Lacey council seeks input on multifamily tax exemption

Lacey City Council on Thursday will consider whether to approve a multifamily property tax exemption for a key area of the city, following a public hearing on the same issue.

The council meeting is set for 7 p.m. Thursday (Dec. 18) at Lacey City Hall, 420 College St. SE.

If approved by the council, the property tax exemption would apply to new multifamily development or redevelopment projects in the Woodland District, including Woodland Square Loop, an area of Lacey the city wants to turn into a true downtown, a mixed-use destination that remains active after 5 p.m.

The Woodland District borders the Chehalis-Western Trail, Interstate 5, Pacific Avenue and College Street. The area already is home to plenty of retail — Target, Kohl’s and Fred Meyer — but not housing. One of the few multifamily developments is Sixth Avenue Place, a 100-unit apartment building on Sixth Avenue.

Woodland Square Loop also is home to several mostly vacant office buildings that surround Huntamer Park. But it’s thought that the new owner of the office properties, MJR Development of Kirkland, might use the tax exemption to convert some of that office space into housing.

But spurring development comes with tradeoffs: The exemption delays some property tax collection for eight or 12 years — 12 years if the developer agrees to reserve 20 percent of the units for affordable housing.

Some other key components of the city’s proposed tax exemption ordinance, according to meeting agenda materials:

In terms of tax savings for a developer, the city used the 100-unit Sixth Avenue Place as an example, showing an average annual savings of about $108,000. Lacey Finance Director Troy Woo said that property was used because it is seven years old, or near the same length of time as an eight-year tax exemption.

Using the same property as an example, the city also crunched numbers on revenue that would not be collected by the city and other taxing districts. Revenue not collected for a seven-year period totals about $758,000, including about $294,000 for North Thurston Public Schools, about $92,000 for the city of Lacey, and about $83,000 for Fire District 3.

Finance Director Woo said the city is thinking big picture with the proposed tax exemption, wanting the “domino effect” of more housing, which could attract more businesses to serve those residents, which ultimately could mean more property tax revenue and sales tax revenue.

More than 90 cities in the state have adopted a multifamily tax exemption, according to city data.