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A. Intent. Limited eight- or 12-year exemptions from ad valorem property taxation for residential targeted areas are intended to:

1. Encourage additional housing, all types, including permanently affordable housing opportunities, market rate workforce housing, and market rate housing within areas of the City designated by the City Council as residential target areas;

2. Achieve development densities which are more conducive to transit use within areas of the City designated by the City Council as residential target areas;

3. Promote economic investment and recovery and create family-wage jobs; and

4. Stimulate new construction or rehabilitation of existing vacant and underutilized buildings for multifamily housing in residential target areas to increase and improve housing opportunities.

B. Duration of Exemption. The value of improvements qualifying under this chapter will be exempt from ad valorem property taxation for eight or 12 successive years (depending on whether or not the property includes an affordable housing component as described in subsections E and F of this section) beginning January 1st of the year immediately following the calendar year of issuance of the final certificate of tax exemption.

C. Limits on Exemption. The exemption does not apply to the value of land or to the value of improvements not qualifying under this chapter, nor does the exemption apply to increases in assessed valuation of land and non-qualifying improvements. In the case of rehabilitation of existing buildings, the exemption does not include the value of improvements constructed prior to submission of the completed application required under this chapter.

D. Rehabilitation Provisions. Per RCW 84.14.030, property proposed to be rehabilitated must fail to comply with one or more standards of the applicable state or local building or housing codes on or after July 23, 1995.

E. Eight-Year Exemption Project Eligibility. A proposed project must meet the following requirements for consideration for a property tax exemption:

1. Location. The project must be located within a residential target area, as designated in LMC 3.64.030(C).

2. Size. The project must include at least 15 units of multifamily housing within a residential structure or as part of a mixed-use development. A minimum of 15 new units must be constructed or at least 15 additional multifamily units must be added to existing occupied multifamily housing. Existing multifamily housing that has been vacant for 12 months or more does not have to provide additional units so long as the project provides at least 15 units of new, converted, or rehabilitated multifamily housing.

3. Property tax exemptions for accessory dwelling units (ADUs) are not permitted under this chapter.

4. Permanent Residential Occupancy. At least 50 percent of the space designated for multifamily housing must be provided for permanent residential occupancy, as defined in LMC 3.64.010.

5. Proposed Completion Date. New construction multifamily housing and rehabilitation improvements must be scheduled to be completed within three years from the date of approval of the application.

6. Compliance with Guidelines and Standards. The project must be designed to comply with the City’s comprehensive plan, building, housing, and zoning codes, and any other applicable regulations in effect at the time the application is approved. Rehabilitation and conversion improvements, and new construction, must comply with Chapter 15.05 LMC. The project must also comply with any other standards and guidelines adopted by the City Council for the residential target area (RTA) in which the project will be developed.

7. Vacancy Requirement. Existing dwelling units proposed for rehabilitation must have one or more violations of Chapter 15.05 or 15.25 LMC. If the property proposed to be rehabilitated is not vacant or, in the case of applications for property to be developed as new construction which currently has a residential rental structure on it, an applicant must provide each existing household a 120-calendar-day move notice as well as provide housing of comparable size, quality, and price which meets standards acceptable to the City. If any household being provided a 120-calendar-day move notice is qualified as a low-income household, the applicant will provide the household with moving expenses according to the current Department of Transportation Fixed Residential Moving Costs Schedule.

F. Twelve-Year Exemption Requirements. A proposed project must meet the following requirements for consideration for a 12-year property tax exemption:

1. All requirements set forth in subsection E of this section; and

2. 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 respectively, and the property must satisfy that commitment and any additional affordability and income eligibility conditions adopted by the City of Lakewood. In the case of projects intended exclusively for owner occupancy, the minimum requirement of this subsection may be satisfied solely through housing affordable to moderate-income households.

G. Extension for Projects Receiving an Initial Eight-Year or 12-Year Exemption. Any project in the Lakewood Station District and Springbrook Residential Target Areas receiving an eight- or 12-year extension may apply for a subsequent 12-year extension in exchange for continued or increased income restrictions on affordable units; and

1. Application must be received within 18 months of expiration of current exemption;

2. At least 20 percent of the housing must be occupied by households earning no more that 70 percent of the Pierce County family median income;

3. Conversion from market rate to affordable units must comply with the procedures outlined in the City’s policies and procedures;

4. Applicants must provide notice to tenants in rent-restricted units at the end of the tenth and eleventh years of the continued 12-year exemption that the exemption will expire and the landlord will provide relocation assistance;

5. Landlords must provide one month’s rent as relocation assistance to a qualified tenant in their final month when affordability requirements no longer apply, even when the affordable rent period extends beyond the expiration of the tax exemption;

6. New extensions are not permitted on or after January 1, 2046.

Any project in the Downtown Residential Target Areas receiving an eight- or 12-year extension is prohibited from making an application for a 12-year extension.

H. Application Procedure. A property owner who wishes to propose a project for a tax exemption shall complete the following procedures:

1. File with the Community and Economic Development Department the required application along with the required fees as set in the Lakewood Master Fee Schedule (adopted annually by resolution). If the application shall result in a denial by the City, the City will retain that portion of the fee attributable to its own administrative costs and refund the balance to the applicant.

