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Home My WebLink About07/15/2025 - Work Study - Additional Doc-MFTE Presentation=TE Review City Council Work Study July 15, 2025 MFTE Types • 8 -Year Property Tax Exemption • No strings attached. • City can choose to impose eligibility requirements. • 12 -Year Property Tax Exemption • 20% of units must be affordable. • City must adopt minimum density requirements. • City defines affordability with some state parameters. • Extensions now possible. • 20 -Year Property Tax Exemption (new) • 20% of units must be affordable for 99 years. • Must be located near transit with 15 -minute service. • City must adopt inclusionary zoning. • All MFTE projects must be in urban center (to be defined by City) MFTE - Basics • Developer/owner does not pay property tax on value added to property for residential units for 8, 12, or 20 years. • Developer/owner pays property tax based on pre -development valuation plus value of any non-residential development added to property. • The savings to the developer/owner is not lost revenue to City or junior taxing districts. It is shifted to the rest of the tax base proportionately based on assessed valuation. • Tax shift for Overlook Apartments added $XX to the average annual property bill. exempted from property taxes through the MFTE, property tax obligations will be shifted to the rest of the tax base: Tax exempted properties add to the property tax levy limit... J � ' ...but these tax obligations will be 0 covered by non-exempt properties �. ea8 8S Year Previous MFTE Approvals Affordable 12 Year MFTE Projects: • Overlook Apartments (The Charleston (shown)): 39 Units • Sedgwick Apartments (Pottery Creek Phase 2): 192 Units • Salmonberry Apartments: 24 Units • Plisko Apartments: 58 Units Market Rate 8 -Year MFTE Projects: • Sedgwick Multifamily (Pottery Creek Phase 1): 136 Units • The Ramsey (In permitting): 99 Units • Blueberry Apartments: 108 Units Case Study Overlook Apartments (The Charleston) vs. Peyseno Apartments ______ , ______ J ______1::: II • _ 11 11 / '3-046• • • 1 111 I I 1 1 11 1 11 2Ii!iJvl�t1}. 3 Tax Accounts found. f.• !� I • - / . ODen Table 1 11 •_ • 312402-2-022-2009 y / ••• Account Status: Active w� 14 �� " • Taxpayer: PAVSEND LANE II LLC ' . %..,! . _ r. t ) Site Address: 1615 ARENO 83 6SE PORT • ♦ ' ORCHARD 98366 11 „ 1r Nail Address: 7583 CLOVER VALLEY RD SE, PORT ORCHARD, WA 98367 �. ,t\ IMP HII ! 312x02.2.022.2009 Account Status: Active _ Taxpayer: PAYSEND LANE 11 LLC Site Address: 1665 pAY5ENO LN SE PORT I ORCHARD WA 98366 Mail Address: 7583 CLOVER VALLEY RD SE, PORT �, ORCHARD, WA 98367 _ 312402.2.022.2009 _ - -� Account Status: Active Taxpayer; PAVSEND LANE II LLC 1 1' Site Address: 1655 PAYSENO LN SE PORT ORCHARD Mail Address: 7583 CLOVER VALLEY RD SE. PORT ORCHARD, WA 98367 - 11 ,� •1 .- - O. a�1,1*I - Overlook vs. Peysno Apartments Peter J Boissonneau Kitsap County Treasurer PO Box 169 Port Orchard, WA 98366 FAC PORT ORCHARD LLC 2302 N 77TH ST SEATTLE. WA98103 2025 WEB TAX STATEMENT Printed 07/01/2025 Account Number 302402-3-062-2009 First Half Due April 30th $0.00 Second Half Due October 31st $1.000.54 Total Due 2025 $1,000.54 . 