Port Orchard committee clears path for multifamily tax exemption public hearing after builder concerns
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Summary
City staff will present affordability scenarios and a redlined ordinance at a public hearing on Oct. 28 after the Kitsap Home Builders Association asked the city to reduce the proposed rent-discount threshold for 12-year multifamily tax exemptions and requested clarifications about mixed-use and parking provisions.
Port Orchard city staff said the multifamily tax exemption (MTE) ordinance will go to a public hearing on Oct. 28, and committee members asked staff to provide additional affordability scenarios before the council takes action.
Nick Bond, Port Orchard community development director, told the Land Use Committee that the Kitsap Home Builders Association (KBA) submitted a packet comment focused on affordability metrics. “They are pretty certain that no one is going to take us up on that offer for the affordable units unless it is lowered,” Bond said, referring to a proposed 25% rent discount below the HUD-published area fair market rent for projects seeking a 12-year exemption.
Why it matters: The proposed change affects whether developers choose the 12-year MTE — which carries a longer tax exemption — versus an 8-year exemption with no affordable-unit requirement. Committee members said they want concrete comparisons showing how different discount levels would affect tenants and developers, and staff agreed to deliver numbers for 25%, 20% and 15% discounts in advance of the public hearing.
Key details and staff recommendations
Bond said the proposed ordinance follows the state minimum that at least 20% of a project's units must be affordable to qualify for the longer exemption; that 20% minimum is not being changed. The committee’s question is the degree of discount below HUD area fair market rent that defines “affordable.” Bond noted that the HUD fair market rent includes utilities and that inclusion inflates the apparent tenant savings under a percent-below-FMR test. “The law requires that the utilities be included,” Bond said.
Bond said the city chose the HUD-based method because it is easier to administer than a rent-as-share-of-income approach, which would require income verification for each unit. He also said staff will provide the committee with math and comparative scenarios before the Oct. 28 hearing.
Mixed-use, live-work and parking clarifications
Bond described several additional, committee-level edits that staff will redline into the ordinance. One change clarifies how a mixed-use building meets the commercial-area threshold: current draft language requires 40% of ground-floor area or 4,000 square feet (whichever is less) dedicated to commercial uses. Staff recommended allowing up to 50% of that commercial area to be live-work units (ground-floor units built to commercial code that can function as either residences or commercial space), while preserving at least half as immediately dedicated storefront or other nonresidential commercial use.
“We should provide some flexibility there, but not just settle for a building that is purely residential from day one,” Bond said. Committee members signaled support for the 50/50 split: Councilmember Scott Dina said he could “live with” the flexibility, and Jay Rosapepe and Eric Warden also expressed support.
Another technical edit came from builders who asked that the qualification for projects that provide all parking “below grade” be broadened. Bond will change the language to allow projects whose parking is “within the footprint of the primary building” (for example, tuck-under or at-grade parking enclosed within the building form) to qualify.
Next steps and timing
Mayor Rob Pecan noted the Oct. 28 meeting will be a public hearing only; “we will be holding a public hearing, but not taking any action that evening,” he said. The earliest the council would take action on the ordinance is the Nov. 18 business meeting. Bond said he will email the requested affordability comparisons to the committee and include the figures in the public hearing packet.
Discussion vs. decisions
The committee agreed on several staff-directed next steps (staff to prepare affordability scenarios and to redline the live-work and parking clarifications into the ordinance) but did not take any formal vote or adopt the ordinance at the Oct. 15 meeting.
Ending
City staff will return the redlined ordinance and affordability comparisons in time for Oct. 28’s public hearing; the council’s earliest possible action is Nov. 18. The KBA and other stakeholders are expected to present comments at the hearing.
