Did the city of Tacoma just cost Pierce County $10 million in affordable housing cash?

Did the city of Tacoma just cost Pierce County $10 million in affordable housing cash?

(Peter Haley/The News Tribune)

PIERCE COUNTY, Wash. — Pierce County officials believe they lost out on an estimated $10 million to help fund affordable housing in the coming years because the city of Tacoma moved ahead with an ordinance this week that in essence capped the amount the county could obtain.

The potential loss has left some County Council members upset even as city officials say they meant no harm.

"I'm feeling really frustrated, and I feel bad because we aren't acting responsible for our civilians and basically giving up that funding," County Councilwoman Connie Ladenburg said Tuesday.

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Tacoma Mayor Victoria Woodards said the program in question is complex and difficult to understand.

"The city did not (intentionally) move forward to take money out of the hands of the county — that I can say with full confidence," Woodards told The News Tribune following the City Council vote Tuesday.

At issue is a new state law that sets aside sales-and-use tax dollars for affordable housing programs across Washington. Counties and cities can get to keep up to .0146 percent of the state's 6.5 percent sales tax collected within their boundaries. Taxes will not be raised, legislators insist.

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The amount allocated to jurisdictions is based on whether they have a tax already in place for affordable housing, mental health treatments or chemical dependency. Jurisdictions with one of those taxes in place qualify for a higher amount of money.

The timing of applications is important, Pierce County officials believe. If the county moves first, it can include the entire county in the calculation for the amount of money it receives. If a city goes first, their taxes are removed from the county's total collection calculation.

Some county officials said they cannot now use Tacoma's qualifying tax "due to the fact the City did not accommodate our request to hold off two weeks while the legislation went through our process," a statement from the county said.

No other city in the county has the qualifying tax, and now the county could collect as little as .73 percent of the state sales tax.

If Tacoma had waited, the city and the county could have benefited from keeping a higher portion of the sales tax, County Councilman Derek Young said.

County Council Chairman Doug Richardson told The News Tribune on Friday he isn't ready to make the call on whether the county would lose money until the Department of Revenue determines how Tacoma's action will impact the county's tax rate.

The issue came to a head Tuesday when the Tacoma City Council was set to vote on an ordinance that would authorize the city to take up to $900,000 per year for the next 20 years from state taxes to spend on maintaining or constructing new affordable housing units in the city.

Staff members from each administration had been talking for months, Young said, but it was not until Monday the county realized the order of implementation mattered. Young said he learned about the time issue from someone in King County government.

Woodards said she wasn't aware of the county's concerns until Young contacted her Tuesday afternoon. After convening Tuesday afternoon to discuss the matter, the City Council decided to proceed.

Pierce County officials got wind of the city's intentions and rushed their own ordinance to the floor.

The Tacoma council passed its ordinance unanimously. The County Council, needing a supermajority to pass its emergency ordinance, failed to do so on a 4-2 vote, with Richardson and Councilman Jim McCune voting no. Councilwoman Pam Roach was absent.

County Council member Dave Morell likened the emergency vote to putting a gun to his head but voted yes.

"The city is hellbent to do it tonight," Richardson said at the meeting. "I'm disappointed if they are unwilling to work with us."

Tacoma officials raced to implement the bill so they could start collecting funds as soon as possible in September. They said they would lose thousands per month if they didn't pass legislation the same month the bill went into effect in July.

The county, state legislative staff and the Department of Revenue said the 20-year clock doesn't start until the county or city pass and implement the law, but the city said waiting would have "have delayed the receipt of revenue now."

Tacoma city attorney Bill Fosbre told The News Tribune the city had been working for three weeks to bring the ordinance before the council. The city doesn't interpret the legislation the way some people in Pierce County government do, Fosbre added. The city would support Pierce County receiving the maximum amount allowed by the law in the case of a mix-up, he said.

"We'd love for (Pierce County) to have the extra revenue because it's a regional problem and is a regional solution," Fosbre said.

The County Council now is planning to vote on an ordinance in two weeks that would authorize it to collect at the lower rate. Pierce County still stands to collect $36 million over the next 20 years to build affordable homes. The city of Tacoma is expected to collect roughly $17 million in the next 20 years.

"While rapid action was taken on Substitute House Bill 1406, allowing Tacoma to begin accessing new revenue for affordable housing starting in September 2019, we remain in conversation with our partners at Pierce County to see if there are more creative solutions we can pursue together to create a ‘win-win' outcome for all Tacoma and Pierce County residents," Woodards said in a statement Friday.

Carl Schroeder, government relations advocate for the Association of Washington Cities, worked on the bill with legislators earlier this year. Capping the amount of funds cities and counties could collect based on 2019 sales-and-use tax dollars gives the state an idea of how much they're giving back to cities in the long run, Schroeder said.

He told The News Tribune on Thursday it's possible Pierce County could have collected a larger quantity of money if Tacoma's 2019 sales-and-use tax dollars had been included in the county's total but that the confusion wasn't intended.

The more dollars that go to affordable housing, the better, Schroeder said.

"We would be supportive of making sure this doesn't make a loss of capacity of what the state was intending to provide," Schroeder said. "The point here is to get as many resources on the ground as possible."

The Association of Washington Cities has received questions from jurisdictions across the state about the bill, and the state Department of Revenue is working to figure out the tax rate breakdown.

"Even us at the Department of Revenue are trying to understand it," spokeswoman Anna Gill said.

Cities and counties across the state are facing an affordable housing need.

"We have a huge challenge with providing housing for people that are sort of working class and below and particularly have huge vacancy rate challenges," Schroeder said.

Nearly 34 percent of Pierce County residents pay more than the federal benchmark that housing should cost a third of income, according to Pierce County data. Pierce County pays the highest percentage of income for housing in the state.

"At the end of the day, we are still getting money for more affordable housing and that's a good thing," Councilman Young said. "The housing crisis is landing hard on Pierce County."