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City Council talks taxes

Bremerton City Council members grappled Tuesday evening with offering tax incentives for new construction of multi-family housing.

The discussion was the focus of a study session attended by Cecil McConnell, Dianne Robinson, Carol Arends, Nick Wofford, Mike Shepherd and Adam Brockus.

“It’s all about trying to make (downtown) more viable,” said Mayor Cary Bozeman about the proposed tax breaks.

Under the proposal, new construction of multi-family housing would be exempt from all state and local taxes for 10 years.

“This is done for two reasons – the creation of jobs and creation of housing,” Bozeman said.

He said the Puget Sound Naval Shipyard is a prime example of how a non-taxed entity still contributes to the economic strength of an area.

For now, this would be limited to the downtown area, said Chris Hugo, director for community development.

The idea is to stimulate new housing development in the city’s designated centers, which would boost population and make the areas more attractive to new businesses.

More sales tax and increased property values are other possible benefits to offering the program. The city would collect its B&O tax, utility taxes and real estate excise tax.

Some council members were not convinced the program would benefit Bremerton.

McConnell, city council president, submitted 14 questions he had about the program. Among his concerns was how using the tax breaks in the designated centers would improve housing in other areas of the city. Hugo and others believe new development will have a “ripple effect” to other areas of the city.

Hugo presented the council members with a list of other cities that have used the incentives. Tacoma started its program 10 years ago and has had 50 projects completed. Federal Way adopted its tax incentive program in 2002 and does not have any projects underway.

The big question is whether new multi-family housing construction would occur without the tax breaks.

Norm McLoughlin, executive director for Kitsap County Consolidated Housing Authority, said the cost to build new exceeds what could be reasonably collected in rent or mortgage. It typically costs $1.50-$1.70 per square foot to to build new, he said. The highest rental rates in the county are at about $1 per square foot.

On the other hand, people tend to pay higher rates when the building is new and view it as a step up from where they were living. The new multi-family housing would replace the older units in the city, he said.

Near the top of McConnell’s question list was how this would reduce the number of rentals in the city. Bremerton has a significantly higher percentage of rental properties than the county.

One suggestion is to limit the projects to owner-occupied ones.

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