OUTSIDE CITY HALL | Error on developer tax breaks means millions in lost revenue
By John V. Fox
and Carolee Colter
For years, we’ve criticized our City Council and mayor for approving millions of dollars in property tax breaks to a handful of large residential developers through the Multi-Family Tax Exemption (MFTE) program. The amount of these tax breaks now rivals our housing levy.
But, in return, all we get is 20 percent of the units in these private developments set aside at rent levels from $1,000 to $1,500 a month (depending on the size of the unit) — hundreds of dollars above what even the average worker in Seattle can afford.
Through 2010, the total value of these giveaways had risen to about $65 million. But as of March of this year, it skyrocketed to more than $200 million. The value of these tax breaks is spread out over 12 years, but it still means that several dozen developers receive about $17 million in tax breaks annually. Any one developer, for example, building 150 units might receive as much as $5 million in tax breaks over the 12-year period, or about $420,000 a year.
As more and more developers request these tax breaks, the annual total subsidy easily could exceed $25 million by next year.
For years, city officials have told the public that the full value of these tax breaks are passed on or “shifted” to the rest of the county’s taxpayers. We were led to believe the assessor had increased everyone else’s rates countywide by that extra $17 million a year. In this way, the city, county and state that normally receive a portion of our tax dollar would not lose any revenue.
We just learned that the King County Tax Assessor’s Office has made a significant error in calculating the MFTE by failing to readjust rates over the years since the program’s inception in the mid-‘90s. It means all or a significant portion of these millions that otherwise would have gone into the city’s, county’s and state’s cash-strapped general fund have simply vanished.
Nothing but higher tax bills
Last year alone, the city’s portion of these lost revenues could be as high as $4 million. That’s a lot of sidewalks that could have been built, potholes repaired, shelters or social-service programs funded.
The county may have lost as much as $3 million.
Since many other cities countywide also give away millions each year in MFTE tax breaks, did the assessor fail to adjust rates here, too, as well? No one really knows what the total annual loss of tax revenues to King County or the state has been, thanks to the assessor’s oversight.
We’ve also learned that the assessor says he can correct the problem. Oops, but he cannot go back and recoup all those lost revenues to date.
It also means from here on out the rest of us taxpayers, indeed, will pay for these $17 million in annual tax breaks — and likely much more over time.
Since the added cost of these tax breaks will be spread across a lot of taxpayers, city leaders have downplayed the amount it will add to each individual tax bill. Still, we estimate as more developers tap the program, it soon could rival or exceed the $65 the average Seattle property owner now pays annually for our seven-year, $145 million housing levy.
In the case of the levy, however, we voted for that increase and we actually get something in return: 300 to 400 units of housing a year serving our poorest households. With MFTE, developers waltz away with millions, and we get nothing but a higher tax bill (already one of the highest among cities in the region).
No questions asked?
Seattle City Councilmember Nick Licata, head of the Housing Committee, is now reviewing the MFTE program. He’s asked for an accounting from the Assessor’s Office of these losses, but so far he’s only been told, “We’ll get back to you in a few weeks.” Perhaps it’s time for the state auditor to take up a review of this program or for a statewide legislative task force to intervene.
The assessor’s incompetence has left taxpayers in the dark while depriving the city of millions in tax revenues at a time we are facing a backlog of infrastructure needs. And for that matter, why hasn’t one city official until now even thought to ask the assessor how MFTE was impacting taxpayers and the city budget?
Meanwhile, developers continue to flood the permit counter in Seattle and other jurisdictions to take advantage of the MFTE program. We’re drowning in record levels of growth so there’s certainly no need to “incentivize” new construction with such tax breaks, especially when we’re getting nothing in return — no low-income units out of the deal.
When will someone in government assume responsibility to end this giveaway? Certainly, we can’t expect such leadership from our current crop of councilmembers and or our pro-growth mayor.
JOHN V. FOX and CAROLEE COLTER are coordinators for the Seattle Displacement Coalition (www.zipcon.net).To comment on this column, write to QAMagNews@nwlink.com.
Voting for the neighborhoods' mayor
"a look at the top candidates for Mayor and who will best represent our communities"
reprinted from Pacific Publishing Newspapers July 2013
- by Carolee Colter and John V. Fox
Links to past columns http://pacificpublishingcompany.com/main.asp?SectionID=1 or here at our website: http://www.zipcon.net/~jvf4119/
Soon you’ll be called on to vote in a hotly contested primary for Seattle’s mayor. As early as July 18, you’ll receive your ballot and have until Aug. 6 to get it postmarked and back to King County Elections.
