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Tax credit could kick-start PACC and reduce sticker shock

Rendering of the proposed performing arts and conference center on 20th Avenue South near the Federal Way Transit Center. - Courtesy photo
Rendering of the proposed performing arts and conference center on 20th Avenue South near the Federal Way Transit Center.
— image credit: Courtesy photo

A tax incentive program could help lift a future performing arts and conference center (PACC) off the ground and alleviate sticker shock over the project's estimated cost.

The Federal Way City Council held its annual retreat March 9, discussing a number of significant issues facing the city in the near future.

First and foremost among them is the city's desire to construct the PACC in the downtown core, using a combination of public and private money.

A handful of citizens attended the retreat and urged the council to move forward and take the risk.

"It's the council's job to make this decision," said Betty Huff of the Federal Way Symphony, pleading with the council to seize this opportunity and avoid letting "the naysayers" dominate the process. "We need to grab this opportunity now."

A recent presentation given by community and economic development director Patrick Doherty had brought the price tag for the PACC up to almost $32 million. That number has left some council members, and members of the public, with sticker shock.

Doherty had some news to share with the council during the retreat that could potentially numb some of the pain of the PACC's price tag, mostly touching on a federal tax incentive program known as "New Markets Tax Credits."

"It's a federal program that allows a substantial tax credit to investors," Doherty said. "In fact, it's 39 percent credit on the overall value of the project, even if they only put $1 million in, (spread out) over seven years. So basically, it's a vehicle for certain types of projects that meet the objectives, to fund gaps from 20-25 percent in the project's funding."

Doherty noted that this tax credit program is funneled through organizations like the National Development Council, and that it's a competitive process. According to preliminary discussions he's had with people familiar with the program, the PACC has the potential to be a strong candidate to qualify for the program.

"What we were told is that, as a stand-alone item, just a performing arts and conference center… we have a better than 50/50 chance," Doherty said. "But as we add programmatic components to the overall picture, we rise way up in competitiveness, such as saying this facility will help address disadvantaged populations' needs for access to culture and arts. We believe we have a good chance at this."

Given some current figures, Doherty noted this program could drastically reduce, or in some instances, zero out certain funding gaps that the city has projected up to this point for the PACC.

(Pictured: a rendition of a proposed performing arts and conference center on 20th Avenue South near the Federal Way Transit Center)


Deputy Mayor Jim Ferrell said this news was good news, but tried to pin Doherty down on Federal Way's chances in being a part of this program.

"As I look at (the New Markets Tax Credits program), that could be an obvious game-changer," Ferrell said, "The New Market Tax Credits would be an excellent avenue to be able to accomplish the project, but we don't want to get too far out there, and because it's a competitive process, find out we didn't qualify. Do we have any idea of how competitive (we are)?"

Doherty reiterated his early point, saying that as a standalone project, the PACC's prospects for being able to take advantage of the program were better than 50/50, but with the additional "programmatic" elements planned, it makes the PACC a very competitive project to be eligible for the tax credit program.

"Our area is an area that competes extremely well," Councilmember Dini Duclos commented, citing her extensive experience with a similar program aimed at incentivizing the construction of low-cost, publicly-built housing.

Mayor Skip Priest also chimed in, saying that Federal Way and the South King County area are known to be in economic trouble at the national level. He referenced a Brookings Institute report that recognizes South King County is in a world of hurt. That knowledge, combined with past and current projects aimed at helping local communities, is, in the mayor's eyes, a bonus.

"We can't guarantee we'd get a grant like this, but at the same time, we have a very positive story to tell," he said.

Councilmember Bob Celski said he was worried about relying on federal funding in this "Era of Sequestration," and asked Doherty how secure this program might be moving forward into the future.

"Right now, in this biennium, she said the tax credits are still intact," Doherty replied, referencing a meeting with a representative of the National Development Council in recent weeks. "Going forward…we don't know."

Doherty noted that the PACC's eligibility for this program all hinged on whether the council would approve paying for a schematic design of the PACC.

"The gamble we have to talk about really is are we willing to start to design the project at our own expense?" he asked. "(That) will position us better to start to get the funding, whatever that funding may be. We cannot even be in this program, unless we have the design to show we're ready."

He continued, saying the two paths before the city were straightforward.

"The worst case scenario would be, we design, we get to a point in the future, and we can't build the project. The best case is, we spend that money on design and that gets us in line for these kinds of opportunities."

Learn more

The city established a website for the project at www.cityoffederalway.com/pacc.

 

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