City apartment buildings getting tax breaks

New student housing near Gonzaga University and an apartment building in Kendall Yards will get tax breaks for 12 years after the Spokane City Council agreed that the projects fell under a program that encourages residential density for people who earn less than an average income.

The projects are among a handful that have been approved since the council rewrote the rules governing the program two years ago. A study showed that it had been used for developments on the outskirts out of town – not really the sort of density the program was meant to encourage. The council voted to strengthen the income requirements, and amended where such tax exemptions are allowed.

“It was out of control,” said Councilman Jon Snyder, who rewrote the program with Steve Salvatori. “It was incentivizing everywhere and thus incentivizing nowhere.”

Previously, the program allowed exemptions near Mead, in Lincoln Heights and on North Indian Trail, among other large swaths far from the city’s core. Now, the eligible area is all of downtown, with extensions along North Monroe, East Sprague Avenue and the Hamilton-Nevada corridor.

“Why are we incentivizing apartments in Southgate when we have dirt lots near downtown?” Snyder said.

Some of those dirt lots, which formerly housed marmots and not much else, will soon have a crush of people.

The student housing, which is not being built by the university, is planned to have 61 units with 214 bedrooms. There will be 24 new apartments in the trendy West Central neighborhood development, totaling 24 bedrooms.

Ali Brast, a planner at the city, said the initial stages of building both projects have begun.

To qualify for the tax waiver, which applies only to the buildings and not the land they sit on, 20 percent of the units must house people earning low to moderate incomes. According to the U.S. Department of Housing and Urban Development, someone in Spokane earning $35,000 or less is considered low income, and $50,000 is a moderate income for one person.

The program, called the Multifamily Tax Exemption, is different than the tax increment financing plan the city used to help kick-start development in Kendall Yards and the University District. Unlike the TIF program, which is a way to finance infrastructure projects such as installing utilities and building roads, the multifamily program is the government’s way to encourage density where private developers have failed to do so.

After Snyder and Salvatori tinkered with the tax exemption in 2012, it gained another goal of encouraging infill development over giving breaks to developers of urban sprawl.

“It’s hard to ascertain for certain whether (the exemption) was the tipping point for a development to happen or not. That’s especially true for projects that are further out,” Snyder said. “We were incentivizing projects where they were going to happen anyway.”