 80-20 split opposed the Midtown exemption at a public hearing last week.
“Nobody’s against affordable housing, but I don’t want to lure developers with these huge tax exemptions,” Susan Bjorling said. “We’re not this desperate.”
Merritt Weese said developers would simply take the exemption for affordable housing, but then raise rents to unaffordable levels after the grace period’s over. “I don’t believe a tax exemption will provide a substantial benefit for those in the community,” Weese said.
Hank Eskridge said Midtown is prime real estate. “Its value to this town should not be sold.”
Terry Lippincott was one of the few who voiced support. How else would people who can’t afford to live here now be able to do so?, Lippincott asked the council. The city needs affordable housing, and this helps get it, she said.
Pickus told council members approving the exemption does not guarantee development, “however, I know the (Multi-Family Tax Exemption) is an effective tool” for it, he said.
In the council’s 5-1 vote to table the issue, Councilwoman Karen Guzak gave the dissenting vote. Guzak said the exemption is the city’s path to get affordable housing, and called on colleagues to act and take leadership on the issue.
Other council members said a delay would allow obtaining clearer answers.
Councilwoman Judith Kuleta weighs the exemption as a consequential decision for the community, and mentioned she’s lost sleep on how to move forward. Kuleta questioned last week whether using an exemption is the right method to achieving affordable housing in Midtown.
Councilwoman Donna Ray, questioned it, too. Would a tax exemption “get us to our goal, which is increase our tax base and increase our affordable housing?” Ray asked.
The City Council’s pause doesn’t pose a big imposition to selling the county site as there’s time, the county staff person overseeing the former county public works yard, Randy Blair, told a Tribune reporter. The land isn’t on the real estate market yet, he said.
When it does go to market, the near-10 acre site would be of Snohomish’s largest pieces of available land to develop.




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