ORD 23-969 - Modifying MDU Limited Property Tax Exemption ProgramORDINANCE NO.23-969
AN ORDINANCE of the City of Federal Way, Washington, relating to
modifying the City's multifamily dwelling unit limited property tax
exemption program; amending FWRC 3.30.010, 3.30.040, 3.30.050,
and 3.30.060 (Amending Ordinance Nos. 03-438, 09-606 and 23-964).
WHEREAS, in 1995 the Washington State Legislature adopted Chapter 84.14 RCW, to
encourage increased residential opportunities in cities required to plan under the Growth
Management Act, by providing for special property tax valuations for eligible multifamily housing
in targeted urban, residential areas; and
WHEREAS, Chapter 84.14 further authorizes cities with a population of at least fifty
thousand to adopt procedures to implement the special property tax valuations; and
WHEREAS, in 1998 the Federal Way City Council adopted the Federal Way
Comprehensive Plan, to implement the planning requirements of the Growth Management Act,
Chapter 36.70A RCW ("GMA"); and
WHEREAS, in 2022, the City hired Heartland, LLC to look at measures the City could
take to improve housing production in the City; and
WHEREAS, in 2023, Heartland, LLC recommended nine actions for the City to take to
improve housing production in the City; and
WHEREAS, in 2023 the Federal Way City Council adopted Ordinance 23-964, expanding
the residential targeted area to include the Community Business (BC) zone; and
WHEREAS, public comment received during the review of Ordinance 23-964 requested
the City to look at the provisions of FWRC 3.30.060 specifically as to the timing for when an
application to the City must be made; and
Ordinance No. 23-969 Page I of 8
WHEREAS, the BC zone is described in the City's Comprehensive Plan as "allowing a
broad mix of uses, including general, specialty, and service retail; commercial; office;
commercial/residential mixed -use; and supportive uses"; and
WHEREAS, the Council desires to expand the flexibility and usefulness of the City's
MFTE program by allowing an application deadline later in the permitting and construction
process.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF FEDERAL WAY,
WASHINGTON, DO ORDAIN AS FOLLOWS:
Section 1. FWRC 3.30.010 is hereby amended to read as follows:
3.30.010 Purpose.
As provided for in Chapter 84.14 RCW, the purpose of this article is to provide limited,
exemptions from ad valorem property taxation for qualified new multifamily housing constructed
in the community business, city center core and frame zones, in order to:
(1) Accomplish the planning goals of the Growth Management Act, Chapter 36.70A RCW, and
the City of Federal Way Comprehensive Plan,, sFeeifi^41), Goals GGP 9 and 10; and/or
(2) Encourage residential opportunities, including affordable housing, within the community
business, city center core and frame; and/or
(3) Stimulate new construction of multifamily housing in the community business, city center core
and frame to increase housing opportunities; and/or
(4) Assist in directing future population growth into the community business, city center core and
frame, thereby reducing development pressures on single-family residential neighborhoods; and/or
(5) Achieve development densities that are more conducive to transit use in the community
business, city center core and frame; and/or
Ordinance No. 23-969 Page 2 of 8
(6) Promote community development and community business, city center core and frame
revitalization, in fulfillment of the Comprehensive Plan.
(Ord. No. 09-606, § 1, 3-17-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-230.)
Section 2. FWRC 3.30.040 is hereby amended to read as follows:
3.30.040 Tax exemption — Duration — Valuation — Exceptions.
(1) Exemption, duration of. The value of new housing construction, conversion, and rehabilitation
improvements qualifying under this chapter is exempt from ad valorem property taxation, as
follows:
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(b) For properties for which applications for certificates of tax exemption eligibility are submitted
under Chapter 84.14 RCWan oraRer- j ly 22 , the value is exempt:
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(1) For eight successive years beginning January 1 st of the year immediately following the calendar
year of issuance of the certificate; or
(ii) For 12 successive years beginning January 1 st of the year immediately following the calendar
year of issuance of the certificate, if the property otherwise qualifies for the exemption under this
chapter and meets the conditions in this subsection. For the property to qualify for the 12-year
exemption under this subsection, the applicant must commit to renting or selling at least 20 percent
of the multifamily housing units as affordable housing units to low and moderate -income
households, and the property must satisfy that commitment and any additional affordability and
income eligibility conditions adopted by the local government under this chapter. In the case of
Ordinance No. 23-969 Page 3 of 8
projects intended exclusively for owner occupancy, the minimum requirement of this subsection
may be satisfied solely through housing affordable to moderate -income households.
(2) Limits on exemption. The exemption does not apply to the value of land or to the value of
nonhousing improvements not qualifying under FWRC 3.30.050, nor does the exemption apply to
increases in assessed valuation of land and nonqualifying improvements. This article also does not
apply to increases in assessed valuation made by the assessor on nonqualifying portions of building
and value of land, nor to increases made by lawful order of a county board of equalization, the
Department of Revenue, or a county, to a class of property throughout the county or specific area
of the county to achieve the uniformity of assessment or appraisal required by law.
