07/19/2023 - PacketCity of Port Orchard
Land Use Committee
July 19, 2023 4:30 pm
Hybrid Meeting
Zoom Webinar Public Link (not to be used by LU Committee):
https://us02web.zoom.us/j/81034433449
Dial -in: 1 253 215 8782
Webinar ID: 810 3443 3449
or
City of Port Orchard Council Chambers located at
216 Prospect Street, 2"d floor or City Hall.
AGENDA
1. Discussion: Perry Ave N
2. Discussion: MFTE
a. Housing Action Plan Recommendations
b. Diaz Meadows MFTE Request
3. Discussion: City Right -of -Way Vacation Request
JOIN US FOR A
FIELD + COMMUNITY MEETIN
FIELD MEETING: WEDNESDAY, JULY 12 AT 10:OOAM
LAND USE MEETING: WEDNESDAY, JULY 19 AT 4:30PM
The City is looking to make roadway
improvements to Perry Ave N including:
• New Signage
As an adjacent property owner, we invite you to share
your thoughts and input on the proposed parking
restrictions marked along Perry Avenue in temporary.,
paint by City Staff.
Remote Access:
Zoom Link: https://us02web.zoom.us/j/81034433449
Zoom Webinar ID: 810 3443 3449
Zoom Call -In: +1 (253) 215-8782
L7
The Land Use Committee is conducting its meeting in the
Council Chambers at City Hall located at 216 Prospect St and
on Zoom.
Members of the public may view and provide public
comment during the meeting in person at City Hall, via the
online platform Zoom, or via telephone.
Port Orchard Housing Action Plan — June 2023 Page 61
5 - Funding Strategies
These actions relate to the financing and funding of affordable housing and related issues like
taxes, fees, and state law.
5.1 - Multifamily Tax Exemption Program
Action: Update the MFTE program based on increased developer interest in
multifamily and mixed -use projects to streamline requirements, balance affordability
and foregone tax revenue, and take advantage of increased flexibility in statewide
legislation.
5.1.1 — MFTE Overview
A multifamily tax exemption (MFTE) program is authorized by a 1995 state law, RCW 84.14.
Cities can grant an 8-year property tax exemption for any multifamily development or a 12-year
exemption for multifamily developments that reserve at least 20 percent of units for low- and
moderate -income households.
The state made several changes to the MFTE program in 2021. The 12-year tax exemption and
affordability covenants can now be renewed for 12 more years if the property owner continues
to provide units affordable to low-income families. Cities may now also offer a 20-year tax
exemption for ownership units if at least 25 percent of these condominium units are sold as
permanently affordable ownership housing.61
A MFTE program can be used for new buildings or existing buildings that require major
rehabilitation. For cities under 20,000 residents, both the 12-year and the 20-year programs
require the development to be in a zone that allows at least 15 dwelling units per acre.
Land, existing site improvements, and non-residential improvements are not exempt and are
subject to normal property taxes. At the local government's discretion, the exemption's basis
may be limited to the value of affordable units or other criteria. The local government has
latitude in many aspects. It can require certain public benefits, change what types of
development apply, and can map specific areas where the exemption is available. Cities can
also set lower maximum rent prices than the statute allows and other lease stipulations such as
requiring the participating units to be pet -friendly.
The MFTE program can have complex fiscal implications due to Washington's "levy lid"
restrictions which limit the rate of increase of total regular property tax revenue to 1 % per year
for communities of 10,000 or more. In theory, the value of the tax exemption granted to
developers would represent foregone revenue for the city. However, the reality is more
complicated. Construction of MFTE projects often takes place over multiple years and county
assessors are required to factor in the portion of new projects which are completed by July 31
each year. However, the tax exemption itself does not take effect until January 1 after the year
in which the project is completed. Theoretically, the assessor should remove the value of the
partially -constructed MFTE properties which were previously added at this point, however, in
61 "Overview of 2021 Changes to the Multifamily Housing Tax Exemption Program." Washington State Department of
Commerce. https://deptofcommerce.box.com/shared/static/7k5p88Vv4lm8ot882gbtzafwzlofkfO5.pdf
Port Orchard Housing Action Plan — June 2023 Page 62
reality this happens inconsistently. As a result, the value of the portion of the property which was
completed in years prior to the final year of construction can result in a "tax shift" where taxes on
that portion of the project's property value are shifted to the citywide tax base if that portion is
not removed from the assessor's table of total taxable property value.62 This complex situation
can obfuscate whether the tax exemption results in foregone revenue to the city or whether it
merely shifts taxes to the citywide tax base. In most cases, both are occurring to some degree.
