FEDRAC PACKET 06-27-2023Finance/Economic Development/Regional Affairs (FEDRAC)
Council Committee Regular Meeting Agenda
Federal Way City Hall – Council Chambers*
Tuesday, June 27, 2023 @ 5:00 P.M.
The City Council may amend this regular meeting agenda and take action on items not currently listed.
Regular Meetings are recorded and televised live on Government Access Channel 21.
To view meetings online, agenda materials, and access public comment sign-up options please visit www.cityoffederalway.com.
*Remote attendance options available via Zoom meeting code: 422 053 447 and passcode: 452084
1.CALL TO ORDER
2.PUBLIC COMMENT
3.COMMITTEE BUSINESS
4.OTHER
5.FUTURE AGENDA ITEMS: THE NEXT FEDRAC MEETING WILL BE JULY 25, 2023 @ 5:00 P.M.
TOPIC TITLE/DESCRIPTION PAGE # PRESENTER ACTION OR
DISCUSSION
A.Approval of Summary Minutes – MAY 2023 3 S.HOMAN ACTION
6/27 - COMMITTEE
B.Converting position within the Police Department 7 K. Sumpter
ACTION
07/05 – COUNCIL CONSENT
C.Tax Increment Financing Informational Briefing 11 K. Niven
DISCUSSION
D.Federal Way Community Center locker room
renovations 69 J. Gerwen
ACTION
07/05 – COUNCIL CONSENT
E. Saghalie/Sacajawea Track Replacements 73 J. Gerwen
ACTION
07/05 – COUNCIL CONSENT
F.AP VOUCHERS 05/15/2023 – 06/15/23 & PAYROLL
VOUCHERS 05/01/2023 – 05/31/2023 75 S.GROOM ACTION
07/05 – COUNCIL CONSENT
G.MONTHLY FINANCIAL REPORT – MAY 2023 147 S.GROOM ACTION
07/05 – COUNCIL CONSENT
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Finance / Economic Development / Regional Affairs Committee
Tuesday, May 23, 2023 5:00 p.m. – City Hall Council Chambers
SUMMARY MINUTES
CALL TO ORDER: Council President Kochmar called the meeting to order at 5:01 pm.
COMMITTEE MEMBERS IN ATTENDANCE: Council President Kochmar served as ex officio per
Council Rules of Procedure 20.8 and both Chair Tran & Councilmember Dovey attended via zoom.
Chair Tran was traveling, available for beginning portion of the meeting as noted below.
COUNCIL MEMBERS IN ATTENDANCE: Both Deputy Mayor Honda and Councilmember Jack
Walsh attended in person and Council member Assefa-Dawson attended via zoom.
STAFF MEMBERS IN ATTENDANCE: City Attorney Ryan Call; Director of IT Thomas Fichtner;
Economic Development Director Tanja Carter; Senior Planner Evan Lewis; Community
Development Director Keith Niven; Parks Director John Hutton; Parks Deputy Director Jason
Gerwen and Finance Administrative Assistant Sherri Nelson. Both Finance Director Steve Groom
and Deputy Finance Director Chase Donnelly attended via Zoom.
PUBLIC COMMENT: None.
A.Approval of Summary Minutes – April 25, 2023 Meeting
Motion to approve the April 25, 2023 minutes as written.
•Moved: Dovey
•Seconded: Tran
•Passed: 3-0
B.Microsoft Enterprise Agreement: Presented by IT Director Thomas Fichtner.
IT Director Thomas Fichtner presented the request for 3-year Microsoft Enterprise
Agreement with Insight Public Sector, Inc., not to exceed $625,825.69
Motion to forward the proposed request to the June 6, 2023 consent agenda for approval.
•Moved: Dovey
•Seconded: Tran
•Passed: 3-0
C.Purchase of Portable Handheld Radios: Presented by IT Director Thomas Fichtner.
IT Director Thomas Fichtner presented request to purchase 11 Motorola police car radios,
not to exceed $37,947.88.
Motion to forward the proposed request to the June 6, 2023 consent agenda for approval.
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•Moved: Dovey
•Seconded: Tran
•Passed: 3-0
D.King County I-Net Customer Services Contract Amendment 1: Presented by IT Director
Thomas Fichtner.
IT Director Thomas Fichtner presented the King Country I-Net contract amendment 1,
providing Internet services for the City.
Motion to forward the proposed request to the June 6, 2023 consent agenda for approval.
•Moved: Dovey
•Seconded: Tran
•Passed: 3-0
Chair Tran formally left the meeting.
E.Tourism Enhancement Grant 2023 Round (2) July – December 2023: Presented by
Economic Director Tanja Carter.
Economic Director Tanja Carter presented four (4) grants recommended for approval by the
Lodging Tax Advisory Committee which included a request for an appropriation increase of
$10,500 in the next budget amendment.
Motion to forward the proposed request to the June 6, 2023 consent agenda for approval.
•Moved: Dovey
•Seconded: Kochmar
•Passed: 2-0
F.Port of Seattle Economic Development Partnership Agreement: Presented by Economic
Director Tanja Carter.
Economic Director Tanja Carter presented the Port of Seattle Economic Development
Partnership Agreement, a matching grant, helping to support local and regional economic
development initiatives across King County.
Motion to forward the prosed request to the June 6, 2023 consent agenda for approval.
•Moved: Dovey
•Seconded: Kochmar
•Passed: 2-0
G.Economic Development Quarterly Update: Presented by Economic Director Tanja Carter.
Economic Director Tanja Carter presented an Economic Development Update on Business
attraction, retention and tourism.
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Discussion Item Only. No Action Taken
H. Resolution 2023 Fee Schedule: Presented by Finance Director Steve Groom
Finance Director Steve Groom requested approval for the proposed resolution Fee Schedule
for 2023.
Motion to forward the proposed request to the June 6, 2023 council business.
• Moved: Kochmar
• Seconded: Dovey
• Passed: 2-0
I. AP Vouchers 04/16/2023-05/15/2023 and Payroll Vouchers 04/01/2023-04/30/2023:
Presented by Deputy Finance Director Chase Donnelly
Deputy Finance Director Chase Donnelly presented a summary of the disbursements of the
month of April 2023.
Motion to forward the prosed request to the June 6, 2023 consent agenda for approval.
• Moved: Dovey
• Seconded: Kochmar
• Passed: 2-0
J. Monthly Financial Report April 2023: Presented by Finance Director Steve Groom
Finance Director Steve Groom summarized the April 2023 financial results with summary and
graphical information on revenues, expenses, cash position, debt and investments.
Motion to forward the prosed request to the June 6, 2023 consent agenda for approval.
• Moved: Dovey
• Seconded: Kochmar
• Passed: 2-0
Other: None.
NEXT MEETING: June 27, 2023
MEETING ADJOURNED: The meeting was adjourned at 6:50 p.m.
Attest: Approved by Committee:
_____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Sherri Nelson, Administrative Assistant II Date
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CITY OF FEDERAL WAY
MEMORANDUM
DATE: June 27, 2023
TO: City Council Members
VIA: Jim Ferrell, Mayor
FROM: Keith Niven, Community Development Director
Chaney Skadsen, Senior Planner
Steve Groom, Finance Director
SUBJECT: Tax Increment Financing Informational Briefing
________________________________________________________________________
Financial Impacts:
The financial impact to the City for consideration of a Tax Increment Financing district
contemplates both future property tax revenues, as a result of private development and
investment, and the construction of public improvements and their associated costs, without
which development would not occur at the rate and scale anticipated.
Introduction:
The purpose of this staff report is to provide an overview of the proposed Tax Increment
Financing (TIF) initiative for Downtown Federal Way, including background information,
outlining the TIF purpose, and detailing the adoption process to create a Tax Increment Area
(TIA) in accordance with the Revised Code of Washington (RCW) 39.114.
Background Information:
In 2021, the Washington State Legislature passed House Bill 1189, granting municipalities the
authority to establish Tax Increment Areas (TIAs). These areas enable the funding of public
improvements to facilitate new private development. The City of Federal Way has long pursued a
vision of creating a vibrant, mixed-use downtown and regional destination. Significant efforts
have been made to plan, design, and execute key infrastructure improvements and amenities to
realize this vision.
The primary objective of this staff report is to revisit the role of a TIA and review the draft City
of Federal Way Tax Increment Area – Project Analysis Report (attached). This report, prepared
by Tiberius Solutions, provides crucial insights into the TIF financial capacity, serving as the
basis for further discussions and decision-making.
