Tax exemption could spur downtown development

By Stefanie Donahue

The city is considering a new property tax exemption to help spur multi-family residential development in the downtown core.

“The multi-family tax exemption is something that’s newly available to us here in Whatcom County due to some changes in state law,” said city manager Michael Jones in a presentation to the Port of Bellingham board of commissioners on November 20. The Port of Bellingham retains a portion of the property taxes collected by the city. “It allows cities to designate target areas where they wish to incentivize multi-family residential development.”

Per Washington state law (RCW 84.14), certain cities can lift the requirement for property owners to pay property taxes on the added value of a multi-family residential development for up to 12 years within a targeted area.

Jones said the city of Blaine intends to target an area within the Central Business District (CBD), which encompasses downtown, residential areas and the harbor. There are several undeveloped and underdeveloped properties in that area, particularly on the west side of Peace Portal Drive.

“We’re interested in stimulating multi-family housing [development] because having people living in downtown is integral to having a dynamic and active downtown which supports the businesses and services,” Jones said.

If approved by Blaine City Council, the tax exemption would allow for an eight-year exemption for multi-family development or a twelve-year exemption for multi-family development that includes an affordable housing component within the targeted area.

After the tax exemption expires, property owners would be required to pay regular property taxes.

Jones said that while the multi-family tax exemption would result in slower property tax revenue growth for the city and other taxing districts such as the Port of Bellingham and fire district 21, it would generate more revenue in the long run.

“It’s not giving people a tax break,” he said. “It’s a tax exemption for something that hasn’t been built yet.”

City administrators are developing a proposal for Blaine City Council to consider early next year. Jones said he’d like to have it up and running by the middle of 2019.