The Washington Joint Legislative Audit and Review Committee's 2019 audit of the MFTE
program found that they could not determine the amount of local tax savings which was shifted
to other taxpayers as a result of the complex situation around the "levy lid."63
5.1.2 — Port Orchard MFTE Summary
Port Orchard has had an MFTE program in place since 2016, which is codified under Chapter
3.48 POMC, and which provides three types of exemptions. The "Type 1" program is a 12-year
exemption available to properties zoned for multifamily or mixed -use near transit or ferry and
requires 20 percent of units to be rented at affordable rates based on HUDs fair market rent.
The "Type 2" program is an 8-year exemption available to abandoned or underutilized
properties within local centers of importance which are encouraged to redevelop. The "Type 3"
program is an 8-year exemption available to properties within local centers of importance and
zoned for multifamily or mixed -use with requirements for denser, "urban" style development: a
minimum density of 50 units per acre and at least 50 percent structured parking, shopfronts
equal to 40 percent of all building footprints, or additional height purchased through the city's
transfer of development rights program.
A total of four projects totaling 332 units (including 20 affordable units) have been built using
Port Orchard's MFTE program, and four more projects totaling 427 more units (including 45
affordable units) are currently in progress. For a full summary of Port Orchard's MFTE program,
see Section 5 of the Existing Conditions and Housing Needs Analysis Report in the Appendix.
Port Orchard's method of setting subsidized rents in MFTE projects at 10 percent below HUD
fair market rents is unusual, as most jurisdictions in Washington rent subsidized MFTE units to
families earning between 80 and 115 percent of HUD's MFI for their area, and cap the rent at 30
percent of the household's income, adjusted for household size. 64 However, Port Orchard's
system meets legal state requirements and, based on a preliminary analysis, seems to result in
rents which are lower than those based on the larger Bremerton -Silverdale MSA HUD MR.
5.1.2 — Recommendations
Port Orchard has seen an increase in proposed downtown residential -commercial mixed -use
projects in recent years. Since these types of projects would be eligible for MFTE funding, it is
important to revisit and potentially update some aspects of the program to balance the benefit
62 This concept is very complex and more information can be found in Commerce's "What is Tax Shift?" guidesheet
here https://deptofcommerce.app.box.com/s/9ig7p2ebm467ddpmb1c5u3d4ei22cs1n as well as starting on p. 37 of
Commerce's MFTE guidebook here: https://deptofcommerce.app.box.com/s/i'5o8One5e1740mmh6uO5grmkO47g3cw
63 The JLARC audit's findings can be found at: https://leg.wa.gov/'Iarc/taxReports/2019/MFTE/f ii/default.html
64 Following HUD's definition of a "cost -burdened" household
Port Orchard Housing Action Plan — June 2023
and foregone tax revenue of affordable units to ensure the program's goals are being met and
to address recent changes in the program allowed under state law.65
Clarify map and zoning of areas of MFTE eligibility. MFTE projects must be in urban centers
as defined by RCW 84.14.010, which describes compact districts with a variety of shops, a mix
of uses, and public facilities. Port Orchard's municipal code contains maps of parcels eligible for
MFTE funding, but they are difficult to read and are not updated with the latest parcel lines, as
shown below in Error! Reference source not found.. An improved map which shows both the
city's established "centers" and the outline of areas eligible for MFTE development at a larger
scale would streamline the process for potential developers.
r
Figure 23. Maps of parcels currently eligible for the Type 1, Type 2, and Type 3 MFTE programs. Source:
City of Port Orchard Municipal Code
Correct definition of underutilized buildings. POMC 3.48.040(2)(a)(iii) states that
underutilized buildings have an "assessed building value to land ratio of two -to -one or more."