TIA Implementation in Downtown Federal Way:
The TIA for Downtown Federal Way aims to revitalize the currently suburban, auto-centric, and
unremarkable downtown area into a vibrant and walkable neighborhood and regional destination.
City of Federal Way DRAFT June 20, 2023 ii
By utilizing tax increment financing, the city intends to generate funding for public
improvements that will facilitate private development and create a distinct urban environment.
On January 21, 2023, the concept of implementing a TIA for Downtown Federal Way was
introduced at the Council Retreat. The proposal received initial support and marked the
beginning of the comprehensive analysis and planning process.
The soon-to-be-opened Sound Transit station in downtown Federal Way, coupled with the City's
investment, presents an unprecedented opportunity to redefine the pace and character of
downtown growth and redevelopment. By leveraging TIF funding, the City aims to implement
transformative changes that will shape downtown Federal Way into a distinctive, mixed-use, and
walkable central hub in the community.
The transformation of City-owned property Downtown (TC-3) is already underway with the
Development Agreement negotiations currently occurring between City staff and One Trent, the
selected developer. A number of the conditions of the agreement are contingent on the timing of
the public improvements such as the public parking garage, plaza, associated infrastructure.
The draft City of Federal Way Tax Increment Area - Project Analysis Report, prepared by
Tiberius Solutions (attached), plays a crucial role in providing a thorough evaluation of the TIA's
feasibility and potential impact. This report assesses various aspects, including projected tax
revenues, infrastructure improvements, and the overall viability of TIF for this area of Federal
Way.
Adoption Process:
The adoption of a TIA in Washington State must adhere to the guidelines outlined in the Revised
Code of Washington (RCW) 39.114. These requirements emphasize the need for community
engagement, review by the Office of Treasurer, and a transparent adoption process.
To comply with the statutory obligations, the following timeline is proposed:
o June 27: FEDRAC Informational Presentation
o June 30: Submission of the project analysis to the State Treasurer
o July 11: Notification letters sent to taxing agencies
o July 31: Public Meeting #1 (Hybrid 5:30 pm in City Council Chambers)
o September 26: FEDRAC Presentation (including adopting ordinance)
o October 3: City Council Presentation (first reading of the ordinance and 2nd Public
Meeting)
o October 17: City Council Presentation (second reading and ordinance adoption)
City of Federal Way DRAFT June 20, 2023 iii
Attachment
City of Federal Way
Tax Increment Area
Project Analysis Report DRAFT
City of Federal Way 33325 8th Avenue South Federal Way, WA 98003
City of Federal Way DRAFT June 20, 2023 iv
Acknowledgments
This report was prepared for the City of Federal Way by Tiberius Solutions, a limited liability
corporation headquartered in Portland, Oregon. Tiberius Solutions specializes in infrastructure
funding and tax increment financing analysis, helping clients achieve their economic and financial goals.
Tiberius Solutions is not a registered municipal advisor as defined in Section 15B of the Securities Exchange Act, as amended by Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The contents of this report are intended to provide factual information and is not intended to be construed as advice or recommendations regarding any specific municipal financial products. The City should discuss any information and material contained in this report with any and all internal or external advisors and experts that the City deems appropriate before acting on this information.
Other firms that contributed to this report include:
Elaine Howard Consulting, LLC led the City’s efforts for public outreach and community engagement on this project.
Johnson Economics conducted technical analysis related to the forecast of future private development in the area, and economic impacts related to job creation and housing affordability.
PFM Financial Advisors LLC (PFM) served as the City’s municipal financial advisor, providing advice on reasonable assumptions for the terms of future indebtedness.
Tiberius Solutions acknowledges the assistance and data provided by staff at the City who were deeply involved in the preparation of this report, providing input on key assumptions and review of all analysis. Tiberius Solutions would also like to thank the valuable contributions made by the King County Assessor’s Office and the Office of the Washington State Treasurer, who provided data used in the analysis and guidance on the content of this report. Despite the assistance of other public and private-sector entities, Tiberius Solutions is responsible for the contents of this report.
City of Federal Way DRAFT June 20, 2023 v
City of Federal Way DRAFT June 20, 2023 vi
Table of Contents
SUMMARY VIII
1 BACKGROUND I
1.1 BACKGROUND AND PURPOSE I
1.2 BOUNDARY I
1.3 OBJECTIVES III
2 ANTICIPATED DEVELOPMENT IV
2.1 PUBLIC IMPROVEMENTS IV
2.2 PRIVATE DEVELOPMENT VI
2.3 IMPACT OF PUBLIC PROJECTS ON PRIVATE DEVELOPMENT VII
3 FINANCE PLAN IX
3.1 FORECAST OF TAX ALLOCATION REVENUES IX
3.2 PROPOSED INDEBTEDNESS XXII
4 ECONOMIC IMPACTS XXIII
4.1 JOB CREATION XXIII
4.2 FISCAL IMPACTS XXVII
4.3 AFFORDABLE AND LOW-INCOME HOUSING XXIX
4.4 LOCAL BUSINESS COMMUNITY XXXII
4.5 LOCAL SCHOOL DISTRICT XXXIII
4.6 LOCAL FIRE SERVICE XXXV
5 EVALUATION OF RISK FACTORS XXXVII
5.1 GENERAL ECONOMIC CONDITIONS XXXVII
5.2 FUTURE ASSESSED VALUES AND TAX RATES XL
5.3 FUTURE PUBLIC COSTS OF CONSTRUCTION AND/OR BORROWING XLI
5.4 OTHER CITY REVENUES XLI
5.5 NON-VOTED DEBT LIMIT XLI
5.6 SEISMIC ACTIVITY AND OTHER NATURAL DISASTERS XLI
5.7 INITIATIVES AND REFERENDA XLII
5.8 CITY OF FEDERAL WAY’S APPROACH TO FINANCIAL UNCERTAINTY XLII
APPENDIX A: TAX LOTS INCLUDED IN THE PROPOSED FEDERAL WAY TIA BOUNDARY XLIII
APPENDIX B: SUMMARY OF PUBLIC OUTREACH XLV
City of Federal Way DRAFT June 20, 2023 vii
APPENDIX C: ALTERNATE SCENARIO XLVI
City of Federal Way DRAFT June 20, 2023 viii
Summary
How Tax Increment Financing Works
In 2021, the Washington State Legislature passed House Bill 1189, allowing some municipalities
(cities, counties, and ports) to establish Tax Increment Areas (TIAs) to fund public improvements that
allow for new private development to occur.1 Revised Code of Washington (RCW) 39.114 describes
the legislative requirements for tax increment financing in Washington. Each TIA must have a clearly
defined boundary and a list of public improvement projects to be funded in the area. Some of the property taxes generated by increases in assessed value in a TIA are allocated to the TIA to help pay for the public projects in the area. The result is each TIA redirects some of the taxes that would have been collected by other taxing districts for the TIA projects instead. Revenues generated from the growth in assessed value within a TIA are not restricted by other RCW provisions that would otherwise limit the jurisdiction’s levy amount to no more than 101 percent of the prior year’s levy authority.
With a TIA, a municipality can borrow money to fund important public projects in an area, and then pay back the cost of those projects with property tax revenues generated by the increased property value of new private development inside the TIA. TIAs can collect property taxes for no more than 25 years. The projects funded by a TIA are intended to stimulate new construction that occurs sooner or with higher values than would otherwise be expected to occur. Thus, some of the property taxes received by TIAs would not exist without the new public projects paid for by the TIA.
When a municipality establishes a TIA, the current value of property in the TIA is “frozen” and called the base value. Property taxes paid on the base value are paid as usual to the taxing districts that collect property taxes in the area. Over time, the property values in the TIA are expected to increase. Property value above the base value is called the increment value. Some property taxes paid on the increment value are distributed to the TIA, called tax allocation revenues. Some taxes, like school district excess levies, are identified in RCW as not impacted by TIAs. Thus, some taxing districts continue to receive taxes paid on the increment value, like usual.
Anticipated Public Improvements
The proposed City of Federal Way (City) TIA includes approximately 215 acres and is generally
bordered by Interstate 5 to the East, S 312th Street to the North, Highway 99 to the West, and S 330th
Street to the South. The development of this area is vital to the City’s goal to transform a suburban,
auto-centric and non-remarkable area of Federal Way into a distinct, vibrant, and walkable downtown. For this development to occur, the City must complete many significant infrastructure projects, including:
1 The tax increment financing program was subsequently amended by house bill 1527 in 2023.
City of Federal Way DRAFT June 20, 2023 ix
Public Parking
Recreation Projects
Mobility Projects
Community Building
Public Safety Projects
Placemaking Projects
The cost of these projects is estimated to range between $72 and $170 million in 2023 dollars, and tax allocation revenues from the proposed TIA would provide essential funding for these projects. When
considering the impacts of inflation and interest on debt, the cost of the public projects would be
more than the amount of tax allocation revenues generated in the proposed TIA. The City assumes
some of the project costs would need to be paid for by additional funding sources.
