City hopes tax break attracts housing downtown


Staff writer

The Federal Way City Council is calling all developers to build multi-family housing in the downtown core.

By a narrow 3-2 vote last Tuesday, the council instated a pilot program that will give apartment and condominium developers a 10-year exemption on property taxes.

It’s part of what’s turning out to be a holistic approach to boosting downtown development by incorporating what Councilman Eric Faison called a package of “carrots and sticks.”

The ordinance is a five-year pilot that designates the downtown core and frame as tax-exempt areas.

Eligible developments must have at least four units of housing and only the housing portion of mixed-use developments will receive the tax exemption. If a development has retail on the bottom floor, for example, the developer would have to pay property taxes on the retail portion of the building.

Councilwoman Linda Kochmar and Deputy Mayor Dean McColgan were skeptical of the ordinance, saying it’s unfair to other property tax payers and service providers, like fire and schools, and won’t necessarily do anything to boost development.

An influx in population would affect the fire department, schools, libraries and other agencies that are partially funded with property tax revenue the city collects. If that tax is exempted for 10 years, those agencies won’t receive funding for services they provide to those housing units.

“I don’t think it’s fair for the city to impose a burden on our fellow government agencies,” Kochmar said.

She said the incentive gets at the heart of a chicken and egg development question. “Build it and they’ll come, or wait for the market,” she said. “I don’t see anyone living on top of Red Lobster, but, then again, growth has occurred in other areas, like Renton.

“I’m more concerned right now with regulations and how they’re affecting the business owners we have now.”

Councilwoman Mary Gates reminded the council that the ordinance is only a pilot the city’s trying to see if it works.

“It’s not going to stay forever,” she said. “We’d expect feedback from the fire department and the school district if there was a problem.”

Deputy Mayor Dean McColgan echoed Kochmar’s concerns.

“A thousand units of development in the downtown core would have to impact service providers,” he said.

He agreed the market isn’t ready for downtown development.

“Developers have to feel the time and opportunity is right. Then they’ll develop downtown,” he said. “No one has stepped forward to say the tax incentive is the thing preventing them from developing.

Councilman Mike Park countered that 1,000 units of development right away is an exaggerated estimation and said the plan serves to further the city’s downtown vision.

“Many years ago, the city adopted a city comprehensive plan for a high-density, pedestrian-friendly city center. That’s the vision that the council adopted. The resolution before us fits that vision,” he said.

Patrick Doherty, the city’s deputy director of community development for economic development, said the tax exemption is expected to “stimulate housing construction in urban areas.”

Tacoma was the first city to implement a property tax exemption in 1996 to encourage residential developers to build housing downtown as part of the city’s concerted revitalization effort. Renton and Kent passed similar tax exemptions in 2001.

Lakewood also recently passed a property tax exemption as part of its city center development process. Interested developers are circling the city, dropping inquiries into how the tax works. Candace Bock, spokeswoman for Lakewood, said one developer has expressed serious interest.

Developing housing in urban areas follows a philosophy called “smart growth,” which recommends growth in areas that already are urbanized, leaving outlying areas undeveloped.

In addition, the state Growth Management Act requires Federal Way to accept a certain number of new housing units to accommodate anticipated population growth.

Federal Way designated the downtown core as the spot for new development because it’s already urbanized and the infrastructure already exists.

But if the city can’t attract developers to build housing downtown, it might have to rezone other areas for multi-family housing.

“We have to accept growth,” Faison said. “It’s better to put it in an urban center than in outlying areas.”

Housing makes sense downtown, Doherty said, because the roads and utility lines are there already.

Traffic might be reduced by putting additional housing downtown because residents could walk to nearby shopping and restaurants rather than driving. Downtown residents also would serve as a captive market for city center retail, he said.

A downtown resident population also could help to clean up the area after hours, Doherty said, because residents serve as passive surveillance.

Faison said the ordinance won’t cost the city anything and could have the effect of attracting development.

“If we don’t get any new development, this doesn’t cost us a dime. And if we do get new development, it still doesn’t cost us anything,” he said. “Everything we get is something more than we would have gotten.”

Staff writer Erica Jahn can be reached at 925-5565 and

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