Here’s our assessment of where the key contestants fall on issues affecting our neighborhoods.
According to a recent KING-5 poll of likely primary voters, only 22 percent say they’ll vote for McGinn. Even though that puts him in front, that’s abysmal for an incumbent — worse than Nickels’ percentage four years ago, when he lost in that primary.
A March Elway poll revealed a whopping 66 percent felt McGinn was doing “only fair” or a “poor job” — and with good reason.
McGinn has had four years to address a $1.8 billion backlog of road and bridge repairs. Yet, nearly every discretionary tax dollar during his tenure has gone to the Mercer corridor, bike lanes or studies for a billion-dollar streetcar network. Other than a recent election-year gesture adding a handful of bus-service hours, he’s done nothing to prevent continued erosion of needed bus service to neighborhoods.
This is the most zealously pro-developer, pro-density mayor our city has seen, and that’s saying something. He’s steered the city away from asking developers to pay impact fees for infrastructure. He appoints only people tied to the development industry to every land-use or planning board or commission. He’s failed to address the accelerating loss of affordable housing and the displacement of thousands of low-income, minority and working people due to increased rents, demolition and speculative sale — all effects of the runaway growth he shamelessly promotes.
Last year, the Displacement Coalition sought repeatedly to facilitate a meeting between Murray and neighborhood and housing/homeless advocates so that he understood our concerns about impacts of growth on our communities and our stock of existing low-income and affordable housing. He never would meet with us. So it comes as no surprise that now, on the campaign trail, he’s demonstrated a lack of concern or even knowledge of these critical issues.
Likewise, it comes as no surprise that Murray is embraced by corporate and downtown elites, including key insiders from past administrations. These folks never warmed to McGinn’s style and never got over his tunnel opposition, his opposition to the panhandling law or his obsession with bikes.
Murray also is known for his hot temper — something he arrogantly directed at us when we publicly wondered how a “progressive” could back former City Attorney Mark Sidran’s 2003 mayoral bid. It bodes ill for neighborhood residents or anyone who might question his policies.
After dividing developer support between Murray and McGinn, you’d think none would be left for Harrell. But a striking 54 percent of his contributions come from downtown and out-of-town big donors. Only about 40 percent come from Seattle’s neighborhoods.
While Harrell has occasionally departed from the pro-development script (for example, his support for the Roosevelt Neighborhood Plan), he’s otherwise backed upzones and institutional expansion and never questioned millions in tax breaks for residential developers.
In a recent forum, he seemed not to grasp that proposed revisions to the city’s Comprehensive Plan would pave the way for still more development, especially around rail stops in Southeast Seattle, where many low-income and minority households are vulnerable to gentrification and displacement.
When we met with Harrell to show him how Seattle Housing Authority’s (SHA) plans wiped out public-housing units and drained away low-income housing-levy dollars, Harrell told us he trusted SHA’s word — and by clear inference, not ours. After promising an independent ombudsman to oversee SHA’s relocation of displaced residents, he quickly gave that up when SHA said it would set one up internally.
Throughout this campaign, Steinbrueck has criticized the city’s misallocation of resources to downtown and South Lake Union at the expense of needed street and bridge repairs and sidewalks in our neighborhoods.
He’s the only candidate to actively oppose a new sports arena in SODO.
He’s called on developers to pay impact fees and replace low-cost housing they remove.
While not opposing growth he promotes managed and responsible levels with mitigation to protect tree canopy, urban streams and especially low-income and minority residents in the path of growth.
He’s fond of saying, “The neighborhoods are the solution, not the problem.”
While on City Council, Steinbrueck voted against wasteful streetcar expenditures.
He sought independent citizens to appoint to SHA’s board, instead of rubberstamping handpicked supporters.
He always tried to bump up housing-levy amounts to serve the poorest households.
He protected blue-collar jobs by blocking attempts to turn SODO and Interbay into office parks.
Steinbrueck opposed Sidran’s “No Sitting Law” and said repeatedly he won’t sacrifice the civil rights of the homeless in the name of public safety.
We’ve crossed swords with Steinbrueck on occasion. But he’s the only candidate in this race proposing real solutions that rein in the devastating impacts of growth now hitting our communities.
He’s our only hope in fact to challenge the status quo and
return city hall to its citizens. We’re supporting him.