Anticipated Private Development
In 2023 the City issued a request for proposals for professional services to prepare a Town Center Master Development Plan for City-owned property that will be a cornerstone project in the City’s
effort to revitalize the downtown. As a result of this process, the City accepted a proposal from One
Trent, a Seattle-based real estate development firm. As of the writing of this report, the City is
currently negotiating a development agreement with One Trent, who plan to develop a four-phase
mixed-use project within the proposed TIA, including residential opportunities in the form of rental
apartments and townhomes for homeownership, retail and office, with an expected taxable value of
$472 million (in 2023 dollars). Additional market analysis was completed to identify speculative future
development opportunities based on current market conditions. It is estimated that future speculative
development in the proposed TIA through would result in an additional $1.2 billion (in 2023 dollars)
in improvement value being added to the tax rolls over the life of the proposed TIA (by 2049).
Impacts to Taxing Districts
The proposed TIA is forecast to receive $68.9 million in tax allocation revenues over the course of 25 years, ending in 2049. This would result in an equal amount of “foregone” property tax revenues from
impacted taxing district levies. However, RCW 84.55.010 allows taxing districts to increase the amount
of their levy to account for growth in assessed value inside a TIA. This would result in slightly higher
overall levy amounts and tax rates for impacted taxing districts. Thus, the net impact the TIA would
have on taxing district levies is $65.0 million, which is less than the total amount of tax allocation
revenues received. The proposed TIA would receive tax allocation revenues from the following levies:
King County: Regular, Lid Lifts, Transportation, Conservation Futures
County Flood Zone
County Ferry District
Port of Seattle: General Fund
City of Federal Way DRAFT June 20, 2023 x
EMS
Sound Transit
City of Federal Way
King County Library System: General Fund
South King Fire & Rescue (Fire District 39)
The following levies are not impacted by the proposed TIA, and therefore would receive additional property tax revenues from new private development in the proposed TIA as soon as construction is
complete:
State Schools (Part 1 and 2)
King County Bonds (voted) levy
Port Bond Fund levy
Federal Way Public Schools (Maintenance & Operations, Construction, and Bond levies)
Library GO Bond levy
Fire District 39 / South King Fire and Rescue (Maintenance & Operations and GO Bond levies)
Economic Impacts
The proposed TIA is expected to generate substantial economic impacts for the local and regional economy. The infrastructure investments supported by the proposed TIA would support a significant
level of development, with substantial employment from construction as well as ongoing business
activity. The total estimated economic impacts (direct, indirect, and induced) from the construction
phase are roughly 12,276 FTE positions and $1.0 billion in labor income (2023 dollars).
Following development, the completed structures are expected to generate ongoing impacts to the
local and regional economy. Employees at the office and retail spaces are expected to generate
income that would circulate in the local economy, supporting additional employment and tax
revenues. The overall level of employment in the proposed TIA is estimated at 632 when completed
and tenanted.
The remainder of this Report details all assumptions used for the analysis of the potential TIA.
Background
Background and Purpose
The City of Federal Way incorporated as a city in 1990 in response to the community desire to take
more control over how the city would develop and grow over time, as opposed to leaving the
decisions to King County. Included in that vision was a recognizable downtown. The downtown, or “City Center” does not currently present an identifiable sense of a downtown or urban center. However, things are changing. With a population just over 100,000, the City is actively taking steps to transform itself into a welcoming city in the Puget Sound region, with an identifiable and memorable downtown.
The City has taken initial steps in transforming the City Center into a true downtown for the community. The City built the Performing Arts & Event Center (PAEC) and the Town Square Park as initial cornerstone elements aimed at defining the City Center neighborhood. In 2026, a Sound Transit light rail station will allow residents, employees, and visitors greater transit access to and from the City Center. As part of the station opening, Sound Transit will be selling approximately six acres in this neighborhood for transit-oriented development. The City owns approximately 7.5 acres of redevelopable property east of the PAEC and north of Town Square Park and the Federal Way Transit Center.
The City sees the Town Center as a central gathering place for community where the whole community can congregate and celebrate. Civic and cultural facilities, including the PAEC, park, and open-space system, will meet the needs of residents, employees and visitors. These amenities will connect to the citywide and regional systems of open spaces, parks, and trails. Public and private projects will contain design elements such as wayfinding, public art pieces, iconic infrastructure and decorative landscaping.
Boundary
Exhibit 1 shows a map of the boundary for the proposed Federal Way Tax Increment Area (TIA),
including all tax lots included within the boundary. The boundary includes approximately 215 acres
and is generally bordered by Interstate 5 to the East, S 312th Street to the North, Highway 99 to the
West, and S 330th Street to the South. All parcels are zoned City Center Core, City Center-Frame, or
Community Business. Excluding rights-of-way, parcels zoned City Center Core compose 53% of the
acreage and 62% of the current taxable assessed real property value. Parcels zoned City Center Frame compose 14% of acreage, and 15% of taxable assessed real property value, and parcels zoned Community Business compose 33% of acreage, and 23% of taxable assessed real property value.
Rev. 7/18
Exhibit 1. Proposed Federal Way TIA
Boundary
Source: Tiberius Solutions with data from the King County Assessor’s Office
Appendix A provides a list of all 130 tax lots included within the proposed TIA boundary. These
properties are located within tax code areas 1202 and 1205. They had a combined appraised value of
$216,417,300 and assessed value of $195,802,900 for tax year 2023.
RCW 39.114 establishes limits for the taxable assessed value of all property included within TIAs for a
jurisdiction. When the ordinance establishing the TIA is passed, the TIA may not have an assessed valuation of more than $200 million or 20 percent of the total assessed valuation of the City of Federal Way (whichever is less). The total assessed valuation of the City in tax year 2023 was $17,270,222,086, which means that 20 percent of that assessed valuation is $3,454,044,417. Thus,
Rev. 7/18
$200 million is the applicable threshold for the maximum amount of assessed value that can be included in the proposed TIA. As stated previously, all of the tax lots within the proposed TIA
boundary have a total taxable assessed value of $195,802,900. Thus, the proposed TIA boundary
complies with the limitations on assessed value described in RCW. These calculations are shown
below in Exhibit 2.
Exhibit 2. Calculations of Limitations on Assessed Value, Proposed Federal Way TIA,
Tax Year 2023
Source: Tiberius Solutions with data provided by the King County Assessor’s Office
RCW 39.114 requires the City to identify any property that it intends to acquire within the proposed
TIA boundary. At the time of writing this report, the City has not identified any specific properties it
intends to acquire within the proposed TIA boundary.
Objectives
The City has identified the following goal and objectives for the proposed TIA:
Goal
Transform a suburban, auto-centric and non-remarkable area of Federal Way into a distinct, vibrant, and walkable downtown.
Objectives
Utilize creative funding tools to help achieve the Goal.
Leverage the regional investment in high-capacity transit; the sale of City-owned property; and,
local investment to attract high-quality, private development that will catalyze redevelopment.
Prioritize walkability and enhanced non-motorized connections. Construct pedestrian-oriented
infrastructure improvements that that improve mobility.
Invest in community gathering areas and placemaking to define the area and create a destination for the community.
Rev. 7/18
Anticipated Development
Public Improvements
The following public improvements may be funded in part or whole by tax allocation revenues
generated by the proposed TIA:
A. Public Parking. These projects may include:
A stand-alone parking garage
Public parking integrated into a private garage
Shared parking agreements w/ other parties
Other equivalent projects that would add parking
B. Recreation Projects. These projects may include:
New park or park expansion
Civic plaza
Park improvements
Other equivalent projects that would add recreational amenities
C. Mobility Projects. These projects may include:
S 320th Dip (Dipping S 320th Street under 21st Ave S for an at pedestrian/bicycles grade
crossing)
Pedestrian promenade
Protected bike lanes
Transit shelters
Bicycle lockers
City Center Access
Other equivalent projects that would increase mobility
D. Community Building. These projects may include:
Public market
Senior center
City Hall
Community Center north
Downtown meeting room
Rev. 7/18
Other equivalent projects that would add an indoor community space to the district
E. Public Safety Projects. These projects may include:
Improvements to benefit Federal Way Police Department
Improvements to benefit South King Fire & Rescue
Improvements to lessen code compliance issues
Other equivalent projects that would improve public safety
F. Placemaking Projects. These projects may include:
Gateway features
Wayfinding signs
Pedestrian nodes/public spaces
Public art
Lighting (e.g. catenary lights, etc.)
