The Economic Development & Tourism Committee reviewed a draft multifamily tax exemption (MFTE) framework that would expand the city's proposed target area and require developments to meet one of four standards to qualify, with an additional four years (a 12‑year exemption) available only if projects reserve deeper affordability. Councilmember John Morrissey, chair of the committee, led the discussion.

Committee members said the proposal is intended to encourage infill and higher‑value projects while ensuring the city gets long‑term tax value. Nick Bond, the city's community development director, said: "State law says that residential target areas under the MFTE statute have to be within designated urban centers." Bond also told the committee the city started with comprehensive‑plan centers and expanded boundaries around downtown and Tremont where a gridded street network makes infill more feasible.

Under the draft ordinance described by Bond, a project would qualify for any MFTE (8 or 12 years) if it meets one of these four options: a mixed‑use shopfront building with a minimum of 4,000 square feet of ground‑floor commercial space or 40% of the building footprint (whichever is less); a multifamily project of at least four stories or 40 units per acre; a middle‑housing redevelopment on lots smaller than 15,000 square feet that creates between four and 12 units; or a three‑story project with 100% of parking below grade. To receive a 12‑year exemption, the draft requires, in addition to one of the four options, that at least 20% of units be at least 25% below fair‑market rent.

Bond described the reasoning for the higher affordability threshold: "We certainly need to be higher than the 10% that this used to be under the previous code," he said, while acknowledging builders told staff a 20% requirement could deter takers. Bond also summarized a comparison between two existing Mile Hill projects: in the Overlook Apartments (which used a 12‑year exemption) the city's analysis found roughly $17,000 in annual rent relief for the set‑aside units and about $1 million in developer tax savings; increasing set‑asides from 10% to 25% would raise tenant savings to about $450,000 in the example Bond cited.

Not all committee members supported the proposed geographic breadth or some of the performance thresholds. Councilmember Mark Chang said he was wary of the short‑term tax shift that results when improvements are exempted and urged focusing incentives on fewer, higher‑priority areas: "My first impression of the map is that there are just too many areas where this would be eligible," Chang said. He suggested narrowing the map so incentives channel redevelopment to downtown and other targeted corridors.

Councilmember Fenton and other members pressed staff for clarity about waterfront and hillside protections. Bond explained existing safeguards: the city's view‑protection overlay limits uphill building heights in hillside areas, and shoreline rules restrict nonresidential and residential heights where state law applies within 200 feet of the shoreline. Bond cautioned that state shoreline protections apply to residential views only in certain circumstances and that "views are not considered property rights" unless a private view easement has been purchased.

Commissioner Anderson (identified in the meeting as speaking in support) said high connection and impact fees make some Port Orchard projects financially marginal and that a program like MFTE can help make redevelopment feasible in an "in‑between" market. The Kitsap Builders Association (KBA) told staff it appreciated the program's middle‑housing provisions but warned that a four‑story requirement may be too expensive for many local projects because of elevator costs.

On mapping, staff said the draft target areas include downtown, Tremont, Ruby Creek, two Bethel centers, Mile Hill and some adjacent parcels along Perry, Farragut and Sherman. The land use committee recommended that staff remove institutional and other nonresidential parcels from the MFTE map to avoid implying those parcels are eligible for residential development. The Economic Development & Tourism Committee also recommended adding the Hidden Hills/Salmonberry area to the map; staff said they will show that area in a different color in the draft shown to full council.

The committee noted Diaz Meadows and some other noncontiguous parcels would remain excluded because they are not contiguous to the center boundaries or do not meet the draft criteria (for example, some proposed projects are three stories and would not qualify under the four‑story requirement). Bond said each MFTE agreement would still come to council for approval and that council would evaluate projects against the adopted criteria; if a development meets the criteria in the code, Bond said, the city would generally be obliged to approve the agreement.

Next steps: staff will revise the MFTE map to remove institutional parcels and add the Hidden Hills area as a differently colored recommendation; the draft ordinance and revised map will be presented at the city council work study the following week for further deliberation.

Background/context: Bond noted the city previously offered a different MFTE structure; past projects have used 12‑year terms under older rules but uptake has varied. The committee's discussion emphasized balancing developer interest with the city's desire for higher assessed valuation and some guaranteed affordable units.

(Reporters: direct questions to City of Port Orchard Community Development Director Nick Bond.)