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Major developers seek a tax break
From the day in 2003 when the City of Auburn adopted its multi-family property tax exemption, requiring a minimum investment per unit of $200,000 to qualify, not a single proposed development project to date has met the threshold.
So, naturally, nobody has used the exemption.
Recently, however, the powers behind two major development projects proposed for the catalyst blocks south of Auburn City Hall wrote the City asking for amendments to the ordinance, for a little flexibility, so they could qualify.
The first, Landmark Development, is to break ground in October on a five-story, 126-unit, mixed-use project called Trek Apartments on the site of the former Cavanaugh Block. The second, Teutsch Partners LLC, has been in talks for months with the City, talks centering on its possible acquisition of the last remaining City-owned property on the catalyst blocks. Its proposal is to develop market rate projects there for senior housing or for apartments.
Because neither project meets the City's threshold today, both developers have asked the City to lower the minimum investment per unit to $130,000.
Bret Jacobsen, one of the principals of the Landmark Development Group, explained what getting the tax abatement would mean.
"What this tax abatement really does is allow us to build a better product than we might otherwise be able to bring to the table," Jacobsen said.
He said that when Landmark developed property in the city of Lakewood years ago, the tax abatement the City offered allowed his company to "bring a product to the market that is probably achieving in excess of 30-percent better rent than anything in the marketplace. It allowed us to better the product type. And that's exactly what we're doing here."
Jacobsen estimated that for the average tenant of the Trek Apartments, the exemption would be worth about $1,000 a year.
Councilman John Holman noted that the study on which the City relied to set the $200,000 per unit threshold was based on all of King County.
"It was using as a market-rate comparable downtown Seattle and Bellevue, and that's not our competition," Holman said.
Councilwoman Nancy Backus, a member of the committee that formulated the tax exemption, said that the $200,000 figure was a product of another time, before the real estate bubble burst.
"The bubble was such that, at the time, $200,000 didn't seem excessive, because we were looking at more condominiums as opposed to apartments or those that could be converted into condominiums," Backus said.
On another track, the City is considering moving the period by which the application for the abatement must be submitted to a point prior to the issuance of building permits.
Elizabeth Chamberlain, Auburn's planning services manager, said that the main reason for the timing change is that a project is fairly set by the building permit submittal stage. Also, she said, applications for the property tax exemption could be reviewed in parallel with the building permit review.