Special street furniture
Other equivalent projects that would improve placemaking
Exhibit 3 summarizes the estimated cost and prioritization for each of these public improvements.
Collectively, these projects are estimated to between $72 million and $170 million in 2023 dollars.
Exhibit 3. Public Improvements to be Funded with Tax Allocation Revenues, Proposed Federal
Way TIA
Source: City of Federal Way
RCW 39.114.020 requires the City to impose a deadline by which commencement of construction of
the public improvements shall begin, “which deadline must be at least five years into the future…"
Thus, for the proposed Federal Way TIA, the deadline for construction of public improvements to begin is 2028.
Rev. 7/18
Private Development
In 2023 the City issued a request for proposals for professional services to prepare a Town Center Master Development Plan for City-owned property that will be a cornerstone project in the City’s
effort to revitalize the downtown. As a result of this process, the City accepted a proposal from One
Trent, a Seattle-based real estate development company. As of the writing of this report, the City is
currently negotiating a development agreement with One Trent, who plan to develop a four-phase
project within the proposed TIA (apartments and office or condos), with an expected taxable value of
$472 million (in 2023 dollars).
Exhibit 4 summarizes the forecast assessed value from this development. One Trent intends to apply
for the City’s Multifamily Tax Exemption (MFTE), which would result in an eight-year tax exemption on
eligible value. This analysis assumes that for Phases 1, 2, and 3 over 95% of total taxable value would
be eligible for the exemption. This analysis assumes Phase 4 would not be eligible for the exemption.
Exhibit 4. One Trent Development Plan
Source: Tiberius Solutions with data and input from the City of Federal Way
Additional market analysis was completed to identify speculative future development opportunities
based on current market conditions. The analysis was conducted by Johnson Economics, using
proprietary development models to evaluate the likelihood of future development on all tax accounts inside the proposed TIA that were not associated with the One Trent development. The analysis estimated the residual land value of each tax lot, based on zoning and current market conditions. Properties with the lowest ratio of real market value to estimated residual land value were forecast to have the highest likelihood of future development. The likelihood of development for each parcel over the 25-year forecast period ranged from 1% to 22%. Of the 9.4 million square feet of potentially developable or redevelopable properties in the proposed TIA, the analysis estimates 17% would experience new development over the 25-year forecast period, resulting in a total of 5,292 new housing units, and $1.58 billion in speculative new construction value.
The analysis conservatively assumes that no speculative development would occur until the One Trent development has broken ground (estimated 2026). Based on conversations with City staff regarding expectations of the use of the MFTE, this analysis assumes that 80% of new construction value within the proposed TIA would be multifamily, and that 100% of that value would be eligible for the 8-year MFTE. It is estimated that future speculative development in the proposed TIA would result in an additional $1.62 billion in improvement value (in tax year 2023 dollars) being added to the tax rolls over the life of the proposed TIA (construction occurring through 2047, and coming on the tax roll through 2049).
Rev. 7/18
Exhibit 5 summarizes the private development forecast to occur in the proposed TIA, both from One Trent and the speculative development. When new projects complete construction, there is a delay
before that increase in assessed value is reflected on the tax roll. This evaluation conservatively
assumes that new construction in the proposed TIA is added to the tax roll two years after
construction is completed. Property value that qualifies for the MFTE exemption would have an
additional eight-year delay (ten years after construction is completed) before being added to the tax
roll.
Exhibit 5. Summary of Estimated Private Development, Proposed Federal Way TIA (2023 $)
Source: Johnson Economics and Tiberius Solutions with data and input from City of Federal Way
Impact of public projects on private development
The development assumptions included in this analysis reflect a scenario where the TIA provides funding for the public projects identified in this report. Without these vital infrastructure
improvements, we do not anticipate significant new construction to occur within the proposed TIA
boundary in the near future. The private development forecast in this analysis would not reasonably
Rev. 7/18
be expected to occur solely through private investment within the reasonably foreseeable future without the proposed public improvements. The increase assessed value within the increment area
that could reasonably be expected to occur without the proposed public improvements would be less
than the increase in the assessed value estimated to result from the proposed development with the
proposed public improvements.
There are currently no projects in the proposed TIA boundary under construction, or with approved
permits for construction. The City-owned property within the boundary is anticipated to be the site
best situated for new private construction. The City received six responses to its RFP for a master
developer for the City-owned property, and all respondents determined that public investments
would be necessary on the part of the City to make private development feasible on the site.
Additional speculative development is not expected to occur in the area until after construction
begins on the City-owned property, which would include City investment in public infrastructure and
amenities in the area. With these proposed investments in public projects, the City-owned site should
act as a catalyst project for private development in the surrounding area, encouraging more private
development activity to occur. Even with the projected public improvements, this analysis assumes
that only 17% of the properties within the proposed TIA boundary would experience speculative
future development over the 25-year life of the proposed TIA.
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Finance Plan
Forecast of Tax Allocation Revenues
Tax allocation revenues generated within the proposed TIA would provide a critical source of funding
to pay for the public improvements identified in this report. The tax increment area is expected to
take effect on June 1, 2024, following the adoption of the ordinance establishing the proposed TIA. Based on this timing, the first year the proposed TIA would be eligible to receive tax allocation revenues is 2025.
The duration of the proposed TIA shall be no more than 25 years after the first year in which tax allocation revenues are collected. This analysis assumes that the final year the proposed TIA would be eligible to receive tax allocation revenues is 2049. In the remainder of this section, the assumptions and methods for forecasting future tax allocation revenues are described.
Determine the Annual Levy Rates
Property tax levies included in the calculation of tax allocation revenues are limited to “regular property taxes” as defined in RCW 84.04.140, except regular property taxes levied by port districts and
public utility districts to repay general obligation debt and regular property taxes levied by the state
for the support of common schools. Regular property taxes also do not include any levies that are
exempt from aggregate limits for junior/senior limits in RCW 84.52.043 or excess property taxes levied
by local school districts.
Exhibit 6 shows the regular property tax levies that are included in the calculation of tax allocation
revenues for the proposed TIA, and the rates associated with each of these levies in 2023. Although
the proposed TIA overlaps two individual tax code areas (1202 and 1205), the property tax levies
included in each are the same. This report therefore does not calculate tax allocation revenues nor
report values by individual tax code area, but instead groups all tax code areas together.
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Exhibit 6. Levies Included in Calculation of Tax Allocation Revenues, Proposed Federal Way TIA, All Tax Code Areas, Tax Year 2023
Source: Tiberius Solutions with data provided by the King County Assessor’s Office
These levy rates are expected to change over time, based on increases in each jurisdiction’s levy authority and changes in assessed value of property within those jurisdictions. Historically, these tax
rates have decreased over time, as growth in assessed value has outpaced growth in levy authority.
This analysis assumes that those historical trends would continue, with rates decreasing over time.
To forecast future changes in tax rates for jurisdictions impacted by the proposed Federal Way TIA, we
forecast growth in assessed value for each jurisdiction, distinguishing between growth from
appreciation of existing property and growth from new construction. Recent historical trends for
assessed value growth in King County have been unsustainably high and are unrealistic to assume will
continue for the 25-year duration of the proposed TIA. Instead, we look at long-term historical trends
for per capita personal income growth as the basis for forecasting appreciation of existing property
values, and we look at forecasts of population growth as the basis for forecasting the increase in
assessed value from new construction.
Per capita personal income growth is strongly correlated with growth in property values. Data from
the Federal Reserve for personal income growth in King County shows that the five-year rolling
average from 1977 to 2012 was between 4.4% to 6.6% per year.2 Growth has been more rapid over the last decade, but that rapid growth is unlikely to be sustainable in the future. Based on the long-
2 U.S. Bureau of Economic Analysis, Per Capita Personal Income in King County, WA [PCPI53033], retrieved from FRED,
Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PCPI53033, June 12, 2023.
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term trends, we assume average annual growth of 5.1% for personal income, and thus 5.1% annual growth in assessed value from appreciation of existing properties for all years of the forecast period.
