City plans to use new tax credit to fund affordable housing


By John Larson

The city of Tacoma is preparing to tap into a new source of funding to support affordable housing. Earlier this year the Legislature approved Substitute House Bill 1406, intended to encourage investments in affordable and/or supportive housing. This is a revenue sharing program in which a city government can receive a local sales tax authority up to 0.0146 percent credit against the state sales tax. Tacoma City Council received an update on the topic during the June 25 study session from Daniel Murillo, Housing Division manager, and Assistant City Manager Todd Wille.

Murillo told the council that this is one more source of revenue that can be used to fund housing for low-income people. He said the city will simply be getting back some of the tax revenue it sends the state each year. It is estimated that this will generate between $800,000 and $900,000 a year.

The tax credit can be in place for up to 20 years. The money can be used to acquire, rehabilitate or construct affordable housing. It can also support the operation and maintenance of new affordable or supportive housing services. The city will be granted the authority to issue general obligation bonds or revenue bonds. It will also be able to enter into interlock agreements with other jurisdictions. Funding must go to projects serving people earning 60 percent or less of the average median income. The average median income of an individual in Tacoma is $26,800 a year. For a household, it is $51,270. Councilmember Keith Blocker noted that one common tax incentive offered by the city is aimed at people making 80 percent or less of the average median income.

Wille explained some of the timing regarding implementation of the legislation. Staff has prepared a resolution for the council to vote upon, which is needed to maximize the capacity of the tax credit. The legislation takes effect on July 28, with a six-month window to enact a resolution of intent. The earliest date that Tacoma would be able to adopt the resolution would be July 30, in order for the tax to be imposed by Sept. 1. This will require the unusual tactic of a double emergency ordinance, meaning it would not go through the typical process of a first reading one week, followed by a second reading the following week. This unique circumstance requires six of the nine council members to approve it, as opposed to five votes on most matters.

The study session on July 30 will offer recommendations on using the funds to implement the city’s Affordable Housing Action Strategy.

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