A long-awaited mixed-use project in Tacoma’s Hilltop neighborhood is getting closer to breaking ground after the City Council recently approved an eight-year property tax break for the developer.
The $40 million development will bring 247 market-rate apartments and almost 17,000 square feet of retail space to the block of South 11th Street between Martin Luther King Jr. Way and South J Street, breathing life into a lot that has long sat vacant, said Pat Beard, a project manager with the city’s Economic Development Department.
The developer, Kirkland-based Jagpal Basra, plans to break ground in June, and construction is expected to be completed by summer 2018, the city said.
Basra decided to invest in the Hilltop in part because of the coming Link light rail expansion, and because he saw the project as something that would transform the neighborhood.
“The community has waited a long, long time for this project,” Beard said.
Council members praised the transit-oriented development during the meeting last month at which they approved the tax break.
“I’m really excited about all of these projects, great infill projects, especially the one at 11th and MLK,” Councilman Ryan Mello said. “It’s getting to the scale we envisioned when the council and the community has done so much work to plan, so we’re really excited for that.”
Under the tax exemption program, the developer will pay property taxes on the value of the land and retail space, but not on improvements made to the land.
The eight-year exemption is for projects with market-rate housing. The city also offers a 12-year tax exemption for developers who build affordable housing.
Councilwoman Lauren Walker Lee asked at the meeting whether the affordable option had been considered for this project. Economic development staff members said they discussed it, but the developer chose to go with the tax break for market-rate housing.
Some have questioned whether the eight-year tax break is still needed, with thousands of new apartments set to come online in Tacoma in the next few years.
City economic development staff members insist it is, because while construction costs are about the same in Tacoma and Seattle, the return on investment for developers here is much lower because they can’t fetch high Seattle rents.
In this case, total property taxes exempted over eight years is expected to be $5.15 million, with $1.15 million of that being the city’s portion.
The development is expected to have 117 studio apartments, 121 one-bedroom one-baths, and nine two-bedroom two-baths, according to a memo from staff.
Rents will start at $800 to $1,400 a month for a studio, $1,400 to $2,300 for a one-bedroom and $2,300 for the two-bed, two-bath units. The smallest studios will be 350 square feet, and the largest apartments will be 1,000 square feet.
While the rents appear consistent with the trend of quickly climbing rates in Tacoma, they have raised some eyebrows.
Some Hilltop residents are worried about potential gentrification and the upward-creep of housing costs that eventually could push out longtime neighbors, said Brendan Nelson, president of the Hilltop Action Coalition.
“We are hearing concerns from the community of this would push gentrification in the Hilltop area, some really challenging questions on what is it actually going to look like, what does this mean for the community,” Nelson said.
With this project, the city has been more proactive about having conversations with the community and bringing the information to people on the Hilltop, Nelson said.
“From what we are seeing and hearing from city officials and folks who have come to present, they are really taking all those things into account and trying to create opportunities in these conversations to where things can remain affordable and to where the community has some investment and input into what those types of things could look like potentially,” Nelson said.
A mix of affordable housing and market-rate housing keeps a neighborhood diverse and vibrant, said Walker Lee, who has lived on the Hilltop for more than two decades.
“It’s a good thing. It fits in with the city’s comprehensive plan, it fits in with the Hilltop subarea plan … and it fits in with a lot of city initiatives, just in terms of finding density in the mixed-use centers throughout the city,” Walker Lee said.
She pointed to the growth of the 12-year tax break option in unsuspected areas — such as a potential affordable development in Point Ruston.
“We need to have a mix of housing wherever it is in the city, so having some market-rate housing in the Hilltop and having affordable housing at Point Ruston or in the Proctor area, that really makes for a healthy community,” she said.
Even with the eight-year tax break, the property will generate more tax revenue than it has been, city staff said. The state Department of Commerce assumed ownership of the grassy lot in 2013 in a settlement with the Martin Luther King Housing Development Association, which had misspent nearly half of the $4 million in state money it received to develop the property. Commerce sold the property to Basra.
City officials have hoped the coming Link light rail extension would help spur the redevelopment of the Martin Luther King Jr. Way business district. The extension is scheduled to be ready by 2022, although President Donald Trump has proposed federal budget cuts that could eliminate $90 million in project funding.
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A representative from Plus said the firm hopes to break ground in early 2018, following demolition work this summer.