Pay more sales tax for affordable housing in Tacoma? You might have to, like it or not
Tacoma City Council is considering increasing sales tax by one tenth of 1 percent to fund affordable housing projects.
If approved, sales tax in the city would increase from 10.2 percent to 10.3 percent, adding a dime to every $100 purchase, not including groceries. The increase would net the city an estimated annual revenue of $5 million.
Washington state House Bill 1590, passed in 2020, gives city and county councils authority to vote to raise local sales taxes for housing and does not require them to ask voters for approval.
Under the law, 60 percent of the proceeds would have to be put toward constructing affordable housing, mental and behavioral health-related facilities and funding operations of maintenance of new affordable housing and facilities where housing-related programs are provided. The remaining 40 percent would be used for “operation, delivery or evaluation” of mental and behavioral health treatment programs or housing-related services. The law also allows the city to bond against 50 percent of the annual funding to draw in additional dollars.
The funds would target populations making 60 percent or below Pierce County’s Area Median Income (AMI), or roughly $51,900 a year for a family of four. The city can also set parameters to target populations below 60 percent AMI. Populations that can be served under the statute include veterans, senior citizens, people without homes, unaccompanied homeless youth and young adults, people with disabilities or domestic violence survivors.
Tacoma Mayor Victoria Woodards said the additional funds from the tax could go a long way to build up needed permanent supportive housing in the city.
“The fact that there could potentially be a solution to help us with that I think is really important,” Woodards said at a council study session on Tuesday.
Woodards acknowledged it’s a hard time to implement a new tax.
“I know this is really a bad time to contemplate something like this, but sometimes you’ve got to make really tough decisions in bad times to get at issues that would be even worse if we didn’t take some action now,” Woodards said.
The dollars would be permanently dedicated to affordable housing and services, but some council members asked for a more detailed plan for what the funds would be used for prior to voting on the issue.
“I’d kind of like to get a better idea of what we’re looking at or where our thoughts would be at passage, so it’s sort of baked in. I think that’s important that people know we have an intention of where it would go,” said Council member Catherine Ushka.
Council member Conor McCarthy suggested tying the tax to a specific number of new affordable units to better track success.
“The more we tie this (money) with what we plan to build and measure ourselves against those goals, the more success we’ll have,” McCarthy said.
Jeff Robinson, director of the city’s Community and Economic Development Department, said that the city would work to put together some estimates on how many housing units the funds could help to create prior to the council voting on the tax, which is slated to happen in March.
Robinson said that in a general sense, one unit of housing in a larger multifamily project can cost between $250,000 and $300,000.
“Money is the key to getting these units built and getting to provide the supportive services,” said Robinson.
If the tax is approved, Robinson said, the city would work with community groups and service providers between April and September to develop a spending plan with specific projects.
Permanent supportive housing is housing paired with access to long-term services, such as mental and physical health services, substance-use recovery, and vocational training. The housing could come in various forms, including a congregate residence with services provided on site or an apartment rented from a private landlord with services provided by mobile community treatment teams.
City staff estimates the tax, if passed, would begin collection July 1 and the city would start receiving funds in October.
Other Washington jurisdictions, including King County, Kent, Spokane, Renton, Olympia and Bellevue, have implemented the tax.
Lynnwood, Multikeo and Mill Creek have the highest sales tax in the state at 10.5 percent, according to the Department of Revenue.
This story was originally published February 26, 2021 at 5:00 AM.