(Ord. No. 09-606, § 1, 3-17-09; Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-233.)
Section 3. FWRC 3.30.050 is hereby amended to read as follows:
3.30.050 Project eligibility.
To qualify for exemption from property taxation under this chapter, the property must satisfy all
of the following requirements:
(1) The property must be located in the designated residential targeted area.
(2) The project must consist of at least four dwelling units of multifamily housing, located within
a residential structure or a mixed -use development, in which at least 50 percent of the space within
such residential structure or mixed -use development is intended for permanent residential
occupancy.
(3) The project must comply with all zoning requirements, land use regulations, and building code
requirements contained in the Federal Way Revised Code and applicable upon land use permit
approval or submittal of a complete building permit application, whichever occurs sooner.
Ordinance No. 23-969 Page 4 of 8
(4) For the duration of the exemption granted under this chapter, the property shall have no
violations of applicable zoning requirements, land use regulations, or building code requirements
contained in the Federal Way Revised Code for which the community development serviees
department shall have issued an order to cease activity ("OTC") or notice of violation and order to
correct ("NOV") that are not resolved by a voluntary correction agreement, vacation by the hearing
examiner, or action of the property owner in compliance with the applicable code requirements as
determined by the director, within the time period for compliance provided in such OTC or NOV
and any extension of the time period for compliance granted by the director.
(5) New construction multifamily housing must be completed within three years from the date of
approval of the application or by any extended deadline granted by the director pursuant to FWRC
3.30.090.
(6) Prior to issuance of a temporary certificate of occupancy, or a permanent certificate of
occupancy if no temporary certificate is issued, tT-he owner must enter into a contract with the city,
approved by the city council, under which the owner has agreed to the implementation of the
development on terms and conditions satisfactory to the city council.
(Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-234.)
Section 4. FWRC 3.30.060 is hereby amended to read as follows:
3.30.060 Application procedure.
The owner of property applying for exemption under this chapter shall submit an application to
the director on a form established by the director. The owner shall verify the correctness of the
information contained in the application by his/her signature and affirmation made under penalty
of perjury under the laws of the state of Washington. The application shall contain such
information as the director may deem necessary or useful, which at a minimum shall include:
Ordinance No. 23-969 Page 5 of 8
(1) A completed city of Federal Way application form, including information setting forth the
grounds for tax exemption;
(2) A brief written description of the project, and schematic site and floor plans of the multifamily
units and the structure(s) in which they are proposed to be located;
(3) Floor and site plans of the proposed project, which plans may be revised by the owner provided
such revisions are made prior to the city's final action on the exemption application;
(4) A statement from the owner acknowledging the potential tax liability when the property ceases
to be eligible for exemption under this chapter;
(5) At the time of initial application under this section, the owner shall pay to the city an initial
application fee of $150.00, plus an amount necessary to cover recording fees under FWRC
3.30.100;
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application may be submitted at any time prior to issuance of a temporary certificate of occu anc .
or a permanent certificate ofoceupancy if no temporary certificate is issued.
(Ord. No. 03-438, § 2, 2-18-03. Code 2001 § 14-235.)
Section 5. SeverabilitY. The provisions of this ordinance are declared separate and
severable. The invalidity of any clause, sentence, paragraph, subdivision, section, or portion of this
ordinance, or the invalidity of the application thereof to any person or circumstance, shall not affect
Ordinance No. 23-969 Page 6 of S
the validity of the remainder of the ordinance, or the validity of its application to any other persons
or circumstances.
Section 6. Corrections. The City Clerk and the codifiers of this ordinance are authorized
to make necessary corrections to this ordinance including, but not limited to, the correction of
scrivener/clerical errors, references, ordinance numbering, section/subsection numbers and any
references thereto.
Section 7. Ratification. Any act consistent with the authority and prior to the effective date
of this ordinance is hereby ratified and affirmed.
Section 8. Effective Date. This ordinance shall be effective thirty (30) days after passage
and publication as provided by law.
PASSED by the City Council of the City of Federal Way this 19th day of September, 2023.
[signatures to follow]
Ordinance No. 23-969 Page 7 of 8
CITY OF FEDERAL WAY:
ATTEST:
*D6� ou�
S 'P -IANIE COURTNFO. CMC, CITY CLERK
APPROVED AS TO FORM:
J. RYAN CALL, CITY ATTORNEY
FILED WITH THE CITY CLERK: 08/30/2023
PASSED BY THE CITY COUNCIL: 09/19/2023
PUBLISHED: 09/22/2023
EFFECTIVE DATE: 10/22/2023
ORDINANCE NO.: 23-969
Ordinance No. 23-969 Page 8 of 8