11 iPCIR6. P..i 1..n Pu'. Past Due Amounts $0.00 opery Dewrpion: RCs(LTANT PARCn 1 or 6o11MDARY USE ADJusTUCNT Rcoo D urOCR AUdTORs rut No Land Value 5229.200 16.0270117 0(110 A PORTION Or LOTS C MO D Or TIC CITY Or PORT ORCOaRD SORT PUT No PO 7OR 2 (S 10658 )': coaorD u10CR uTsAP co.1NTYAuorroas rut No 100061]!46. SrisG AN AAICNDMCNr r,/1Ia s o. n. Building Value $8.341 500 cation Address Multiple addresses on Ne Personal Property Value 50 Distribution of Your 2025 Taxes Current Year (2025) Details 0 5% PUD 51020 Taxable Value 5229.200 22% PORT 54480 Tax Code Area 0810 Levy Rate 8 721692 31% REGIONAL LIBRARY 56290 General Property Tax $1.536 05 74% COUNTY 514840 Voter Approved Rate 2316% 129% CITY 5257 0o Voter Approved Tax $462 97 22 3% FIRE $445 50 Noxious Weed $2 06 232% LOCAL SCHOOL 546280 Total 2025 Charges $2.001.08 284% STATE GENERAL 550750 Past Due Unpaid Amounts Year I Principal I Int,Pen+Fees I Total Peter J Boissonneau Kitsap County Treasurer PO Box 169 Port Orchard. WA 98366 PAYSENO LANE II LLC 7583 CLOVER VALLEY RD SE PORT ORCHARD. WA 98367 Printed 07/01/2025 ccount Number 312402-2-022-2009 First Half Due April 30th $0.00 Second Half Due October 31st $63,374.34 Total Due 2025 $63,374.34 rut nr1P6. P..1 . P,��I, w Past Due Amounts $0.00 1pe+y Descrital RCsaLTANr PARCC 6Or 6OUNDARu Lilt ADlusruCNr RrCORDCD UNDrq AUGTORs ruEw Land Value 5426.500 1101.0051. AND AS DEPICTED ON SURVLY RECORDED UNDCR AUDfTRS RC NO 202110140052. IN VOIUTAC 91 Or torus POSES Budding Value 'U.) ni0ous1(1061WLL61v[.R000ROS or XITSAP courrrYNGT . wA96UN .rn•rw a Lay ru' 514.105.840 :aeon Address Muttlpk addresses on Me Personal Properr; Value SO Distribution of Your 2025 Taxes Current Year (2025) Details 0 5% PUD 5645 so Taxable Value $14 532 340 2 2% PORT 52.83800 Tax Code Area 0810 Levy Rate 8721692 31% REGIONAL LIBRARY 53.98780 General Property Tax 597.392 07 7 4% COUNTY 59.409 30 Voter Approved Rate 23 16% 129% CITY $1629210 Voter Approved Tax $2936451 223% FIRE 52824520 Noxious Weed $2 10 232% LOCAL SCHOOL 529.34550 Total 2025 Charges S126.748.68 284% STATE GENERAL $35.98290 Past Due Unpaid Amounts Year I Principal I InUPen/Fees I Total 2024 $0 00 $0 00 5000 2023 $0 00 SO 00 I SO 00 2022 + Prior $0 00 SO 00 SO 00 To view details of each levy change go to To view details of each levy change go to www kitsan nov/treasurer Overlook vs. Payseno Apartments • Overlook Apartments (12 -year MFTE): • Total U n its: 39 • Affordable Units: 8 Units with reduced rent • Annual property tax bill: $2,001.08 • Estimated annual tax savings is $84,722. (prorated based on Payseno tax bill per unit) • Estimated 12 -year tax savings to developer/operator is $1,016,665. • Estimated value of rent relief to qualified tenants is $17,280 annually ($2,160 per unit). • Estimated 12 -year tax savings to qualified tenants is $207,360 ($25,920 per unit). • Payseno Apartments (no MFTE): • Total U n its: 57 • Annual property tax bill: $126,748.68 Is Port Orchard Meeting Its Housing Targets? • Yes, Port Orchard has already added 3,675 residents of its 10,500 -person target (2020-2044). • Port Orchard has grown at 4.6-6.59% for the past 3 years. Growth would need to slow to 1.6% over the next 19 years meet target. • Port Orchard has added 1,856 housing between 2020 and 2025. • Port Orchard has been especially good at building