Assessed value growth from new construction is correlated with population growth. The most recent
State Growth Management Act (GMA) population forecasts for King County were conducted in 2022
and cover the period from 2025 to 2050. This forecast calls for gradual slowing of population growth
in the County, with an average annual growth rate of 0.9% from 2025 to 2031, 0.8% from 2031 to
2038, 0.7% from 2039 to 2049, and 0.6% in 2049. We apply those same percentage growth
assumptions to our forecast of assessed value from new construction countywide (and apply the 0.9%
growth rate for the years before this forecast, 2023-2025). This forecast of future growth in assessed
value from new construction countywide is not directly tied to forecasts of construction activity within
the proposed TIA, as the annual growth in assessed value in the proposed TIA is estimated to be only
a fraction of the total forecast countywide in any given year.
Exhibit 7, Exhibit 8, and Exhibit 9 show the forecast of future levy rates applicable for the TIA. The total
applicable levy rate for the proposed TIA is forecast to decrease from $3.730590 in 2023 to $1.158518
in 2049. This analysis conservatively assumes that no potential future levies or extensions of current
levy lid lifts would be approved by voters.
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Exhibit 7. Forecast of Future Levy Rates, Proposed Federal Way TIA (1 of 3)
Source: Tiberius Solutions
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Exhibit 8. Forecast of Future Levy Rates, Proposed Federal Way TIA (2 of 3)
Source: Tiberius Solutions
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Exhibit 9. Forecast of Future Levy Rates, Proposed Federal Way TIA (3 of 3)
Source: Tiberius Solutions
Forecast Future Assessed Value in TIA
Future growth in assessed value in the proposed TIA would come from new construction and the
appreciation of existing property. This report assumes 5.1% annual growth assessed value for existing
property value, based on long-term trends in personal income for King County as described above.
As stated previously, much of the new construction forecast to occur in the proposed TIA is
predicated on City providing adequate infrastructure, including the projects identified in this report. The expected increases in assessed value from new construction anticipated to occur in the proposed TIA over its lifetime were shown previously in Exhibit 5.
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Exhibit 10 summarizes all of the anticipated increase in assessed value from new construction, including known development and speculative development. This exhibit includes the value of new
development in both constant 2023 dollars and nominal dollars, which account for appreciation of
property values between now and when the projects complete construction.3 Assuming annual appreciation of 5.1% as described above, the total increase in assessed value from new construction in
estimated to be $1.6 billion constant 2023 dollars, and $3.8 billion in nominal dollars.
Exhibit 10. Assessed Value from New Construction, Proposed Federal Way TIA
Source: Tiberius Solutions with data and input from the City of Federal Way and Johnson Economics
In addition to increases in assessed value from new construction, all property values in the proposed
TIA are estimated to increase by 5.1% per year from appreciation. Exhibit 11 summarizes the forecast
total growth in assessed value in the TIA from new construction and appreciation.
3 Note that no additional inflation is assumed between the date the construction is completed and the date the increased
value appears on the tax roll based on conversations with county assessors in Washington.
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Exhibit 11. Assessed Value Forecast, Proposed Federal Way TIA (Nominal $)
Note: Dollar values in this summary exhibit may differ than other exhibits in the report due to rounding Source: Tiberius Solutions
Forecast of Tax Allocation Revenues
Exhibit 12 shows the forecast of annual tax allocation revenues, combining the forecasts of future assessed value in the proposed TIA and applicable tax rates. Annual tax allocation revenues are
expected to be $34,533 in 2025, increasing to over $7.1 million in its final year in 2049. Total tax
allocation revenue over 25 years is expected to equal $68.9 million.
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Exhibit 12. Tax Allocation Revenues, Proposed Federal Way TIA (Nominal $)
Source: Tiberius Solutions
Factors Affecting the Accuracy of the Forecast
The biggest factor affecting the accuracy of the tax allocation revenues forecast is the value and timing of new construction in the proposed TIA. The amount of future tax allocation revenues is, in
part, dependent upon new construction. If that construction occurs on a different schedule, or with
different values than has been assumed, it could impact the accuracy of the forecast.
In addition to the timing and value of new construction, actual tax allocation revenues for the
proposed TIA would depend upon the actual appreciation/depreciation in assessed value in the area
as well as the actual levy rates imposed. There is significant uncertainty with these factors over the
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next 25 years. However, these factors are related in ways that help to provide some confidence for this forecast. Changes in property values in the proposed TIA from appreciation/depreciation are likely to
follow a similar pattern to changes in property values from appreciation/depreciation countywide.
And, those countywide changes in appreciation/depreciation would determine annual changes in the
levy rates imposed.
If property values increase faster than forecasted, it would result in lower levy rates and a similar
forecast of annual tax allocation revenues. Similarly, if property values increase slower than forecasted
(or decrease), it would result in higher levy rates and a similar forecast of annual tax allocation
revenues.
The accuracy of the tax allocation revenues forecast is more impacted by the relative growth in
assessed value within the proposed TIA versus countywide. In theory, rates of
appreciation/depreciation in these two geographies should be similar over time. However, if they do
differ, it has the potential to significantly impact the tax allocation revenues forecast. If properties
within the proposed TIA appreciate faster than the county as a whole, it would lead to more tax
allocation revenues than what is forecasted. Conversely, if properties within the proposed TIA
appreciate slower than the county as a whole, it would lead to less tax allocation revenues than what
is forecasted.
Impact on Overlapping Tax Levies
Tax allocation revenues are generated through the reallocation of tax levies. In other words, the
financial impact of the proposed TIA is primarily borne by the affected, overlapping taxing districts.
These impacts occur as “foregone” tax revenues. Thus, these jurisdictions are not losing revenue relative to what they collect today, but instead these districts would temporarily forego the future increase in revenue generated within the proposed TIA. Once the proposed TIA ceases to collect tax allocation revenues (limited to no more than 25 years), then these impacted jurisdictions would begin to receive the full amount of annual taxes from the new construction that has occurred within the proposed TIA.
RCW 84.55.010 allows taxing districts to increase the amount of their levy to account for growth in assessed value inside a TIA. This would result in slightly higher overall levy amounts and tax rates for impacted taxing districts. Thus, the net impact the TIA would have on taxing district levies is less than the total amount of tax allocation revenues received.
Exhibit 13 summarizes the annual tax revenues forecast to be foregone by the affected taxing districts. All jurisdictions are collectively expected to forego $65,015,961 in tax revenue over the life of the proposed TIA. While this is a significant amount of foregone tax revenues, it is not expected that much of this private development could or would occur within this area without the public investments proposed to be funded by the proposed TIA. Thus, a portion of these foregone revenues likely would not exist but for the investments made by the proposed TIA. Following the expiration of the proposed TIA, these revenues would be redirected to the overlapping taxing districts.
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Exhibit 13. Impact on Overlapping Tax Levies, Proposed Federal Way TIA (Nominal $) (1 of 3)
Source: Tiberius Solutions
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Exhibit 14. Impact on Overlapping Tax Levies, Proposed Federal Way TIA (Nominal $) (2 of 3)
Source: Tiberius Solutions
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Exhibit 15. Impact on Overlapping Tax Levies, Proposed Federal Way TIA (Nominal $) (3 of 3)
Source: Tiberius Solutions
Not all overlapping taxing districts would be impacted by the proposed TIA. The following property tax levies would be excluded from the calculation of tax allocation revenues:
State Schools (Part 1 and 2)
King County Bonds (voted) levy
Port Bond Fund levy
Federal Way Public Schools (Maintenance & Operations, Construction, and Bond levies)
Library GO Bond levy
Fire District 39/ South King Fire and Rescue (Maintenance & Operations and GO Bond levies)
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All taxing districts listed above, whose rates would be excluded in the calculation of tax allocation revenues would not experience any foregone revenues from the proposed TIA. This includes the
Federal Way Public Schools. For these jurisdictions, the proposed TIA would generate increased
property tax revenues once the anticipated private development comes on the tax roll, or would
reduce the property tax rate needed to produce the authorized levy amount.
Proposed Indebtedness
To finance the public improvements identified in this report, the City anticipates issuing limited tax general obligation bonds. These bonds would be secured by a pledge of the City’s full faith and
credit, including its regular property tax levy, and would be subject to statutory limitations and
constraints on general obligation indebtedness. The actual terms of indebtedness are uncertain and
would be based upon the ultimate timing and amount of indebtedness the City chooses to incur, tax
allocation revenues collected, and financial market conditions at the time of issuance. For the
purposes of this analysis, the City consulted with their municipal financial advisors, PFM to estimate
terms of indebtedness based upon current market conditions and the proposed timing and amount
of future indebtedness.
City staff and PFM have begun the process of developing financing alternatives. We expect to
produce options that depend on the figures and timelines that come from the development
agreement with One Trent and initial cost estimates for public projects such as the parking garage
and plaza. We anticipate the planned indebtedness would extinguish the $4.8 million interfund loan
on the Town Center property, and finance construction of the garage and plaza over the 25-year
maximum duration for the TIA. To better align the anticipated tax allocation revenues with scheduled
debt service payments, it is likely that the City will consider financing options with interest-only
payments in the early years of the TIA.
