Planning Commission favors aggressive impact-fee reductions for affordable housing, backs change-of-use exemptions

Bothell staff presented a draft update to the city's transportation impact fee (TIF) study at the Planning Commission meeting on Oct. 1, seeking guidance on (1) whether to adopt more aggressive fee reductions for affordable housing and (2) whether to exempt minor "change in use" projects from impact fees. Commissioners indicated general support for the more aggressive reductions and for creating a limited change-of-use exemption aimed at small, non-structural conversions that activate downtown and neighborhood commercial spaces.

What staff proposed: Boyd Benson, utilities and development services manager, and Steve Morikawa (city engineer), with consultant Carmen Quan, explained that the draft study identifies about $370 million in candidate transportation projects from the 2024 comprehensive plan and estimates roughly $99 million in fee-eligible costs for a 12-year planning horizon. Using that project list and trip-generation assumptions, the consultant calculated a per-person-trip fee equivalent to roughly $9,900. That calculation produces draft per-unit fees similar to today’s rates: approximately $13,000 for a single-family home (about an 11% increase from current) and $5,400 for a multifamily unit, with a 10% reduction applied in areas near frequent transit or inside growth centers.

Affordable-housing reductions: Staff presented two reduction packages for affordable units. The "lower" package proposed a 10% reduction for units at 50–80% area median income (AMI), 30% reduction for 30–50% AMI, and recognition that multifamily tax exemptions currently trigger a 50% fee reduction. The "higher" package proposed a 20% reduction for 50–80% AMI, 50% for 30–50% AMI (and for MTEx), and an 80% reduction for the most deeply affordable 30% AMI units. Staff estimated the lower package would lower net fee revenue by about $9.6 million over the 12-year window; the higher package would reduce net fee revenue to roughly $77 million from about $99 million. Staff said either option should still provide sufficient revenue to fund the listed projects under reasonable growth assumptions.

Commissioner views: Several commissioners said they favored the more aggressive reductions to better incent affordable housing production. "I tend to think... the higher reduction is probably worth the trade off," said Commissioner Westerbeck. Commissioner Jones and others asked staff to document the assumptions behind revenue estimates and grant-share assumptions so the public and Council could understand how projected shortfalls were calculated. Commissioners also discussed whether fees could be increased in low-transit areas to offset reductions in high-transit zones; staff explained that approach is harder to defend in a fee study because trip-generation math and defensibility must be demonstrated.

Change-in-use exemption: Council asked staff to study an exemption for "minor change in use" (projects that convert an existing structure's use without structural expansion). Staff reviewed other jurisdictions and recommended a narrowly defined exemption similar to Kirkland's approach: exempt projects that change use but do not increase building size or structural footprint. Staff estimated limited lost revenue — roughly $1.6 million over 12 years under conservative assumptions — and said the exemption would promote reuse of small downtown storefronts or neighborhood commercial conversions (for example, a garage-to-corner-store conversion). Commissioners expressed near-unanimous support for the exemption, citing downtown activation and small-business feasibility as central benefits; Commissioner Westerbeck said the change would avoid killing small retail or food concepts by an immediate high fee burden.

Next steps and schedule: Staff will draft findings, conclusions and recommendations and bring them to the Planning Commission for a formal recommendation to Council. Tentative schedule provided by staff: transmit to City Council Oct. 21, public hearing on Nov. 18, final Council adoption in December and an effective date for new rates of Jan. 1, 2026. Staff emphasized that fee assumptions (grant receipts, project phasing, construction cost inflation and the pace of growth) will be monitored and the fee schedule revisited in periodic updates.

Numerical examples: staff displayed sample fees and reductions — for a typical single-family home the 2026 draft fee without reductions was about $13,000 and about $12,000 with the 10% reduction in the transit-proximate area; a multifamily unit's draft fee was about $5,400 and about $4,900 with the 10% reduction.

Quotations: Boyd Benson (Utilities and Development Services Manager) explained the methodology: "We identify eligible projects, determine growth share, and divide total cost by number of person-trips to get cost per trip." Commissioner Gustafson noted that spatially targeted reductions change incentives and asked whether fees could be raised in low-transit areas to balance incentives; staff responded such a move is possible but harder to defend in the fee study without strong trip-generation evidence.

Limits and caveats: Staff noted grant revenue assumptions are conservative relative to the 2024 comprehensive-plan project list and that the fee study covers a 12-year planning window for the draft analysis (with a 20-year context supplied). Commissioners asked staff to make assumptions and caveats explicit in the findings and to include monitoring triggers if revenue or project delivery diverges from projections.

Outcome: Commissioners signaled support for the more aggressive affordable-housing reduction package and for a narrowly defined change-in-use exemption; staff will draft findings and recommendations for formal review and transmittal to Council.