housing for households earning 50%-120%+ AMI. >120% AMI 100-120% AM I 80-100% AMI 50-80% AM I 30-50% AM I 0-30% AMI, non-PSH 0-30% AMI, PSH Emergency Temporary Housing 1,288 998 717 16976 -156 1,246 507 2,051 619 20 79� 2880 944 0 414 11 209 �I 540 0 Totals Current Supply: 8,610 Housing Units* New Supply Needed: 3,704 Housing Units -500 500 1,500 2,500 Baseline Supply (2020) Built 2020-2024 ■ Remaining New Supply Needed (2024-2044) Increasing Housing Supply Stabilized using Prices/Rents? Stabilized Vacancy c > M 4. Pd 4.00% 000% N M r .- N M Q .ti N M V .--. N M V N M C .- 4 N M Q N N M Q .--. N M Q •- N M Q N M Q .- N M 00000000000000000000000000000000000000000000 Q Q Q uY u1 Lt u. lD w lD lD I- n n n w w w w (n M M M O O O O .ti .-s .- .ti N N N N M M M M Q C Q C uY .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 .4 N N N N N N N N N N N N N N N N N N N N N CJ O CJ O CJ O O CJ O O O CJ O CJ O O CJ O CJ O CJ O CJ O O O O O O O Q O Q O O O O O O O O Q O O N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N City p U Arlington ❑ Auburn ❑ Bainbridge Island ❑ Battle Ground ❑ Bellevue ❑ Bellingham ❑ Black Diamond ❑ Blaine ❑ Bonney Lake ❑ Bothell ❑ Bremerton ❑ Buckley ❑ Burien ❑ Burlington ❑ Camas ❑ Carnation ❑ Centralia ❑ Chehalis ❑ Chelan ❑ Cheney ❑ Chewelah ❑ Cle Elum ❑ College Dlace ❑ Colville City (Stabilized Vacancy) • Port Orchard Average Rent Average Rent S2,000 s1,500 a 51,000 5500 so N M Q rr N M Q eti N M C •ti N M Q r1 M M Q e-1 N M R .4 M M C .4 N M Q eti M M Q r1 N M Kr N N M R .4 00000000000000000000000000000000000000000000 City ❑ Pacific ❑ Pasco ❑ Po -t Angeles ❑✓ Port Orchard ❑ Port Townsend ❑✓ Poulsbo ❑ Prosser ❑ Pullman ❑ Puyallup ❑ Quincy ❑ Rainier ❑ Raymond ❑ Redmond ❑ Renton ❑ Richland ❑ Ridgefield ❑ Roy ❑ Royal City ❑ Ruston City (Average Rent) • Bainbridge Island • Bremerton • Gig Harbor • Port Orchard Median House Price $1,400,000 51,200,000 $1,000,000 it $800,000 $600,000 f/ $400,000 $200,000 $0 N M Q .- N M V N N M C N N M Q -4 N M Q .--1 N M Q .--1 N M Q N N M ' -4 N M ' -4 N M R .-4 N M R .--4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0000000000000000000000000 ' ' ' Ln In In In ,o LD ,D ,o r-. r-. r-. f-. M M M M m o' m M O O O O .-4 .-4 .-4 . N N N N M M M M ' C Q ' In .- .-w .-w .w .-w .4 .-y .4 .- .4 .w .4 .4 .4 .4 . -1 .-1 . -1 — — .-4 .4 N N N N N N N N N N N N N N N N N N N N N O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N City p u Cle Elum ❑ College Place ❑ Colville ❑ Connell ❑ Coulee City ❑ Coupeville ❑ Covington ❑ Dayton ❑ Deer Park ❑ Des Moines ❑ DuPont ❑ Duvall ❑ East Wenatchee ❑ Eatonville ❑ Edgewood ❑ Edmonds ❑ Ellensburg ❑ Enumclaw ❑ Ephrata ,—,_ City (Median House Price) • Bainbridge Island • Bremerton • Gig Harbor • Port Orchard • Poulsbo • Seattle •+. View nn TahIeau Puhlir ~l ' Th n v a Share Which building types are not being developed? • Middle Housing (except McCormick Village) • Small Scale <12 units • Mixed Use Shopfront Buildings • 429 Bay Street (waterfront) • Ramsey Apartments (in permitting, has METE) • Affordable Ownership Units • Riverstone — Housing Kitsap • Apartments with underground parking • Apartments taller than 3 -stories • Downtown/Redevelopment Which building types are being developed? • Detached Houses • Does not