This appears to be backwards, as underutilized buildings are defined by a low building to land -
value ratio. The code should be revised to state "building value to land ratio of two -to -one or
less," or land value to building value ratio of two -to -one or more."
Add minimum density in units per acre to multifamily and mixed -use zones. State law
requires that 12-year and 20-year MFTE programs which contain affordable rental or
homeownership units be located in areas zoned for a minimum average density of 15 units per
acre in cities with populations under 20,000. Port Orchard does not currently define minimum
unit densities in its code, although the allowed zoning in MFTE areas likely meets this threshold
based on allowed height, setbacks, FAR, etc. However, to better comply with state law,
considering quantifying minimum densities in the zoning code for mixed -use and multifamily
zones. See Section 2.3.3 for considerations.
Consider changes to the method of income calculations for affordable units and conduct
an audit of the program. Port Orchard's program is unusual in that it uses HUD fair market
rent to calculate rents for subsidized units. Although the system seems to be working and is
allowed under state law, it may be more complex for developers or property managers who are
accustomed to methods used in most other cities where MFTE programs are tied to the HUD
median family income. If the City wishes to ensure a deeper level of affordability compared to
the MFI, the program could be calibrated to a lower level (such as 60 percent rather than 80
65 A comprehensive list of 2021 legislative changes to the MFTE program can be found here:
https://deptofcommerce.box.com/shared/static/7k5p88Vv4l m8ot882gbtzafwzlofkf05.pdf
Port Orchard Housing Action Plan — June 2023 Page 64
percent MFI). Regardless of the method used, the city should audit the MFTE program annually
to ensure that the cumulative benefit to income -restricted residents is greater than the foregone
revenue from the tax exemption. This audit should be conducted by the Community
Development or Finance department and should result in an annual report presented to city
council. Additionally, consider partnering with Housing Kitsap for MFTE administration and to
reduce city staff's workload when verifying incomes of subsidized unit residents, since housing
authorities have infrastructure and skills in place to conduct such income verifications.
Consider removing transit proximity for affordable units. Port Orchard's Type 1 program
currently requires projects to be within '/z mile of a transit stop or ferry terminal. Although this
provides benefits to lower -income residents who do not own vehicles, the quality and availability
of transit service in Port Orchard is low and is a recent study by WSDOT indicates that transit in
the city is not at the level or frequency which encourages residents to own fewer vehicles.66
It is also not clear that transit proximity has any practical effect, since the maps for the Type 1
and Type 3 programs are nearly identical. Removing this requirement could expand eligible
projects and the distribution of affordable units across the city.
Consider a height bonus for MFTE developments. Currently Port Orchard allows a height
bonus for Type 3 MFTE developments through the Transfer of Development Rights (TDR)
program. Such programs are rarely used. Numerous cities in Washington, including Port
Angeles and Kirkland, allow height bonuses in exchange for the provision of affordable units in
their MFTE programs. Consider adding such a bonus to the MFTE to improve development
feasibility. Such a program could have separate height bonus allowances based on zoning and
MFTE program type. See Strategy 2.3.2 for more details.
Streamline requirements for Type 3 program. The Type 3 program currently has somewhat
stringent requirements to create denser, urban -style buildings through various criteria. Although
the intention to stimulate higher density development in centers is an important component of
the program, recent projects suggest that the share of structured parking, density, and
commercial square footage required may be disincentivizing use. Each of the three
requirements could be streamlined to increase viability of participating in the program:
• The requirement for 50 percent structured parking combined with 50 units per
acre of density may be redundant since the only way to achieve higher densities is by
putting parking into structures. Eliminating the structured parking requirement but
retaining a relatively high -density requirement (40-50 units per acre) would effectively
require that the project either include structured parking or that surface parking ratios are
relatively low.
• Reducing the requirement for 40 percent of all building footprints to contain
commercial use or replacing this requirement with a required minimum percentage of
the frontage being commercial would be appropriate given the exiting amount of
66 "Frequent Transit Service Study." Washington State Department of Transportation.
https://engage.wsdot.wa.gov/frequent-transit-service-study/
Port Orchard Housing Action Plan — June 2023 Page 65
commercial zoning in Port Orchard. The design requirements in the MFTE ordinance
may also be superfluous given the existing block frontage standards in POMC 20.127.
