SNOHOMISH — If the City Council agrees to put in place a temporary tax waiver on new multimillion-dollar residential buildings in the city’s Midtown District along Avenue D, a carrot to attract more affordable housing, homeowners in the city and in the broader area would end up paying extra on their property taxes to make up the difference.
How much?
It depends on what your house is worth, whether any developer applies for the exemption, and fundamentally whether any developers bite.
But unless the whole stretch redevelops overnight, it may be between $20 and $50 added to your property tax bill to give a big project a tax break, depending on your home’s taxable value.
For a developer, it could be worth millions. The city’s planning director said it’s influential enough for whether a developer chooses to build in Snohomish or elsewhere.
The City Council will vote on the matter Sept. 20. Some members are still openly debating the idea.
The County Assessor’s Office presented the council with raw data last week.
If a new building got $2 million in tax exemptions, someone with a $468,000 house within city limits would have seen their 2022 property tax bill be 95 cents higher than normal to offset the exemption.
$2 million is about the amount the city exempted for a seven-unit building at 161 Lincoln Ave. under a development tax break in the Pilchuck District. The impact was 0.0024 cents per $1,000.
The Tribune asked the County Assessor’s Office to produce a scenario of a 100-apartment building with $40 million exempted. This could be a new five-story building, similar to plopping the Aero Apartments in Everett at Hewitt and Rucker avenues into Midtown.
Here, $19.11 is what a $468,000 homeowner’s tax bill would have gone up in 2022. The actual levy rate impact would be 4 cents per $1,000 for city residents if a $40 million development was exempted this year.
Area residents would pay about 40% less since they wouldn’t pay city property taxes but do pay taxes to the Snohomish School District, Snohomish Fire District 4 and others. In this $40 million scenario of a city development, the rate is 0.024 per $1,000 in assessed value; for a $500,000 home, that’s $12.
The minimum residential zoning densities in Midtown would require any residential development at the county’s Avenue D site to have at least 144 units.
A supersized example presented to council is 1,485 units at $594 million exempted in 2022 figures. The cost this year would have been a bump of 71 cents per $1,000 to the levy rate. A $468,000 homeowner would have seen a $344 property tax increase.
Councilwoman Karen Guzak called the scenario “pure fantasy” in reaction.
The city’s going to mass-mail information about the exemption and set up a website soon.
The County Assessor’s Office can only really calculate on historic data not on future forecasts, county assessor Linda Hjelle emphasized.
Affordable housing
Snohomish’s new proposal would alter the parameters to get a builder's exemption in the Pilchuck District and add it to Midtown.
The parameters would waive property taxes for eight years only if a developer builds multi-family residential with at least 10% of the units rent-limited as affordable to “low-income” people, and adds four more years only if developers arrange to either have 25% or more of the units as affordable housing or if 20% of the units are affordable for “low-income” households, with 10% of those units price-restricted for “very low-income” housing.
What’s “low-income”?
By the metrics, a single person would have to earn no more than about $63,000 a year to be classified “low-income,” or earning 80% of the median or less.
They’d need to earn under about $40,000 a year to be classified “very low-income” based on 50% of the median income.
With affordable housing being defined as costing no more than one-third of income, for somebody earning $60,000, the cap on rent can be no more $1,650 a month.
For a “very low-income” single earner, that caps it to $1,100 a month in rent.
The average median income of the whole county dictates what income levels fall into what category. This median is $115,000, federal data says.
Some City Council members are still debating if the exemption is the right approach for development.
Giving an exemption can motivate developers to build affordable housing, albeit not guaranteed, city planning director Glen Pickus said previously.
The future’s not ours to see, city planners emphasize. The market will decide.
On July 5, the representative for the county-owned Avenue D yard said they advocate for the exemption, but said the county does not support adding a “very low-income” requirement to get a 12-year exemption period.
Public mixed
Exemption supporters say building affordable housing is the only way service employees who work in Snohomish could afford the rent to live in Snohomish.
Opponents have said developers would ride out the exemption period with lowered rents, but then raise rent prices because nothing obligates them to continue offering affordable housing.
People living outside the city have raised objections to the City Council creating a tax incentive which affects their property taxes.
Others criticized that Snohomish encouraging development dilutes what attracted people to live in the Snohomish area.
Another public hearing is set for the Sept. 20 council meeting before council takes a vote.
Further clarification on Midtown tax exemption idea, printed Aug. 31:
Readers requested further information on recent figures in a story in the Aug. 24 Tribune on the city’s proposed developer tax exemption incentive.
In one example, if a developer’s new building valued at $2 million obtains the tax exemption, someone with a $468,000 house within city limits would have seen their 2022 property tax bill be 95 cents higher than normal to offset the exemption.
The 95 cents is derived from how much a developer would be charged that year.
The developer in that example would have paid $21,000 in taxes owed which now he or she wouldn’t thanks to the exemption on the exemptable value of their building.
Instead, the $21,000 in unpaid tax would be spread as a price increase upon all other property owners in the area to cover the difference.
Nearby residents outside city limits would see impacts because they pay taxes to the Snohomish School District, Snohomish Fire District 4 and others which serve the geographic areas where the exemption is proposed.
The personal impact depends on what your house is worth and if a developer gets the exemption.
The City Council will vote Sept. 20 whether to authorize a temporary tax exemption for development in the Midtown District.
Developers could apply for an 8-year tax exemption only if they include a certain percentage of units that are defined as affordable housing.
