Tax abatement is a welcome development for all

A downtown pulsing with renewed development, spurred in part by 10-year tax abatements granted new residential construction, as well as housing rehabilitation. The number of households has increased by 24 percent. Former suburbanites returning to the urban core, and not missing the old lifestyle one bit.

Spokane? No, Philadelphia.

The city with the third-largest downtown population implemented its abatement program in 1997. Since then, according to a Jan. 8 New York Times article, 10,000 people have moved into Philadelphia’s City Center. More than 8,000 housing units have been added, and the boom continues. Toll Brothers, one of the largest housing contractors in the United States, is building 750 luxury homes and condominiums at the city’s former Navy shipyard.

The abatements have been so successful some are starting to question why they are still necessary. Philadelphia’s urban renaissance, say opponents, no longer needs artificial stimulus. And aren’t other property owners being penalized because of the higher valuations the city’s boom has produced?

We’re hearing those same arguments in Spokane after just 16 projects have been granted tax abatements, which exempt new and redeveloped residential units from property taxes for 10 years. Contrary to popular belief, not all are downtown, and not all have gone to luxury developments.

“We’ve had a real variety of applications,” says Teresa Brum from the city’s Economic Development division.

She says the abatements have helped Washington cities implement their comprehensive plans by giving them a tool to promote growth where they can extend services most efficiently, and impose the minimal burden on existing infrastructure.

Spokane adopted a plan stressing a pattern of centers — Manito, Garland, Hillyard, etc. — connected by corridors. The initial abatements focused on areas around the downtown, as well as Indian Trail. As the City Council reassesses the program, other areas may be targeted.

Take Hillyard, for example. Not only has that area got a neighborhood core ripe for redevelopment, in a few years it will have a renovated Rogers High School. Perhaps an expanded Northeast Community Center if the Legislature can be sold on making some investments there. That should be a compelling mix for a developer who can offer a tax break not on a $500,000 home, but one valued somewhere south of $200,000.

A 2005 study done of Tacoma’s abatements estimated that city’s program effectively lowered the price of a $200,000 home to $183,200. That puts a mortgage within reach of more buyers.

Tacoma has approved tax relief for 77 projects since 1997. The study discounts the short-term tax loss.

“Since many of the projects would not have been developed without the program, those taxes would not have been collected by jurisdictions in either case. With the expiration of the ten year exemption period, tax collections will increase significantly,” says the report from Property Counselors of Seattle.

In Spokane, the taxes foregone so far are infinitesimal. The valuation of the first 14 projects approved is only $42 million. The city’s total property tax base is about $10 billion. And if the city is out property taxes for a decade, the treasury gets a significant up-front boost from construction-related sales taxes, and ongoing utility tax revenues.

In the case of West 809 Main project in the former Burlington Coat Factory building, condominiums are only half the pie. Ground floor space will be occupied by a new restaurant and relocated fitness center, neither of which will enjoy the tax abatements.

That vacant building, owned by an affiliate of Cowles Publishing Co., has generated very little property tax revenue since the retailer left, Brum notes. And nothing in the way of excitement to downtown, which will certainly not be the case when the development is completed.

Spokane needs new housing — construction of all sorts, if fact — if the city is going to grow its way out of perpetual budget defects, and stop the grinding away of municipal services. Annexation, as proposed for the commercial area north of Francis along North Division, will help. But peripheral areas cost more to serve than those closer to city offices and shops, police headquarters, and the like. Residents and workers in those areas must jump in their vehicles to reach retail centers and restaurants.

In Philadelphia, 37 percent of downtown residents walk to work. That’s the highest percentage in the nation.

The City Council should run, not walk, towards extending and expanding Spokane’s tax abatement program. Five years and 16 projects is just a good start.

And after all, wouldn’t you rather be here than in Philadelphia?