On Garfield Street in Parkland, a row of aging business buildings stands across the street from a modern college bookstore and commons – signs of a neighborhood in transition.
The eclectic, two-block stretch wedged between Pacific Lutheran University and Pacific Avenue South soon could see its biggest change yet, with the help of a state-approved tax break.
Construction on a $20 million project to build 104 apartments, plus office and retail space, a block away from PLU is expected to start late this year. The apartments would contrast sharply with the lower-end rental units along the Pacific Avenue strip.
The project aims to attract PLU professors, staff members and other professionals to live near campus instead of in downtown Tacoma or Seattle, said developer John Korsmo Jr.
“It will be a great housing opportunity to keep the people that are working in the community living in the community,” Korsmo told the Pierce County Council last month.
PLU officials are excited, too.
“I just think it’s going to change the whole vibe on Garfield Street, the entrance to campus, and be a wonderful place to live and work,” said Sheri Tonn, the university’s vice president of finance and operations. But the four-story project, called Garfield North, has drawn some criticism because of the tax break that will help drive it.
State lawmakers this year approved a 12-year property tax exemption on the value of new residential housing on Garfield. The legislation was designed specifically for this project.
Roxy Giddings, who lives nearby, told the County Council the exemption is “a big fat tax loophole.” She said she fears she’ll have to pay extra taxes because of it.
Graham resident Matt Hamilton also objected. “When you lower somebody’s tax, you have to raise somebody else’s tax,” he said.
Paul Bocchi, the County Council’s budget analyst, described the impact on individual taxpayers as “very small” because it would be absorbed over a countywide base.
Meanwhile, a few people have raised concerns about neighborhood gentrification, and that some small businesses might get priced out.
“This is a cool thing,” shop owner DJ Brown said about Garfield North. “Just don’t take out the little guy while you’re doing it.”
The County Council last month unanimously approved a resolution taking the first step to create a target area – including Garfield Street South – for the tax break.
Both the Planning Commission and County Council will hold public hearings on aspects of the project next week. Final council action is expected in August.
The development is a partnership of PLU, Korsmo Construction and Affinity Investments of Tacoma. Construction is scheduled to start in October or November, with completion in fall 2013, Korsmo said.
Several buildings, including about a half-dozen businesses and a house, would be taken down, along with three trees deemed “significant” under county rules – an Oregon White Oak and two Douglas firs.
The tax exemption would create an estimated annual tax burden of at least $239,000 starting in 2014, resulting in higher taxes.
County Council member Rick Talbert, D-Tacoma, told critics last month the tax abatement is a necessary tool for the county to meet its state requirement to accommodate urban growth – a tool that cities have had for years.
Korsmo, president of Tacoma-based Korsmo Construction, said in an interview that the tax break is critical for the developers to offset lower rental income. He noted that rents are less in Parkland than in downtown Tacoma and Seattle.
The tax exemption also makes it easier to obtain financing, which the partners haven’t finalized, he said.
“It makes a project like this possible because we are eliminating that expense for the first 12 years,” Korsmo said.
In the year after the exemption ends, he said Garfield North would generate $350,000 in property taxes, based on present values – enough to make up for the life of the tax break.
Tonn, the PLU executive, said she doesn’t expect an overall loss in property tax revenue from current levels because the land and retail space would be taxed.
She said the apartments are needed to attract faculty and staff to live near campus. She said there’s a lack of “modern, secure, apartment-style living” in the Parkland area.
Tonn said the $15 million in construction costs will generate $1.4 million in sales tax.
The project would employ about 100 workers.
“This has a huge positive cash flow for all of the tax base in the long run,” Tonn said. “The burden to any one taxpayer is really tiny. ... The overall net positive to this neighborhood, this community is huge.”
LIVE WHERE YOU WORK
The 2.2-acre mixed-use project is the only building planned so far for the 69 1/2-acre area that would be eligible for the tax exemption. Most of that area – 40 acres – falls within the PLU campus.
Plans call for a mix of retail, office and PLU classroom space on the ground floor. The apartments would make up three floors above ground level.
According to the legislation, the tax break is contingent on 20 percent of the units being rented as affordable housing. Korsmo said the project will target moderate-income households to meet that requirement.
He projected rent would be about $800 a month for a studio, $1,000 for a one-bedroom unit and $1,300 for a two-bedroom apartment.
“We’re going to be offering a very attractive building with some very attractive amenities within the building that people would expect to see in downtown Tacoma or downtown Seattle,” Korsmo said.
The plan is to keep professionals – from the Franklin Pierce School District as well as from PLU – living, shopping and eating near where they work, he said.
The housing isn’t intended for undergraduate students at the 3,500-student university. But Korsmo hopes some graduate students will live there and stay after they finish their degrees.
Korsmo expects the project to spark office and retail development. “One supports the other,” he said.
It’s no sure thing, however. Some mixed-use projects in the region – notably University Place’s Town Center – have found it difficult to attract builders and tenants.
The City of University Place borrowed more than $40 million to develop its Town Center. After years of struggle to find buyers, construction recently started on a building that mixes retail and apartments.
Korsmo said at least one business on the Garfield site is in talks to rent space in the new building.
Other businesses on the block include a tattoo parlor, a massage studio, a hair salon and the trophy-engraving shop that DJ Brown has operated for three years.
Brown, who co-owns Getting Personal Imprinting with his wife Judi, said they can’t afford rent in the new building because it would be four times the $1,500 per month they currently pay. Brown said their lease expires in January.
Korsmo said if existing businesses can’t afford to rent in the new building, the partners will help them relocate.
“The last thing we want to do is hurt somebody’s business and force them to close,” Korsmo said.
“I believe him when he says that,” DJ Brown said.
But until an offer is in writing, the Browns said they will continue waiting for help to relocate and to compensate them for business they’ll lose when they have to move. A meeting this week did not yield a settlement acceptable to them.