City considers property tax break for Kent Station Apartments developer

It appears Seattle developer Tarragon will get about a $25,000 property tax break each year for the next eight years from the city of Kent for building an 154-unit apartment complex at Kent Station.

The City Council’s Operations Committee approved the contract for the tax break at its April 7 meeting. The full council is scheduled to consider the exemption at its April 21 meeting.

“I get that we’ve got this ordinance on the books,” Council President Dana Ralph said. “I request that this be brought to the (council’s) Economic and Community Development Committee to look at it going forward. It’s here and exists so I won’t be voting against it but I would like to dive into it a little deeper.”

Ralph and Councilman Bill Boyce also agreed to put the proposal on the other business part of the next council agenda so the full seven-member council can discuss the issue.

Tarragon started construction earlier this year on the Kent Station Apartments next to the shopping center along Fourth Avenue North and across from the Maleng Regional Justice Center. Construction is expected to be finished in spring 2016.

The contract exempts Tarragon from paying property taxes on the apartment complex building for eight years. The company still must pay taxes on the land value.

The exemption will cost the city an estimated $25,000 per year in property tax revenue, said city principal planner Matt Gilbert at the committee meeting. He said it will save Tarragon an estimated $2 million over the eight years in building valuation as the exemption also saves the developer from paying taxes to schools, the Kent Regional Fire Authority and a couple of other taxing districts.

The state Legislature initially approved the property tax exemption program in the 1990s to help encourage development and increase density in urban areas.

Gilbert said the city adopted the tax break in 1998 to encourage development downtown but Tarragon is the first developer to use it.

Seattle-based Goodman Real Estate, which last year opened The Platform Apartments just down the street from the Kent Station Apartments, didn’t apply to the city for the tax exemption.

“It was just something they didn’t want to spend the time to apply for and engage in,” Gilbert said about Goodman. “They had other financial expectations and abilities vs. a developer like Tarragon who decided it was worth their time.”

Tarragon first notified the city a year ago that it might seek the exemption with a letter city staff that supported to extend the exemption to developers of multifamily housing projects for an additional five years because of the costs to build a large apartment complex.

“Tarragon said this incentive really put them over the top in terms of deciding to go ahead with the project,” Gilbert said. “The equity they would normally have to put into the project – their own funding – needed to be at a certain percentage and without this program they couldn’t get it to that.

“They said it was around 30 percent they put in and they go get loans and other funding for the rest. But the way this brings their operating costs down over the duration of that eight years was a very important incentive.”

The apartments will include a mix of studio, one bedroom and two bedroom units. The empty site had been used for overflow parking at the shopping center. Amenities at the new complex are expected to include a rooftop deck, two large outdoor courtyards, garden plots, a barbecue area, fire pits, a fitness center, community lounge, bike room, lobby and dog run.

The construction of 150 to 200 residential units was part of the planned unit development for Kent Station agreed upon between Tarragon and the city. Tarragon finished the retail phases but had yet to build any residential housing at the shopping center.

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