Multifamily tax exemption program at heart of debate over proposed apartments in Tumwater


A proposed housing development in Tumwater renewed negative commentaries regarding the state’s multifamily tax exemption program.

The proposed housing development is named Rookery Apartments, a six-unit building located on Capitol Boulevard and Dennis Street.

The developers are applying for an eight-year tax exemption through a state incentive program that provides tax breaks to multifamily housing developers.

The city council would have to authorize a conditional tax exemption for the development as part of the approval process.

The General Government Committee met Wednesday, June 12, to endorse a contract with the developer, granting the conditional exemption, but not before Councilmember Joan Cathey asked what the city could do to amend the program, so it benefits more low-income households.

Cathey inquired city staff if they could require the exact requirements for a variation of the program that grants tax exemption for 12 years.

Under the 12-year version, developers may apply for the incentive if 20% of their development is reserved for affordable or moderate-income households. This condition is not required to take advantage of the eight-year tax exemption.

Cathey said she believed there was no need to incentivize developers to build in Tumwater and that the developers who took advantage of the program were already “wealthy.”

Cathey also took issue that other taxpayers bear the burden of the incentive.

As Planning Manager Brad Medrud explained, the city’s total property tax is not reduced despite the tax breaks; the exempted tax amount is just redistributed across the entire tax base.

In response to Cathey’s comments, Medrud also said that the council could certainly discuss the program on a deeper level. Councilmember Michael Althauser added that they could include the issue in the council’s 2025 work plan, which he mentioned is developed during the council’s annual retreat.

Althauser mentioned that since the council adopted the program in 2017, the state legislature has allowed for 20-year tax exemptions if developers ensure that some housing units will be designated as affordable for 99 years. The councilor said they could look into these changes but noted that doing so would put an additional workload on city staff working on a new comprehensive plan and amendments to the city’s tree code.

Medrud also advised that for any incentive program, more requirements would dissuade applicants from taking advantage of the incentive.

Cathey later changed her tune and said that the Rookery Apartment was a good use of the program after Tessa Bradley, the applicant seeking the tax exemption, defended the project.

Bradley, from the architecture firm Artisans Group, explained that the project is a first-of-its-kind, small-scale housing development by long-time residents and business owners.

Bradley said they initially pursued developing the apartment as affordable housing but could not do so financially as they also aim to certify the building as a passive house. To be certified as a passive house, buildings must meet certain energy efficiency requirements.

Due to reduced profit margins, Bradley said the bank only approved the loan to fund the project because of the possible tax exemption.

“If we don't get the multifamily tax exemption, I'm not even sure what happens because the bank relied upon it to give us our loan, because we are at the very breakeven point of this project,” Bradley said.

According to documents prepared for the committee's meeting, 411 multifamily housing units are set to benefit or are currently benefiting from the program as of April. Three hundred units are still being constructed, while 141 units have been completed. Only 66 units of the 411 units are classified as affordable housing.


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  • longtimeresident

    All housing units will become affordable housing when there is a glut of apartments looking for renters; I can already see that happening. And on the issue of tax exemption, if the big guys can get the exemption, why not the little guys.

    Wednesday, June 19 Report this

  • PamelaJHanson

    The developer needs to prove that they need the tax exemption for the loan - if they are stating that the success of this project has either an implied or conditional requirement from the bank. It would be unfortunate if there is pressure sales tactics being played on the city for a median income, not low income, housing tax break that redistributes taxes to other homeowners. By the way, the total dollar amount of the actual property tax shift cannot be clearly stated, if stated anywhere in city documents, because the County Assessor cannot assess a value and put it on the tax roll until construction is completed. It is called new construction. The “unknown dollar amount” of the “property tax exemption” should be a concern of everyone, it really should. Questions: 1) Does the bank have the answer? 2) What bank? 3) The County Assessor can't compute the data for the tax roll because the actual receipts aren't even generated. The construction loan has to be based on “estimates,” right? 4) What is the estimated tax amount (shift) and estimated loan? 5) Wait a minute, the loan was already approved by the bank before the exemption (see quote)? And, 6) Exemptions should be for the needy, such as senior citizens and the disabled instead of developers, right? The bank is not dumb, and neither are our great taxpayers that attempt to armchair analyze tax exemptions…

    Thursday, June 20 Report this

  • Yeti1981

    And this is why projects don't get built affordably. How many homes has Councilmember Cathey built? Does she understand that builders aren't typically sitting on a pot of funds that they can simply tap into at anytime. There's typically banks involved and tons of requirements to access the funding needed to just initiate a project and get it approved. Profit margins in the homebuilding industry are about the 6th lowest of any industry. And the more obstacles that take from those margins, the less likely the project will get built. If you want affordable housing, you have to incentivise builders to do it. Otherwise, it does not pencil out.

    Thursday, June 20 Report this

  • BobJacobs

    Two points not made clear in this article:

    1. "Tax breaks for developers" sounds benign, but it isn't. Every penny not paid by the developers is paid by the rest of us -- just added to our property tax bills. But not shown separately on our tax bills so we can see how much we are subsidizing developers.

    2. The 12-year property tax exemption does require at least 20 percent of the units to be for moderate income people. But only for 12 years. For the rest of the developments' long life there are no such limitations -- these units become market-rate.

    Another point not made is that these subsidies inflate land values. If they weren't available, developers would pay less for land. Great for land speculators, not for everyone else.

    Bob Jacobs

    Monday, June 24 Report this