City extends incentive for multifamily buildings

After fire gutted the Lloyd Building in 2005, the owner used a new tax incentive to rebuild and continue providing housing to low-income families.

Mark Agee, the Lloyd’s owner, said the city’s multifamily tax exemption has helped his company, Ten Talents, keep rents low while maintaining quality.

Without the exemption, it would have been “a lot harder to make it affordable,” Agee said.

That tax break, which also benefits buyers of million-dollar condos, will remain available in Spokane.

City Council members voted unanimously Monday to extend the multifamily exemption program another five years. It was created in 2000 and was scheduled to end in April.

The tax breaks are intended to encourage more people to live downtown and in several neighborhood business districts throughout the city, including Hillyard, Garland, an area near Spokane Falls Community College, and most of Monroe Street between the Spokane River and Garland Avenue.

Under the program, new apartments and condos in approved areas continue to pay taxes on the land and, for a remodeling project, the value of the building before construction. For 10 years, the owner pays no taxes on new construction.

Susanne Croft, the city’s economic development manager, said bringing in residents improves the economy by providing loyal customers to neighborhood businesses, such as restaurants. “It really brings new life to the area,” she said.

Much of Monday’s discussion about the program centered on ways to encourage developers to build outside downtown and provide more affordable housing options. Council members said they would consider minor changes within a few months.

A total of $10 million of property value was exempted from 2007 taxes on the seven properties that so far have qualified for the program and been built, according to Spokane County assessor’s office records.

Even so, tax revenues have increased from the properties, mostly because the value of the land has risen with new construction. Those same seven parcels paid taxes on $3.7 million in value, almost double the properties’ taxable value before the program.

Projects with about 1,000 living units have been approved for the exemptions so far – though not all of them have been constructed. Of those, 42 percent are condos, according to city statistics. The rest are apartments expected to lease around market price or below.

About 55 percent of the condos are expected to have a sale price between $300,000 and $750,000. About 10 percent are expected to sell for more than $750,000, including some that sell for more than $1 million in West 809, the converted Burlington Coat Factory connected to River Park Square. West 809 is owned by the Cowles Co., which also owns The Spokesman-Review.

“It should be more intended to try to make housing affordable,” Agee said. “People who can afford a half-million dollar condo should be able to pay taxes.”

Others argue that even with recent excitement about downtown housing, there’s an overabundance of low-income units.

Ron Wells, a Spokane architect who has developed projects for upper, moderate and low-income residents, said a better mix would help downtown and neighborhoods flourish.

“When they spend a lot of money, they help create jobs,” Wells said. The exemptions help “bring more people downtown to live and spend money and create new economic activity.”

The program can help make condos more affordable, said Chris Venne, the development finance manager for Community Frameworks, a nonprofit affordable housing group.

Venne said Community Frameworks bought a former nursing home on 7th Avenue and plans to turn it into 28 condos. But the land sits a block outside the downtown area that qualifies for the exemption.

With the exemption, a person earning about $22,000 a year would qualify to buy a unit. Without it, a person would need to earn almost $28,000, he said. The difference likely could leave out a lot of downtown and hospital employees who likely will be attracted to the condos.

“Who it really rewards is the downtown work force,” he said.

Venne said he isn’t bothered by exemptions that benefit wealthier condo dwellers.

“We need to build a downtown community, and that takes all levels,” Venne said.

City officials stress that the city doesn’t lose tax revenue through the program because owners continue paying taxes on the land and any structures that existed before the program.

However, if the new construction was immediately put on the tax roll instead of exempted, it would increase the amount the city and county could collect. The program does not affect the total collected for voter-approved taxes because other property owners pick up the cost of voter-approved taxes that otherwise would be paid on exempt property.

City leaders argue that a high percentage of the projects likely would never be built without the incentive. They also note that the new construction results in higher utility and sales tax collections, not to mention the property taxes that will be available after 10 years.

“They couldn’t get the projects to pencil out without this exemption,” Croft said. “The city is definitely getting more revenue even with the exemption in place.”