• Finally, an overall height bonus for MFTE developments as discussed above may be
more effective than the TDR height bonus option currently in the Type 3 program.
Reduce minimum number of units required for participation. Port Orchard's program
currently requires a minimum of 10 units in a project to qualify for the MFTE program. State law
only requires a minimum of four units. Updating the Port Orchard program to require a minimum
of four units would bring the program in line with statewide standards as well as potentially
providing added feasibility for smaller "missing middle" housing types.
Consider adding a requirement for affordable units to be distributed within a
development/building. This promotes principles of mixed -income communities and avoids real
or perceived concentrations of pover
Consider adding a 20-year MFTE program. Since 2021, cities under 20,000 residents such as
Port Orchard can add a 20-year ownership MFTE program under RCW 84.14.021(1)(b) where
at least 25 percent of units must be sold to a qualified nonprofit or local government partner that
will ensure permanent affordable homeownership. Providing affordable homeownership
opportunities to low- and moderate -income households can help build wealth for households
which otherwise could not afford to own a home.
Allow a 12-year extension for Type 1 participating property owners. Since 2021, cities are
allowed to grant a 12-year extension to existing MFTE programs within 18 months of expiration.
Multifamily housing approved for a 12-year extension must maintain 20% of units as affordable
for low-income households (during the extension period moderate -income households are no
longer included in the affordable unit counts). Tenant notice and relocation assistance are
required in the 10th and 11th years of projects receiving a 12-year extension (see more detail
below). Port Orchard should consider adding this provision to its MFTE program to ensure
continued affordability of units created through this program.
Require relocation assistance for low-income tenants whose rent subsidy is expiring.
The 2021 changes to the MFTE program which allow the 12-year extension described above
also require that landlords provide notice in the 10th and 11th years of the program that it will
expire in the 121h year and provide one month's rent as relocation assistance to qualified tenants
in their final month of tenancy. Best practices in line with the anti -displacement strategies in
Strategy 3.1 would also extend these tenant protections to any Type 1 property, regardless of
whether it is an extension or not.
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City of Port Orchard
City Clerk's Office
216 Prospect Street, Port Orchard, WA 98366
(360) 876-4407 • FAX (360) 895-9029 • cityhall@cityofportorchard.us
www.cityofportorchard.us
PETITION TO VACATE CITY RIGHT-OF-WAY
APPLICATION
(POMC 12.08 / Resolution No. 030-17)
This document is considered a public record and is subject to public disclosure laws in Chapter 42.56 RCW.
Property Owner's Name(s): Kltsap County Courthouse
Mailing Address:614 Division Street, MS-4 Port Orchard WA 98366
Street City State Zip
Contact Information: Karen Goon, County Administrator. 360-337-4403 kgoon@co.kitsasp.wa.us
Phone Email
Address of Requested Vacation: Austin Ave, between Taylor Street and Smith Street
Street or nearest cross street
Parcel Number of Requested Vacation: See attached Exhibit C, D & E.
1. The undersigned, owner of real property abutting upon that public street/alley described
below, does hereby petition the City of Port Orchard to vacate said street/alley, described as
follows (you may attach a separate sheet containing the legal description):
Legal description of the requested right -of --way prepared by a licensed surveyor:
See exhibit A & B.
all situated in the City of Port Orchard, County of Kitsap, State of Washington; declares that this
petition is supported by the signatures of the owners of more than two-thirds of the real
property abutting the requested vacation area; and requests that said City Council by
Resolution fix a time and place when this petition shall be heard and determined by that
authority, which time shall not be more than sixty (60) days nor less than twenty (20) days after
passage of such Resolution (RCW 35.79.010)
2. State the proposed use of the vacated right-of-way:
New surface parking lot to serve the new courthouse expansion and remodel.
Page 1 of 3
Vacation of City Right -of -Way Application
3. Provide a map of the proposed right-of-way area to be vacated with the following
information:
a. Approximate width of the area to be vacated
b. Approximate length of the area to be vacated
c. Approximate total square footage of the area to be vacated
I/We declare under penalty of perjury under the laws of the State of Washington that the
foregoing information and attached documentation is true and correct, and that I/We are the
true and correct owner(s) of real property abutting the requested vacation of City right-of-way.
