The Spokane City Council is launching a review of an ordinance that for the last five years has enabled developers to obtain 10-year property-tax exemptions for residents who buy new multifamily housing units from them in certain areas of the city.


Earlier this week, the citys staff gave the councils subcommittee on planning, community, and economic development a list of 14 projects that have received the exemption, plus other information, to examine in the review.


I dont think its a crisis; I think its appropriate to review it, says City Council President Dennis Hession, who serves on the subcommittee with Councilmen Al French and Brad Stark. Its one of the classic collisions of an effort to stimulate development and a cost that the incentive has to the citizens.


The exemption was intended to stimulate residential development, at first just in the central business district and West Central neighborhood, then later in the Riverpoint area, Brownes Addition, and certain centers and corridors targeted for growth by the citys comprehensive land-use plan. Yet, Hession says, developers increased use of the exemption and the citys approval of it for an apartment project in the already busy Indian Trail area have raised concerns.


The city has approved the exemption for a total of 11 projects since the beginning of 2003, after authorizing it for just two projects in 2000 and one in 2002. As developers have used the incentive more and more, the cost to other residents of the city has climbed, Hession says.


Under the ordinance, developers continue to pay property taxes on the value of the land on which they build a qualifying multifamily project and on the value of any improvements that were on the site before they did the project. Buyers of the units in such a project, however, dont pay property taxes for 10 years after they buy their residences.


Under state law, the city can collect 1 percent more in property taxes each year. Given that and how the exemption ordinance works, the rest of the citys taxpayers pick up the added burden while the buyers of the multifamily units that qualify for the break pay no property taxes for a decade.


The exemption has been granted for some developments that include expensive units, and the issue of why the buyers of those units qualify for tax breaks that the rest of the citizenry doesnt receive is a fair concern, Hession says.


The citys current budget crisison Tuesday, voters were asked to approve a lifting of the lid on property-tax collections to fund servicesis bound to make the fairness part of the tax exemption even more ticklish.


Hession says the council also will address the question of whether the exemption should be left in place, or whether the original inertia that impeded development in areas where the exemption is available has become a thing of the past.


At least one council member has questioned the approval of the exemption for a 212-unit apartment project at 5420 W. Barnes Road in the busy Indian Trail area, Hession says.


That area is one of the so-called centers and corridors the city has targeted for growth, and there has been quite a bit of development in that neighborhood, says John Pilcher, the citys economic development director. He says traffic is congested in the Indian Trail area, and the city needs to improve the infrastructure.


To help the City Council weigh the continued applicability of the exemption, the citys staff will look at whether the break should continue to be available everywhere its available now, Pilcher says. He adds that the council will mull such other factors as income and value levels, design criteria, and project size.


Not all areas in the centers and corridors earmarked for development qualify for the break, Pilcher says. Rather, he says, the underlying zoning of property must allow multifamily projects, or the exemption cant be extended there.


Yet, the city needs to bring about infill development in vacant areas within its borders and also hopes to spark high-density development in places, and the exemption is a tool that can help it accomplish such goals, Pilcher says.


The exemption provides some benefits that arent readily apparent, he says. For example, Pilcher says, people who live downtown, where the exemption initially was made available, tend to shop at businesses in the city rather than at establishments in the county, which helps the citys tax base.