Draft multifamily tax‑exemption targets higher‑value and 'missing middle' housing; council narrows maps and seeks public comment

City planning staff on Sept. 16 presented a draft multifamily tax‑exemption ordinance with new eligibility criteria intended to encourage higher‑value projects and missing‑middle housing. Director Nick Bond (planning) said the draft offers both eight‑ and 12‑year exemptions and four qualifying pathways, including mixed‑use shop‑front buildings, buildings at least four stories high, small‑lot middle housing (4–12 units), or projects with 100% below‑grade parking. “These programs are a property tax waiver, and cities can enact them to support local housing goals,” Bond told the council. Under the draft, a 12‑year exemption would require 20% of units to be affordable and rented at 25% below fair‑market rent for the duration; staff said that raises the affordability target compared with the city’s previous ordinance. Bond said the Kitsap Home Builders Association expressed concern that the 25% discount may not “pencil out” and indicated it may provide a pro forma to show feasibility. Staff presented a sample analysis of a small infill project and estimated a tax‑shift impact of about $10.36 per tax parcel per year in the city for that hypothetical development; Bond said tax revenues would eventually increase as higher‑value buildings mature but that early years shift costs to existing local taxpayers. The land‑use and economic‑development committees had differing map recommendations; councilors asked for a single clear map. After discussion, councilors generally supported keeping the red (existing center) areas visible on the map and adding the economic‑development committee’s green area to the MFTE target map to capture additional redevelopment corridors. Bond advised he will check whether a SEPA (environmental) or other review is required before scheduling a public hearing and asked staff to prepare public‑hearing materials. Councilors raised implementation questions—reporting requirements for 12‑year exemptions, the administrative burden of monitoring affordability and income qualifications, and whether the program should focus narrowly on downtown or include other corridors. No ordinance vote was taken; staff will finalize the draft map and return the proposal for a public hearing after completing administrative reviews and outreach.