5�nl Zz_
Signature of Applicant Date
Signature of Applicant
Date
When submitting this application, please make sure the following requirements are
completed and documents are submitted:
• Support for Vacation of City Right -of -Way Petition form(s) signed by the owners of real property
abutting upon the part of the street or alley sought to be vacated (these owners must, along
with the Petitioner, constitute the owners of at least two-thirds of the real property abutting
such area);
• New legal description to include the requested right-of-way;
• Documentation supporting the fair market value of the street or alley sought to be vacated, if
applicable;
• Documentation supporting the application of the Non -User Statute, if applicable;
• Dimensions of area proposed to be vacated;
• Map of the proposed right-of-way to be vacated outlined or highlighted;
• Application processing fee of $120; and
0 $500 appraisal fee refundable deposit (Petitioner shall pay the actual cost of the appraisal, upon
Council approval).
$120 Vacation Fee Received
FOR CITY CLERK'S OFFICE USE ONLY
Yes No
Receipt No.:
$500 Vacation Appraisal Fee (Refundable Deposit) Received Yes No
Support for Vacation Petition By Abutting Property Owners form(s) Received _
Public Hearing Date:
Notices Posted by:
Approved by the City Council
Date of Noticing:
Yes No
Receipt No.:
Yes No
Page 2 of 3
Vacation of City Right -of -Way Application
EXHIBIT A
VACATION DESCRIPTION
THAT PORTION OF AUSTIN AVENUE (AUSTIN STREET ON FACE OF
PLAT) LYING ADJACENT TO LOTS 1 THROUGH 5 INCLUSIVE OF
BLOCK 8, SWEANY'S ADDITION TO SIDNEY AS RECORDED IN
VOLUME 1 OF PLATS AT PAGE 55, RECORDS OF KITSAP COUNTY,
WASHINGTON;
TOGETHER WITH THAT PORTION OF ALLEY LYING ADJACENT TO LOTS
1 THROUGH 5 INCLUSIVE OF BLOCK 8, SWEANY'S ADDITION TO
SIDNEY AS RECORDED IN VOLUME 1 OF PLATS AT PAGE 55,
RECORDS OF KITSAP COUNTY, WASHINGTON.
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PROFESSIONAL LAND SURVEYORS
2320 MOTTMAN RD SW, STE 106
TUMWATER, WA 98512
360.688.1949
EXHIBIT A
KITSAP COURTHOUSE
DATE: 4/04/2022
SCALE: 1 "=80'
M2C PROJECT NO.: 22-103
SHEET NO. 1 OF 2
EXHIBIT A
4 7
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S87'41'25"E 366.09
S87'41'25"E 366.09
TAYLOR ST�
AREA BEING VACATED III
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EXHIBIT B
KITSAP COURTHOUSE
DATE: 4/04/2022
SCALE: 1 "=80'
M2C PROJECT NO.: 22-103
SHEET NO. 2 OF 2
EXHIBIT B-1
VACATION DESCRIPTION
THAT PORTION OF SWEANY STREET LYING ADJACENT TO LOT 10,
BLOCK 3 AND ADJACENT TO THE ALLEY IN BLOCK 3, SWEANY'S
ADDITION TO SIDNEY AS RECORDED IN VOLUME 1 OF PLATS AT
PAGE 55, RECORDS OF KITSAP COUNTY, WASHINGTON;
TOGETHER WITH ALL THE ALLEY IN BLOCK 2 AND THE ALLEY
ADJACENT TO LOTS 6 THROUGH 9 INCLUSIVE, BLOCK 3, SWEANY'S
ADDITION TO SIDNEY AS RECORDED IN VOLUME 1 OF PLATS AT
PAGE 55, RECORDS OF KITSAP COUNTY, WASHINGTON.