The public improvements within the Proposed TIA are anticipated to be funded through limited tax
general obligation bonds, which are constrained by the City’s statutory capacity for non-voted general
obligation indebtedness. Exhibit 16 shows the calculated statutory authority for non-voted general
obligation indebtedness for the City in 2023, estimated to be $257,137,929. The City has $27,983,000
of outstanding non-voted general obligation indebtedness, and a cash reserve of 363,121 resulting in
$229,518,050 of remaining debt capacity. This remaining capacity is substantially larger than the
amount of indebtedness being contemplated by the City for the proposed TIA.
Exhibit 16. Statutory Authority for Non-Voted General Obligation Indebtedness,
City of Federal Way, 2023
Source: City of Federal Way
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Economic Impacts
Job Creation
The proposed TIA would be expected to generate substantial economic impacts for the local and
regional economy. The infrastructure investments supported by the proposed TIA would support a
significant level of development, with substantial employment from construction as well as ongoing business activity. Impacts during the construction phase would be temporary, while the impacts from operations once construction is complete would be ongoing.
These impacts include direct impacts (jobs and spending occurring directly in the TIA), as well indirect and induced impacts. Indirect impacts are secondary impacts generated by the portion of direct expenditures that are spent on goods and services provided by local businesses. Induced impacts are secondary impacts generated by local expenditures made by employees who received personal income from the direct and indirect expenditures. The induced impacts are often referred to as the “multiplier effect” as the initial direct expenditures are re-spent multiple times, rippling through the local economy.
To model the economic impacts of various activities, Johnson Economics utilized the IMPLAN (IMPact for PLANning)4 economic multiplier model. IMPLAN is an economic impact model designed for
analyzing the effects of industry activity (employment, income, or business revenues) upon all other
industries in an economic area.
Development activity in the area is expected to exceed $1.1 billion in current dollars over the next 25
years. Of that, over $472 million is proposed as part of the One Trent Development agreement. This development is expected to be introduced to the tax rolls in phases through 2040.
4 Minnesota IMPLAN Group (MIG), Stillwater, Minnesota
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Exhibit 17. Summary of Predicted Construction Investment by Year, Proposed Federal Way TIA (2023 $)
Source: Johnson Economics
To evaluate the temporary construction impacts of the proposed development programs, we
calculated the total construction spending of the project measured as a direct industry change in
construction of new nonresidential and residential commercial structures. Estimated construction expenditures were converted into estimated contributions to employment income and output at the King County level (Exhibit 18). Key findings include:
Construction spending would translate into an estimated 7,229 direct full time equivalent (FTE) jobs over the construction period. Direct jobs would pay an estimated average of roughly $89,749 per FTE for wages and benefits.
Because the development period is estimated to extend over multiple years, the direct construction jobs projected likely represent some of the same employees, employed throughout the project lifecycle over multiple buildings/phases.
Each direct construction job would support approximately 0.7 indirect and induced jobs during the construction period. This translates into roughly 5,047 FTE jobs and labor income of $377.6 million during the construction period.
The total estimated economic impacts (direct, indirect, and induced) from the construction phase are roughly 12,276 FTE positions and $1.0 billion in labor income (current dollars). The
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average annual impact over the 25-year period would be 491 FTE positions and $41.1 million in labor income.
Exhibit 18. Summary of Projected Impacts During Construction Phase, Proposed Federal Way
TIA (2023 $)
Source: Johnson Economics, based on assumed future development forecasts
The preceding table also summarizes projected impacts on value added and output. The following is a
brief description of what these terms represent:
Output is the value of an industry’s production. It can be measured in two ways: from the sales
(income) perspective or the expenditures (spending) perspective. From the income perspective, output is the sum of sales to final users in the economy (gross domestic product or “GDP”), sales to other industrial (intermediate inputs), and inventory change. From the spending perspective, output is the sum of an industry’s “value added” and intermediate inputs.
Value added is defined as the total market value of all final goods and services produced within a region in a given period of time. It is the sum of all added value at every stage of production of all final goods and services produced within a country in a given period of time. In other words, it is the wealth created by industry activity. Value added in a social accounting matrix model such as IMPLAN is equal to GDP.
Following development, the completed structures would be expected to provide for ongoing impacts to the local and regional economy. Employees at the office and retail spaces would be expected to generate income that would circulate in the local economy, supporting additional employment and tax revenues.
At full buildout the TIA is expected to contain a mix of residential units and commercial space, with an overall direct investment approaching $1.7 billion in construction.
On an ongoing basis, the study area is expected to accommodate direct employment of 632, with direct labor income of $29.1 million and $84.8 million in economic output.
The associated ancillary indirect and induced impacts are estimated to account for 187 jobs and $13.6 million in labor income.
The total annual impact is estimated at 819 full-time equivalent positions with annual labor income in current dollars over $42.8 million.
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Exhibit 19. Summary of Projected Ongoing Impacts from Operations, Proposed Federal Way TIA (2023 $)
Source: Johnson Economics, based on assumed future development forecasts
The overall impacts have been additionally broken out for the project planned by One Trent, as well
as assumed speculative projects. While the TIA is expected to realize the level of development
summarized previously, this known development has a higher level of certainty. As summarized in the following table, known projects and infrastructure investments are expected to support 3,770 full time equivalent positions and $315.2 million in labor income during construction, with ongoing annual employment of 251 with associated labor income of $13.2 million.
Exhibit 20. Summary of Impacts, Known Projects and Infrastructure, Federal Way TIA (2023 $)
Source: Johnson Economics, based on assumed future development forecasts
Construction and operation of the multiple development programs in the study area will support a
sizable number of jobs directly, as well as having significant indirect and induced impacts. The
construction and ongoing operation of developments in the area is estimated to support roughly 70,037 full time equivalent positions through 2049, reflecting average annual support of approximately 2,663 jobs, with roughly $102.4 million per year in labor income in current dollars.
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Exhibit 21. Summary of Average Annual Impacts Through 2049, Federal Way TIA (2023 $)
Source: Johnson Economics, based on assumed future development forecasts
Fiscal Impacts
In addition to economic impacts, development, and operation of the various development parcels in
the proposed TIA would have fiscal implications for the City of Federal Way, King County, other local
service providers, and the State of Washington. These impacts include sales tax, property taxes, income and business taxes, and development charges and fees.
Sales taxes will represent the most significant fiscal contribution, during both the construction and ongoing phases. The next largest source of local and state tax revenue would be property taxes, while the federal government is expected to realize a substantive level in income taxes.
Exhibit 22 and Exhibit 23 present an estimate of tax contributions, such as income and business taxes, from the construction and operations based on the modeling assumptions in the IMPLAN scenarios. Estimates are broken down by federal vs. state and local contributions. These fiscal impacts exclude direct property taxes, as property tax revenue from the planned development within the TIA is calculated and reported separately in this report. While direct property taxes are excluded from the tables below, the analysis does include some property taxes from indirect and induced activity that occurs outside of the proposed TIA. Key findings include:
Through the construction period, the project is expected to contribute $164.9 million at the federal level, and $56.4 million in state and local tax revenues (excluding property taxes).
When completed and operational, the combined program is expected to generate $3.4 million per year in state and local taxes (excluding property taxes), while generating $9.6 million in federal taxes.
Sales taxes represent the largest source of state and local revenue, with close to $38.0 million in sales taxes during construction and an additional $4.7 million per year going forward.
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Exhibit 22. Summary of Anticipated One-Time Tax Revenues Associated with Construction (2023 $)
Note: Excludes Property Taxes Source: Johnson Economics, Minnesota IMPlan Group, based on assumed future development forecasts
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Exhibit 23. Summary of Anticipated Ongoing Tax Revenues, Excluding Property Taxes (2023 $)
Note: Excludes Property Taxes Source: Johnson Economics, Minnesota IMPlan Group, based on assumed future development forecasts
Affordable and Low-Income Housing
The TIA is not anticipated to have a substantial negative impact on affordable and low-income housing in the region and is more likely to increase affordability through the expansion of residential
opportunities. The TIA may have minor impacts on housing affordability due to indirect impacts on
housing affordability associated with economic activity generated within the TIA.
Housing Construction in the TIA
There are a number of existing affordable housing complexes within and around the TIA (Traditions,
Senior City, Uptown Square).
