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Can the New Affordable Housing Sales Tax Credit Help Auburn?

Community Development Manage Jeff Tate will present a summary of House Bill 1406 at tonight’s City Council Study Session.  If adopted by the city, HB 1406 will allow the city to “capture a portion of sales tax that is already being levied and collected, provided that it is used to support affordable housing objectives,” states the agenda description.

“The funding option created by the State Legislature takes advantage of existing tax revenues,” said Tate. “Rather than raising taxes, this option allows tax dollars that are already being collected in Olympia to be redistributed back into our city where we can direct the money to affordable housing initiatives that are important to Auburn.”

A brief breakdown from tonight’s agenda summary highlights that:

  • HB 1406 goes into effect on July 28, 2019.
  • If a city elects to collect the tax, the authority to collect and use the funds expires after 20 years.
  • HB 1406 allows cities to pursue two collection options:
    a. Half authority of .0073% (Auburn’s estimated revenue would be approximately $155,000 annually)
    b.Full authority of .0146% (Auburn’s estimated revenue would be approximately $310,000 annually)
  • Option 3.b requires that the city also adopt a local supplemental sales tax committed to affordable housing objectives.
  • Funds can be used as follows
    a. Retained within the city.
    b. Pooling with other jurisdictions (e.g. SKHHP)
    c. Bonded against the revenue stream and pledge revenue collected to repay the bonds.
    d. Ceded to County
  • To activate, the city must adopt the resolution of intent by January 28, 2020, and adopt final legislation by July 28, 2020.

What This Means For Auburn

“Each city that takes advantage of this option can use the funding in ways that work best within that particular community. The State Legislature recognizes that the challenges with solving the affordable housing crisis is not a one size fits all approach and is helping enable local government to more successfully contribute to solutions,” explained Tate.

“With that said, there is a lot of work to do in this area. This revenue option is not going to solve housing affordability,” Tate continued.  “The City of Auburn is fortunate to be a member of the South King Housing and Homelessness Partners (SKHHP) which is made up of King County and 9 south county cities (Auburn, Burien, Covington, Des Moines, Federal Way, Kent, Normandy Park, Renton and Tukwila). This collaborative is already working together on affordable housing objectives. If each city within the collaborative enables the funding from HB 1406 the possibilities expand dramatically in ways that South King County approaches affordable housing in our region.”

The MRSC Insight Blog posted an in-depth blog post explaining more about SHB-1406.  Read more about this new potential affordable housing revenue here: SHB 1406: Understanding the Affordable Housing Sales Tax Credit

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