2. A complete application shall include:

a. A completed City of Lakewood application setting forth the grounds for the exemption;

b. Preliminary floor and site plans of the proposed project;

c. A statement acknowledging the potential tax liability when the project ceases to be eligible under this chapter;

d. For rehabilitation projects and for new development on property upon which an occupied residential rental structure previously stood, the applicant shall also submit an affidavit stating that each existing household was sent a 120-calendar-day move notice and that each household was provided housing of comparable size, quality, and price acceptable to the City;

e. For any household being provided a 120-calendar-day move notice that qualifies as a low-income household, the applicant will also submit an affidavit stating that moving expenses have been or will be provided according to the current Department of Transportation Fixed Residential Moving Costs Schedule;

f. In addition, for rehabilitation projects, the applicant shall secure from the City verification of the property’s noncompliance with Chapter 15.05 LMC;

g. Verification by oath or affirmation of the information submitted.

I. Application Review and Issuance of Conditional Certificate. The Director may certify as eligible an application which is determined to comply with the requirements of this chapter. A decision to approve or deny an application shall be made within 90 calendar days of receipt of a complete application.

1. Approval. If an application is approved, the applicant shall enter into a contract with the City, subject to approval by resolution of the City Council regarding the terms and conditions of the project. Such contract shall require the applicant to comply with LMC Title 8 for the property at issue. Upon Council approval of the contract, the Director shall issue a conditional certificate of acceptance of tax exemption. The conditional certificate expires three years from the date of approval unless an extension is granted as provided in this chapter.

2. Denial. The Director shall state in writing the reasons for denial and shall send notice to the applicant at the applicant’s last known address within 10 calendar days of the denial. An applicant may appeal a denial to the City Council within 14 calendar days of receipt of notice. On appeal, the Director’s decision will be upheld unless the applicant can show that there is no substantial evidence on the record to support the Director’s decision. The City Council’s decision on appeal will be final.

J. Extension of Conditional Certificate. The Conditional Certificate may be extended by the Director for a period not to exceed 24 consecutive months. The applicant must submit a written request stating the grounds for the extension, accompanied by a processing fee, the amount of which is listed in the City’s Master Fee Schedule. An extension may be granted if the Director determines that:

1. The anticipated failure to complete construction or rehabilitation within the required time period is due to circumstances beyond the control of the owner;

2. The owner has been acting and could reasonably be expected to continue to act in good faith and with due diligence; and

3. All the conditions of the original contract between the applicant and the City will be satisfied upon completion of the project.

K. Application for Final Certificate. Upon completion of the improvements agreed upon in the contract between the applicant and the City and upon issuance of a temporary or permanent certificate of occupancy, the applicant may request a final certificate of tax exemption. The applicant must file with the Community and Economic Development Department the following:

1. The total number and type of units produced;

2. The number, size, and type of units produced meeting affordable housing requirements;

3. The development cost of each unit produced;

4. The total monthly rent or total sale amount of each unit produced, affordable and market rent;

5. The annual income and household size of each renter household for each of the affordable units; and

6. A statement that the work was completed within the required three-year period or any authorized extension.

Within 30 calendar days of receipt of all materials required for a final certificate, the Director shall determine which specific improvements satisfy the requirements of this chapter.

L. Issuance of Final Certificate. If the Director determines that the project has been completed in accordance with the contract between the applicant and the City and has been completed within the authorized time period, the City shall, within 10 calendar days, file a final certificate of tax exemption with the Pierce County Assessor.

1. Denial and Appeal. The Director shall notify the applicant in writing that a final certificate will not be filed if the Director determines that:

a. The improvements were not completed within the authenticated time period;

b. The improvements were not completed in accordance with the contract between the applicant and the City; or

c. The owner’s property is otherwise not qualified under this chapter.

2. Within 10 calendar days of receipt of the Director’s denial of a final certificate, the applicant may file an appeal with the City’s Hearing Examiner, as provided in Chapter 1.36 LMC. The applicant may appeal the Hearing Examiner’s decision in Pierce County Superior Court under RCW 34.05.510 through 34.05.598, if the appeal is filed within 30 calendar days of notification by the City to the owner of the decision being challenged.

M. Annual Compliance Review. Annually, when requested by the Community and Economic Development Department, for a period of eight, 12, or 20 years, the property owner shall file a notarized declaration with the Director indicating the following:

1. The number, size, and type of each unit, market rate and affordable;

2. The total monthly rent each unit, affordable and market rent; and

3. A description of any subsequent improvements or changes to the property.

The City shall also conduct on-site verification of the declaration. Failure to submit the annual declaration may result in the tax exemption being canceled.

N. Cancellation of Tax Exemption. If the Director determines the owner is not complying with the terms of the contract, the tax exemption will be canceled. This cancellation may occur in conjunction with the annual review or at any other time when noncompliance has been determined. If the owner intends to convert the multifamily housing to another use, the owner must notify the Director and the Pierce County Assessor within 60 days of the change in use.

1. Effect of Cancellation. If a tax exemption is canceled due to a change in use or other noncompliance, the Pierce County Assessor may impose an additional tax on the property, together with interest and penalty, and a priority lien may be placed on the land, pursuant to state legislative provisions.

2. Notice and Appeal. Upon determining that a tax exemption is to be canceled, the Director shall notify the property owner by certified mail. The property owner may appeal the determination by filing a notice of appeal with the City Clerk within 30 calendar days, specifying the factual and legal basis for the appeal. The Hearing Examiner will conduct a hearing at which all affected parties may be heard and all competent evidence received. The Hearing Examiner will affirm, modify, or repeal the decision to cancel the exemption based on the evidence received. An aggrieved party may appeal the Hearing Examiner’s decision to the Pierce County Superior Court. [Ord. 792 § 1 (Exh. A), 2023; Ord. 738 § 3 (Exh. B), 2020.]