Income restricted affordable housing units are required to make up 4% of the total units within any
new housing project with 25 units or more. The City of Federal Way’s development regulations
requiring mixed-income housing projects through the affordable housing regulations ensure long-term production of income restricted units.
The Sound Transit surplus property within the TIA is subject to Washington State Statute RCW 81.112.350, requiring the agency to offer 80 percent of its surplus property that is suitable for housing
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to qualified entities to develop housing affordable to families at 80 percent of area median income or less.
New construction within the TIA is expected to primarily consist of residential developments, as well
as some commercial development. Our land use modeling indicates that residential uses currently
represent the highest and best use for most parcels in the TIA, and the office market is expected to
remain challenging for the next decade. As a result, most of the projected development activity is
expected to be primarily residential with some ground floor commercial uses, as well as
redevelopment and/or reconfiguration of retail space.
While the new projects are expected to provide largely market rate units with relatively high rent
levels, the market-rate construction within the TIA can still help to improve housing affordability in the
region. Housing prices are determined based on the factors of supply and demand. Thus, any new
construction of housing units in the region that increases housing supply should reduce price
pressure in the local housing market. Indeed, most housing economists identify a persistent lack of
new construction in past years for the rapid increases in home values in recent years.
The process by which construction of new market-rate homes helps to improve housing affordability
is known as “filtering.” Construction of a new market-rate home allows a household to move out of a
lower-quality, existing home to purchase the new home. The previous home occupied by that
household is now vacant, and available to another household at a lower price than the new home.
Thus, constructing new homes at virtually any price point should ultimately improve the availability of
homes at all income levels.
Impacts on Housing Affordability from Economic Activity
Evaluations of housing affordability often focus on the cost of housing, but affordability is defined as
the ability of someone to pay for a good or service. Thus, this evaluation of housing affordability also
considers household incomes. Increases in household income will increase the ability of households to pay for housing, thus increasing housing affordability. The economic impacts generated by the new development anticipated within the TIA are expected to support marginal increases in local household incomes, helping to support regional housing affordability.
The City of Federal Way is a relatively well-balanced community in terms of jobs and housing, although the workforce commuting outside of the City for employment exceeds those commuting in by almost 12,000. An estimated 26,490 workers were estimated to commute into the City for employment in 2020, while 38,201 commuted to jobs outside of the community. These commuting patterns are shown in Exhibit 24.
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Exhibit 24. Estimated Workers Commuting Into and Out of the City of Federal Way, 2020
Source: US Census Bureau, LEHD Database
Federal Way residents who commute out of the City of employment are largely employed in Seattle (21.9%) to the north, as well as Tacoma (7.5%) and Kent (7.4%). Developing additional residential
capacity near the new transit infrastructure should reduce commuting costs for local residents, which
can have a substantive financial impact. Exhibit 25 shows the locations of employment for Federal
Way residents.
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Exhibit 25. Location of Employment for Federal Way Residents, 2020
Source: US Census Bureau, LEHD Database
Local Business Community
To be completed - This section will be filled in after the City has completed community outreach and conducted interviews with representatives of local businesses.
This section will summarize key points from those interviews. Full notes from interviews with business representatives to be included as an appendix to the report.
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Local School District
As stated earlier in this report, the property tax levies for Federal Way Public Schools and the State Schools fund would not be included in the calculation of tax allocation revenues, and therefore would
not experience any foregone revenues from the TIA. Private development anticipated to occur as a
result of public improvements within the proposed TIA would generate increased property tax
revenues for state school funding reduce the levy rate for local school levies. Exhibit 26 shows the
forecasts of the future property tax revenues that could be generated for state levies over the 25-year
duration of the proposed TIA. Development within the proposed TIA would be estimated to generate
$49.0 million in property tax revenues for State school funding over the 25-year forecast period.
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Exhibit 26. Property Tax Revenues for State Schools, Proposed Federal Way TIA (Nominal $)
Source: Tiberius Solutions
Development within the proposed TIA would be estimated to generate additional assessed value for local school funding over the 25-year forecast period. This assessed value would not result in a net
increase in total tax revenue for the local school district, but rather would reduce the levy rate that the
school district imposes to produce the approved annual levy amounts for debt service and
enrichment.
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Local Fire Service
This section can be expanded upon to include a summary of any feedback received directly from the Fire District during the outreach phase of the project.
Exhibit 13 shown earlier in this report summarized the impact from foregone property tax revenue the
proposed TIA is expected to have on each taxing district, including Fire District 39/ South King Fire
and Rescue. These annual impacts would be estimated to begin at $11,000 per year in 2026, increasing over time to $2,590,000 in 2049, the final year of the proposed TIA. Cumulatively, it is estimated Fire District 39/South King Fire and Rescue would forego $25.0 million of property tax revenue over the 25-year life of the TIA, or an average of $1.0 million per year. The TIA would not impact the district’s other two levies: the Maintenance & Operations and GO Bond levies.
RCW requires any TIA to include a mitigation plan if the TIA will impact at least 20 percent of the assessed value of an impacted fire district. South King Fire and Rescue provides service within the proposed TIA boundary and would be the only fire service provider impacted by the proposed TIA. The total assessed value of the South King Fire and Rescue is $28.7 billion in 2023, and is forecast to grow to $126.7 billion by 2049. Increment value for the proposed TIA would be $0 in 2024 and is forecast to grow gradually over time to nearly $6.1 billion in 2049. Thus, the proposed TIA increment value is estimated to be less than 6% of the total assessed value for South King Fire and Rescue in each year of the proposed TIA, and therefore would not require a mitigation plan. The ratio of increment value to total value for South King Fire and Rescue is shown in Exhibit 27.
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Exhibit 27. Forecast Proposed Federal Way TIA Increment Value as a Share of South King Fire and Rescue Total Assessed Value (Tax Year 2023 to 2049).
. Source: Tiberius Solutions
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Evaluation of Risk Factors
Certain statements contained in this document reflect not historical facts but forecasts and forward-
looking statements. All projections, forecasts, assumptions, and other forward-looking statements are
expressly qualified in their entirety by the cautionary statements set forth in this report. All forward-looking statements are inherently subject to a variety of risks and uncertainties that could cause actual results or performance to differ materially from those that have been projected. Such risks and uncertainties include, among others, changes in regional, domestic, and international political, social, and economic conditions; federal, state, and local statutory and regulatory initiatives; litigation, population changes; technological change; and various other events, conditions, and circumstances, many of which are beyond the control of the City.
General Economic Conditions
The City monitors economic changes in the region and on the national landscape. The City has seen
reduced single-family residential permits issued in 2022 when compared to the previous two years.
Current land use applications are up for commercial retail projects. Many businesses continue to struggle to fill job openings and supply chain issues have caused inflationary pressures on residents and the City. The City has seen increased costs for public works construction projects, basic services and supplies that support the public services provided to Federal Way residents.
Historical Sales Tax has trended positively. Factors such as inflation, growth of the underlying retail base and economic uncertainty all contribute to a climate suggesting caution. That said, 2023 YTD Sales Tax is trending 14% over prior year. A cautious 5% increase in future years has been budgeted, which would yield the following City-provided forecast for budgetary purposes in the 2023-24 biennium and following year.
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Historical assessed value of property citywide has trended positively since 2013, as shown in the following graph.
Due to the 1% cap on property tax levy for existing property, the increase in the City’s annual levy has of course not kept pace with the increase in assessed value.
The actual historical trend in Property Tax Rate has resulted in a decrease which creates a theoretical
capacity for voted lid lift. The General Fund levy maximum of $3.60 per $1,000 of assessed value is
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reduced by $1.50 for the levy rate available for the overlapping fire district and $0.50 for the overlapping library district, leaving a practical cap of $1.60 available to the City.
The City Finance Department embarked on creating an investment portfolio of Treasuries and
uncallable Agencies for a substantial portion of City reserves. By evaluating historical and forecasted
cashflow needs, the finance staff commenced investing $55 million in $1M increments, maturing $1M monthly. Historically, the City’s cash was invested exclusively in the State Treasurer’s Local Government Investment Pool, which has an average maturity cap of 60 days. The City’s laddered investment portfolio purchased longer maturities, up to 48 months, allowing investing farther up the yield curve than the State Pool is able to. This, coupled with the recent rise in underlying investment rates, has created a substantial, predictable and budgetable income stream to the City’s General Fund.