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EXHIBIT A
CAST-
KITSAP COURTHOUSE
PROFESSIONAL LAND SURVEYORS
DATE: 4/04/2022
2320 MOTTMAN RD SW, STE 106
SCALE: N/A
TUMWATER, WA 98512
M2C PROJECT NO.: 22-103
360.688.1949
SHEET NO. 1 OF 2
EXHIBIT B-1
- - - - VISION ST
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AREA BEING VACATED —t--_ _ 10 1
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T 24N, R 1 E, WM
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PROFESSIONAL LAND SURVEYORS
2320 MOTTMAN RD SW, STE 106
TUMWATER, WA 98512
360.688.1949
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EXHIBIT B
KITSAP COURTHOUSE
DATE: 4/04/2022
SCALE: 1 "=100'
M2C PROJ NO.: 22-103
SHEET NO. 2 OF 2
EXHIBIT B-2
VACATION DESCRIPTION
THAT PORTION OF ALLEY LYING ADJACENT TO LOTS 1 THROUGH 3
INCLUSIVE OF BLOCK 4, SWEANY'S ADDITION TO SIDNEY AS
RECORDED IN VOLUME 1 OF PLATS AT PAGE 55, RECORDS OF
KITSAP COUNTY, WASHINGTON.
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EXHIBIT A
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C$AST..
KITSAP COURTHOUSE
PROFESSIONAL LAND SURVEYORS
DATE: 4/18/2022
2320 MOTTMAN RD SW, STE 106
SCALE: 1 "=80'
TUMWATER, WA 98512
M2C PROJECT NO.: 22-103
360-688-1949
SHEET NO. 1 OF 2
EXHIBIT B-2
SWEANY ST
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PROFESSIONAL LAND SURVEYORS
2320 MOTTMAN RD SW, STE 106
TUMWATER, WA 98512
360-688-1949
SW 1 /4 SE1 /4, SEC 2
T 24N, R 1 E, WM
EXHIBIT B
KITSAP COURTHOUSE
DATE: 4/19/2022
SCALE: 1 "=80'
M2C PROJECT NO.:
SHEET NO. 2 OF 2
6
M2
C
22-103
City of Port Orchard
City Clerk's Office
' ` spa..• '� 216 Prospect Street, Port Orchard, WA 98366
(360) 876-4407 • FAX (360) 895-9029 • cityhall@cityofportorchard.us
'. _•'� www.cityofportorchard.us
SUPPORT FOR VACATION OF RIGHT-OF-WAY
PETITION BY ABUTTING PROPERTY OWNERS
This document is considered a public record and is subject to public disclosure laws in Chapter 42.56 RCW.
Property Owner Seeking Vacation (Petitioner):Kltsap County Courthouse
First and Last Name
Contact Information: Karen Goon, County Administrator. 360-337-4403 kgoon@co.kitsasp.wa.us
Phone Email
Street or Nearest Cross Street of Requested Vacation: Austin Ave, between Taylor Street and Smith Stree
Parcel Number of Requested Vacation: See Exhibit C, D & E
Signatures of owners of real property abutting requested vacation of right-of-way area (Note: all persons who have
an ownership interest must sign this document. This includes co-owner(s) and/or spouses, or corporate officers
authorized by the corporation.
By signing, I/We declare under penalty of perjury under the laws of the State of Washington that:
• I/We are the true and correct owner(s) of real property abutting the street or alley sought to be vacated.
• I/We understand that I/We may see an increase on my/our tax assessment if this vacation of right-of-way
petition is approved.
• I/We understand I/We may be required to pay for a portion of the vacated right-of-way.
Karen Goon
First and Last Name (Printed) of Property Owner/Corporate Officer
Managing Member No. 1
Kitsap County Courthouse
Name of Corporation (if applicable)
TIcnD -p- R cc�-cq Cd1 I A l !i,:� Qz (lA
(Signature and/or Title) P0 (mil �* %k�*62f
First and Last Name (Printed) of Property Owner/Corporate Officer Name of Corporation (if applicable)
Managing Member No. 2
(Signature and/or Title)
See Exhibit C, D
Property Address
Mailing Address: 614 Division Street, MS-4
Street
Contact Information:
360-337-4403
Phone
See Exhibit C, D
Tax Parcel Number
Port Orchard WA 98366
City State Zip
kgoon@cie-14+-a-�s l<rI t5�+'. focJ
Email
Page 3 of 3
Vacation of City Right -of -Way Application
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