Washougal City staff spent more than an hour reviewing the city’s multifamily tax‑exemption (MFTE) program and the tradeoffs involved in letting the existing 8‑year program expire or extending and modifying it.

What the program is and options under state law

Staff explained the key options in state law: an 8‑year exemption (no state affordability requirement, commonly used to incentivize market‑rate multifamily); a 12‑year exemption (requires at least 20% of units at low‑to‑moderate income levels); and a 20‑year model (requires at least 25% of units to be sold to a qualified nonprofit or local government partner for long‑term affordable homeownership). Staff said the 8‑year option is the city’s current program and that the city originally added a mixed‑use/first‑floor‑commercial requirement when the code was adopted.

Tax‑shift and local fiscal effects

City financial staff presented a worked example to show how MFTE changes local property tax bills. Using a hypothetical or recent example, staff showed the exempted residential improvement portion shifts part of the tax levy to other taxpayers and gave a concrete figure: in one calculation, an example $600,000 house’s city portion of property tax would increase by about $15 per year while the exemption is in place (staff noted the shift declines over time as other new value comes onto the tax rolls and expires when the exemption ends).

Benefits and tradeoffs

Staff outlined the city’s goals: MFTE can catalyze mixed‑use redevelopment, produce rooftops that increase sales tax, utility tax and impact‑fee revenue, and help meet Growth Management Act housing obligations. The tradeoff is a short‑term reduction in property tax revenue from the exempted residential portion and a redistribution of that levy to other property owners.

Council direction and next steps

Staff told the council the city’s local MFTE program currently expires June 30, 2026, and the state program sunsets in 2032 unless extended at the state level. Staff recommended retaining the 8‑year tool but returning with options to modify it—examples included adding a local affordability requirement to the 8‑year program, strengthening the mixed‑use requirement or considering the 12‑year option with affordable units. Staff also noted that specific projects seeking MFTE would still come before the council for developer agreements and project‑level review.

Discussion vs. decision

The council’s conversation covered fairness (who bears the tax shift), the role of developer agreements to secure public benefits, and whether the community should be asked directly about this kind of public investment. No ordinance vote occurred; staff said they would return with more detailed options and outreach plans.