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Future Assessed Values and Tax Rates
This report forecasts future property tax allocation revenues based on the assumed timing and value
of new construction in the proposed TIA, future appreciation of those properties once they have been
constructed, and future changes in property tax rates applicable to the calculation of tax allocation revenues. All of these factors are subject to uncertainty, and future tax allocation revenues could be higher or lower than forecast in this report. Factors that could result in lower collections of tax allocation revenues include:
Delays in construction of private projects in the proposed TIA. The proposed TIA is limited to 25 years of tax allocation revenue collection. Any delay in private construction would reduce the total amount of tax allocation revenues collected during the 25-year duration.
Lower than anticipated valuation of private projects in the proposed TIA. This report estimates the value of new construction based on assumed construction costs. The King County Assessor would ultimately determine the value of new construction, in part, based on the net operating income of the properties at stabilization. It is likely that the Assessor would determine the market value of improvements in the proposed TIA would exceed their construction costs, but the actual determination of value depends on market conditions at the time the new construction is added to the tax roll. If the Assessor values new construction in the proposed TIA at less than the amounts assumed in this report, it would reduce the total amount of tax allocation revenues collected during the 25-year duration.
Lower appreciation of property values for properties inside the proposed TIA than countywide. The rate of appreciation of property values countywide determines annual changes in applicable tax rates. This report assumes property values inside the proposed TIA
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would appreciate at the same rate as properties countywide. If properties in the proposed TIA appreciate at a faster rate than countywide, it would increase the total amount of tax
allocation revenues collected during the 25-year duration. However, if properties in the
proposed TIA appreciate more slowly than properties countywide, it would reduce the total
amount of tax allocation revenues collected during the 25-year duration.
Future Public Costs of Construction and/or Borrowing
This report estimates the future timing and value of construction of public projects partially or fully funded by the proposed TIA. The actual timing and cost of these projects is uncertain and could be
affected by factors outside of the City’s control. The terms of future indebtedness are also uncertain.
Changes in interest rate, amortization period, and other factors could result in a total cost of
borrowing that exceeds the assumptions used in this report. Borrowing assumptions in this report
were developed with the assistance of the City’s financial advisors and reflect conservative financing
assumptions based on current market conditions.
Ultimately, if public construction costs are higher than anticipated or the cost of borrowing is higher
than anticipated in this report, the City could cover those higher costs by allocating more of its
general tax levy than is forecast in this report. Alternatively, the City could seek other funding sources
or eliminate or redesign elements of the public improvements to reduce the total cost to the City.
Other City Revenues
The City would expect to pay a portion of the costs of the public infrastructure in the proposed TIA with other legally available City revenues. General economic conditions, in addition to conditions
within the proposed TIA could affect taxable sales, real estate transactions, and other taxable events.
The City would be obligated to pay debt service on its limited tax general obligation bonds even if
City revenues are negatively affected by these or other conditions.
Non-Voted Debt Limit
The City’s ability to issue limited tax general obligation bonds is limited by assessed value within the City at the time the bonds are issued. A decline in assessed value in the City, or growth that is slower
than expected, could constrain the City’s non-voted debt capacity and ability to finance proposed TIA
(and other) projects with non-voted debt. If the City is required to fund a greater share of project
costs on a pay-go basis due to debt capacity constraints, the pace of the investment may be slowed
with resulting impacts on private development.
Seismic Activity and Other Natural Disasters
The City can give no assurance regarding the effect of an earthquake, a tsunami from seismic activity in Washington or in other areas, a volcano, mudslide, or other natural disaster, or that surrounding
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facilities and infrastructure could or would be rebuilt and reopened in a timely manner following a major earthquake or other natural disaster.
Initiatives and Referenda
In recent years, there have been a number of initiatives filed in the State, including initiatives targeting fees and taxes imposed by local governments or subjecting local governments to additional
requirements. The City cannot predict whether this trend will continue, whether any filed initiatives will
receive the requisite signatures to be certified for the ballot, whether such initiatives will be approved
by the voters, whether, if challenged, such initiatives will be upheld by the courts and whether any
current or future initiative could have a material adverse impact on the City’s finances or operations.
City of Federal Way’s Approach to Financial
Uncertainty
The City has considered all of the issues identified above. The City intends to secure the debt with a
pledge of both tax allocation revenues and the City’s general tax levy. Some of the potential risk
factors could be addressed by delaying the timing of the proposed indebtedness or reducing the list of projects to be funded by the indebtedness. The City anticipates incurring the initial indebtedness in 2024 or 2025 when multiple private development projects within the proposed TIA should be under construction. If those private construction efforts are delayed or substantially reduced in value, the City could choose to alter their approach to the planned indebtedness. The City has considered, and will continue to consider alternative financing structures that may be employed to address any of the risk factors identified in this report.
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Appendix A: Tax lots included in the
Proposed Federal Way TIA Boundary
Property Identification
Number
Levy
Code
Total Appraised
Value
Total Taxable
Value Zone Acres
921049057 1202 $0 $0 City Center Core 0.5
921049111 1202 $806,900 $806,900 City Center Frame 0.7
921049137 1202 $19,302,900 $19,302,900 City Center Core 4.6
921049019 1202 $1,420,500 $1,420,500 City Center Frame 0.6
921049020 1202 $1,344,000 $1,344,000 City Center Core 0.4
921049030 1202 $2,305,100 $2,305,100 City Center Core 1.9
921049035 1202 $2,674,300 $2,674,300 City Center Core 2.4
7978200525 1205 $6,308,600 $0 City Center Core 4.4
7978200526 1205 $0 $0 City Center Core 11.5
921049163 1202 $1,597,700 $1,597,700 City Center Frame 1.3
921049172 1202 $3,242,200 $3,242,200 City Center Core 1.5
921049270 1202 $2,119,300 $2,119,300 City Center Core 0.9
921049271 1202 $1,722,700 $1,722,700 City Center Core 0.5
921049276 1202 $2,932,100 $2,932,100 City Center Core 1.9
921049280 1202 $0 $0 City Center Frame 0.8
921049296 1202 $749,000 $749,000 City Center Core 0.4
921049302 1202 $13,626,800 $13,626,800 City Center Frame 7.0
1621049023 1205 $3,689,500 $3,689,500 Commercial 6.5
1621049028 1205 $7,404,700 $7,404,700 City Center Core 2.0
1621049037 1205 $41,375,000 $41,375,000 Commercial 62.2
1621049039 1205 $0 $0 Commercial 2.2
2423200010 1202 $0 $0 City Center Core 0.1
2423200020 1202 $0 $0 City Center Core 0.5
2423200030 1202 $0 $0 City Center Core 0.4
2423200040 1202 $0 $0 City Center Core 0.8
2423200050 1202 $0 $0 City Center Core 7.5
2423200055 1202 $0 $0 City Center Core 0.5
2423200060 1202 $0 $0 City Center Core 0.9
2423200070 1202 $0 $0 City Center Core 0.5
7622400011 1202 $1,761,300 $1,761,300 City Center Core 1.5
7622400025 1202 $2,164,700 $2,164,700 City Center Core 1.8
7622400010 1202 $33,573,000 $33,573,000 City Center Core 31.7
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Property Identification Number Levy Code
Total Appraised Value Total Taxable Value Zone Acres
7622400020 1205 $84,400 $84,400 City Center Core 0.9
921049299 1202 $5,452,800 $250,900 City Center Core 0.7
921049053 1202 $11,543,100 $11,543,100 City Center Frame 8.8
921049021 1202 $0 $0 City Center Core 3.9
921049297 1202 $23,856,200 $23,856,200 City Center Core 6.0
8575000010 1202 $0 $0 City Center Frame 3.1
8575000020 1202 $0 $0 City Center Frame 1.8
921049017 1202 $0 $0 City Center Frame 5.6
921049042 1202 $488,900 $0 City Center Core 0.8
921049321 1202 $1,374,300 $0 City Center Core 2.2
921049337 1202 $0 $0 City Center Core 1.0
921049027 1202 $1,617,100 $0 City Center Core 1.3
921049298 1202 $0 $0 City Center Core 4.8
7622400019 1202 $10,732,900 $10,732,900 City Center Core 10.4
8665030000 1202 $5,623,600 $0 City Center Core 1.7
921049304 1202 $5,523,700 $5,523,700 City Center Core 1.5
Total $216,417,300 $195,802,900 215.0
Source: Tiberius Solutions with data provided by the King County Assessor’s Office
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Appendix B: Summary of Public
Outreach
To be completed - Summary of all public outreach conducted for the project and feedback received.
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Appendix C: Alternate Scenario
To be completed - The City will evaluate a more conservative financial scenario, in terms of the financing terms for indebtedness incurred. This alternative scenario is intended to inform the City of the potential impact on tax allocation revenues and the City’s general fund resources, if conditions are less favorable than anticipated.
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