The Economic Development & Tourism Committee of the Port Orchard City Council reviewed a proposed target-area map and a rewritten multifamily tax-exemption (MFTE) ordinance that would limit eligibility to designated centers, set four clear project-qualification paths, and raise the affordable-unit requirement for longer abatements.

Committee Chair John Morrissey and City Community Development Director Nick Bond presented the draft framework, explaining how the city started with comprehensive-plan-designated centers and made targeted expansions around downtown. "State law says that residential target areas under the MfTE statute have to be within designated urban centers," Bond said, noting the city can define its own center boundaries for MFTE purposes.

The draft ordinance replaces the previously repealed MFTE chapter. Under the new draft, any MFTE award (eight or 12 years) must meet one of four eligibility paths: a mixed-use shopfront with a minimum 4,000 square feet of ground-floor commercial or 40% of the building footprint (whichever is less); a multifamily project at least four stories tall or about 40 units per acre; a middle-housing infill redevelopment on lots under 15,000 square feet with four to 12 units; or a three-story project provided 100% of parking is below grade. To qualify for the longer, 12-year abatement, projects would also have to set aside 20% of units at no more than 25% below fair market rent (the draft threshold is higher than the city’s prior 10% standard).

Why it matters: committee members framed MFTE as a tool to make certain infill and higher-value projects feasible in a market where high connection and impact fees can make development marginal. Bond said the city hopes the rules will attract projects that generate higher assessed value while preserving the requirement that each MFTE agreement comes to council for approval.

Discussion and concerns: Council member Mark Chang cautioned that MFTE is effectively a short-term shift of property-tax burden to other taxpayers and said the city should prioritize only projects that "really benefit the city." He asked for a much narrower target area. Council member Fenton and Commissioner Anderson pushed back that many downtown and near-water parcels are costly to build on and that a broad but disciplined approach (with strict qualifying criteria) could encourage middle-housing projects and other redevelopment that otherwise might not "pencil" for builders. "I see it as a tax shift that we have to be very careful about," Chang said.

Bond and staff noted the draft tries to simplify eligibility compared with the prior code (which treated redevelopment differently than new development). Bond acknowledged builders’ concerns that some requirements — notably a four-story minimum and the 20%/25% affordability threshold for 12 years — could limit takers. He pointed to local comparisons: projects that used the longer abatement (the Overlook Apartments on Mile Hill) provided tenant rent relief totaling about $17,000 annually for the affordable units in that project and produced roughly $1 million in developer savings over the abatement period. Staff said raising the affordable-unit share from 10% to 25% would increase tenant savings to roughly $450,000 in a similar example, while also increasing administrative and audit work for the city.

Mapping and scope: staff proposed removing nonresidential or institutional parcels (schools, courthouse) from the target map so the map doesn’t imply housing is allowed where zoning or other protections prohibit it. The committee asked staff to show zoning outlines over the proposed MFTE boundaries so members could see where the program could realistically apply. Committee members agreed to ask staff to present the map with a separate color highlighting a recommended addition: the Hidden Hills/Salmonberry area.

Next steps: the committee directed staff to take the draft ordinance and updated map to the full City Council work study for further review. Staff said each MFTE agreement would return to council for approval and that the program could be adjusted later if no developers use it.

Ending note: members stressed the draft balances encouraging infill and middle housing while seeking a return on the city’s foregone tax revenue; whether developers take the offer remains uncertain and will affect future amendments.