Seattle Sun Newspaper - Vol. 8, Issue 4, April 2004

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Council approves apartment

development tax breaks

By JAMES BUSH

Hey buddy, can you spare a quarter?

That's what it will cost the average homeowner per year for each building benefited under a city program offering 10-year tax abatements to developers of new apartment structures. The Seattle City Council approved the six-year program at its March 15 meeting by a 6-to-3 tally.

Although the subsidies may only cost the average homeowner a couple bucks per year, City Council members Nick Licata, Richard McIver and David Della say that's still too much. The trio first tried unsuccessfully to amend the legislation, then voted against its approval. "We're giving a tax benefit without receiving a comparable value back," said McIver.

While the program will only include three North End neighborhoods: Northgate, the University District, and Bitter Lake, it's especially important to efforts to redevelop Northgate Mall's former south parking lot.

Developer Bruce Lorig, who is interested in building a mixed-use development in the South Lot, alongside a restored section of Thornton Creek, stated at a Feb. 19 public meeting that his project would need the tax abatement to pencil out.

Likewise, Edward Walker of King County's transit-oriented development program, which is slated to develop the other half of the South Lot, testified in favor of the tax break at a City Council hearing.

Meanwhile, in the University District, residential and business groups are split over the program. The Greater University Chamber of Commerce and The Ave. Group are backing the tax breaks, while the University District Community Council and the University Park Community Club are opposed.

Why is the City giving tax breaks to developers in the first place?

Authorized under a state law aimed at encouraging new housing construction in development-starved urban areas, the original Seattle tax abatement program ran during the years 1999 to 2002. It was limited to economically distressed neighborhoods and those urban villages which have fallen short of growth targets set in the Seattle Comprehensive Plan.

This year's legislation expands the number of neighborhoods affected (Mayor Greg Nickels insisted on adding the U-District and South Lake Union, although neither meet the original criteria for inclusion in the program) and tinkers with the affordability standards. Some 964 units were constructed under the 1999-2002 program, with 424 of those units designated as "affordable."

But affordable to whom? The former legislation used the definitions of units that were affordable to persons making 60 percent and 80 percent of the Seattle median income, which adds up to $905 per month (at 60 percent) or $1,105 per month (at 80 percent) for a studio apartment.

That's market rate housing, says Matt Fox, U-District Community Council president. "Why in God's name are we subsidizing apartments that rent for more than $800 a month?" Fox asks.

Critics of the program say that it's so easy to meet affordability requirements that developers are basically getting something for nothing.

For example, the Sunday, March 14 Seattle Times classified advertising section contained ads for 18 studio apartments in the University District, all of which rent for between $475 and $660 per month.

But proponents call the units created by the program "work force housing," a segment of the market aimed at persons earning $30,000 to $40,000 pear year.

With publicly subsidized housing built for low- and very-low-income residents and most private developers targeting high-end populations, many neighborhoods have a hole in their housing supply, they say.

"In the University District, we have a dire shortage of affordable work force housing," said Theresa Lord Hugel, executive director of the University Chamber. She added that the area needs a balance of housing types to support a healthy, 24-hour neighborhood. "We don't want to be a commercial corridor where everything closes down at 5 o'clock," she said.

Laura Bachman of Lorig Associates agreed that more housing is better. "We can say for certain that if this program did not exist there are a lot of affordable housing projects that would never occur," she said. Lorig constructed the Uwajimaya mixed-use project in the International District and Welch Plaza in the Central District under the original tax exemption program.

Nonprofit housing developers like the program because they often have to bundle several subsidies to successfully finance an affordable housing project. The work force housing argument also drew the support of some environmental groups (1000 Friends of Washington) and unions (SEIU's Local 6) who testified in favor of the program.

The three City Council members who voted against it refused to subsidize units affordable to persons earning above 65 percent of median income, but couldn't convince their colleagues to support several proposed amendments to the final ordinance.

Licata said that despite the relatively small cost to individual taxpayers, the tax break could represent a tax burden shift of up to $30 million annually, which would be borne by all other city property owners. "I do not believe this benefit would justify such a large public cost," he said.