qualify for MFTE • Garden Apartments • 656 Units with MFTE • 889 Units constructed or under construction without MFTE • 423 Units Permitted without MFTE but not moving forward or on hold. • McCormick Village Mixed Housing Rentals (Detached House, ADU, 4-plex, 8- plex) • Not in MFTE eligible area. • Special overlay district and subarea plan. Are Existing Affordable MFTE Units Worth the Tax Shift? HUD Fair Market Rent and Maximum Rents Including Utility Allowance 2025 Efficiency/Studio One -Bedroom Two -Bedroom Three -Bedroom Four -Bedroom 10c' Below Fair Market Rent S 1.269.90 $ 1.411.20 S 1.851.30 S 2,416.50 $ 2.781.00 Maximum Rent Charged After Subtracting Utilty Allowance S 1,058.90 S 1,188.20 $ 1,598.30 $ 2,132.50 $ 2,465.00 Income Limits by Family Size and Unit Type 2025 Family Size 1 2 3 4 5 6 7 8 40% Median Income Studio/Efficiency $ 34,807.50 $ 39,780.00 $ ..14,752.50 S 49,725.00 $ 53,703.00 $ 57,681.00 S 61,659.00 $ 65,637.00 65% Median Income 1 -Bedroom $ 56,562.19 $ 64,642.50 $ 72,722.81 S 80,803.13 $ 87,267.38 $ 93,731.63 S 100,195.88 $ 106,660.13 75% Median Income 2 -Bedroom $ 60,913.13 $ 69,615.00 $ 78,316.88 S 87,018.75 $ 93,980.25 $ 100,941.75 S 107,903.25 $ 114,864.75 80% Median Income 3 -Bedroom $ 69,650.00 $ 79,600.00 $ 89,550.00 S 99,450.00 $ 107,450.00 $ 115,400.00 $ 123,350.00 $ 131,300.00 Pros and Cons of MFTE • Increases housing supply helps to help prevent rent increases. • 12 -year exemption provides modest rent relief to tenants. • Helps City achieve goals (development in centers, downtown redevelopment, etc.) • Some projects do not pencil without MFTE (423 units permitted but not moving forward). MFTE could help these projects pencil. • New infrastructure (parks, sidewalks, road improvements, water/sewer improvements), one-time fees, sales tax, utility tax • Can be structured to make the city more fiscally sustainable. • Tax Shift - Tax burden for these units shifted to other property owners in Port Orchard. • High administrative cost for affordable units • Annual reporting • Annual auditing • Annual calculation of utility allowance • Contract administration • Application processing Recommendations 8 -Year MFTE • Mixed -Use Shopfront Buildings (Especially downtown redevelopment and in other designated centers). • Apartments with underground parking or minimum density requirement (50 units per acre). • Increase property tax per acre after 8 years and reduce stormwater impacts. • Small scale middle housing redevelopment projects (12 or fewer units). • Small scale infill projects don't have the same economies of scale compared to large projects and increase assessed valuation per acre. • Projects where units are for sale (condos, townhomes). • Creates home ownership opportunities for low- and moderate -income households. • Projects taller than 3 -stories. • Buildings 4 -stories and taller are more expensive to build, result in higher valuation/acre. 8 -Year MFTE as a City Investment pr • Consider the Peyseno Apartments Project (No MFTE): • 2025 Property Tax Bill: $126,748 • Consider cumulative property tax revenue versus: • 8 -Year MFTE, developer builds 4 -stories instead of 3 -stories • 8 -Year MFTE, developer builds 5 -stories instead of 3 -stories • Assume property tax bill increases 3% annually. • Assume 2025 property tax per story is $126,748 divided by 3. • Assume no tax shift. MFTE as an Investment 30 Years — Cumulative Revenue $9,000,000.00 $8,000,000.00 $7,000,000.00 $6,000,000.00 $5,000,000.00 $4,000,000.00 $3,000,000.00 $2,000,000.00 $1,000,000.00 $0.