Council deadlocks on ordinance to use state CHIP grants to reimburse developer connection fees; members call for more study

Sedro‑Woolley council members split Tuesday over an ordinance (filed as Ordinance 210225 in the meeting packet) that would allow the city to accept state CHIP (Capital Housing Incentive Program) grant revenues and use them to reimburse utility permitting and connection fees for qualifying affordable‑housing units.

The city attorney’s staff described the program as a state capital‑budget grant that can be layered with local programs to reduce per‑unit development costs. Kelly (city finance) and Charlie (city attorney/staff) told the council that CHIP grants are competitive, administered from the state capital budget, and typically function as reimbursement grants: developers or eligible applicants pay upfront and, if awarded a state grant, get reimbursed. Staff said the program requires the city to adopt an ordinance that specifies the reimbursement option before the city can receive CHIP funds for a project.

Council debate covered five themes: whether the state capital fund is an appropriate source to subsidize development costs; whether subsidizing connection fees for affordable units would shift public costs onto taxpayers; how competitive CHIP grant awards are administered; the administrative burden on city staff to manage grant reporting; and the urgency created by an imminent application deadline for one local project.

Councilman Henderson moved to postpone the ordinance for a future workshop to allow more study; that motion failed on council votes. A subsequent motion to approve the ordinance was made and put to a vote; that motion did not carry and the ordinance was not adopted. Later in the meeting a procedural motion to reconsider the item was moved and seconded and the council voted to bring the ordinance back for reconsideration at a later meeting; the file therefore remains active but not adopted.

Why it matters: staff noted the program could reduce the upfront connection costs developers pay for sewer and water for qualified affordable units (the presentation used an example of a roughly $9,900 sewer connection fee per unit). The city would only reimburse fees if a CHIP award is received and council authorized acceptance; staff emphasized there is no automatic city cash outlay unless and until the council approves a specific grant acceptance and reimbursement to a project.

Clarifying details: staff said CHIP funds come from the state capital budget and are competitive; applicants to date have primarily been counties or cities and not individual homeowners; the ordinance was written broadly to allow future applications but staff said the immediate deadline for one local project creates the pressure to decide quickly.

Ending: the council did not adopt the ordinance at first reading; members asked for further study and for time to review eligibility limits, affordability bands, and possible guardrails limiting reimbursement to wholly affordable projects. A motion to reconsider the item succeeded, so the subject will return to council for further consideration.