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 -Without MFTE 3 -Stories (Cumulative) -With MFTE 4 -stories (Cumulative) -With MFTE 5 -stories (Cumulative) MFTE as an Investment - 90 Years — Cumulative Revenue $100,000,000.00 $90,000,000.00 $80,000,000.00 $70,000,000.00 $60,000,000.00 $50,000,000.00 $40,000,000.00 $30,000,000.00 $20,000,000.00 $10,000,000.00 $0.00 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 -Without MFTE 3 -Stories (Cumulative) -With MFTE 4 -stories (Cumulative) -With MFTE 5 -stories (Cumulative) MFTE as an Investment 30 Years — Cumulative Revenue $12,000,000.00 $10,000,000.00 $8,000,000.00 $6,000,000.00 $4,000,000.00 $2,000,000.00 $0.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 -Without MFTE 3 -Stories (Cumulative) -With MFTE 4 -stories (Cumulative) -With MFTE 5 -stories (Cumulative) -With MFTE 5 -Stories Tax Shift (Cumulative) 8 -Year MFTE as a City Investment • Cumulative Property Tax Revenue on 4 -stories with MFTE crosses 3 -stories without MFTE after year 24. • Cumulative Property Tax Revenue on 5 -stories with MFTE crosses 3 -stories without MFTE after year 18. • Consider other benefits: • Infrastructure Investment • One-time fees • Sales Tax • Utility Tax • Offsite Improvements • Increased HousingSupply> Rents Stable • After 30 Years: $2,159,377.12 in additional revenue for 5 -story project • After 90 Years: $35,601,709.50 in additional revenue for 5 -story project • With tax shift, these numbers increase to $4,020,059.19 and $37,462,391.23 respectively Recommendations for 12- and 20 -Year M FTE • Staffing Implications — Housing Coordinator • Auditing and Reporting • Improve benefits to tenants • Increase savings from 10% below market rent to 20% or 25% below market rent. WEfficiency/Studio One -Bedroom] Two-BedroomlFhree-Bedroom Four -Bedroom I I 1 FY 2025 HUD Fair Market Rent Including Utilities $ 1,411.00 $ 1,568.00 $ 2,057.00 $ 2,685.00 $ 3,090.00 10% Below Fair Market Rent $ 1,269.90 $ 1,411.20 $ 1,851.30 $ 2,416.50 $ 2,781.00 20% Below Fair Market Rent $ 1,128.80 $ 1,254.40 $ 1,645.60 $ 2,148.00 $ 2,472.00 25% Below Fair Market Rent $ 1,058.25 $ 1,176.00 $ 1,542.75 $ 2,013.75 $ 2,317.50 Total UtilityAllowance $ 211.00 $ 223.00 $ 253.00 $ 284.00 $ 316.00 Staff Recommendation • Easy to administer compared to 12 -year program. • Will help city achieve goals for downtown and other targeted areas. • Can increase city's property tax revenue by delivering high value projects compared to typical non -METE projects. • Additional staffing resources supported by application fee. • Greater rent savings for tenants (at least 20% below HUD fair market rent). • A more clearly defined rental allowance framework. • Consider requiring the same criteria that apply to 8 -year projects to strengthen city finances. • Could require more stringent affordability requirements, 20% below HUD fair market rent. • Could require more units in the complex be made affordable, minimum of 20% of units. Questions