City offers developers 12-year tax break to build downtown housing

New housing projects in downtown Anchorage could now qualify for a 12-year property tax break, the city Assembly decided Tuesday night.

The administration of Mayor Ethan Berkowitz pitched the tax break as a way to boost the languishing downtown core and spark economic activity.

The Assembly voted 10-1 in favor of the measure. Assemblyman Dick Traini was the only “no” vote, saying he thought the tax incentive should extend to other parts of Anchorage. Developers now have five years to apply.

One of Anchorage’s leading multifamily developers emerged as a vocal opponent of the proposal. At an Assembly hearing last month, developer Shaun Debenham said limiting the tax break to the downtown core would disadvantage his plans for a large housing project in West Anchorage. He said the measure failed to account for a broader apartment housing deficit in the city.

Debenham said after Tuesday’s vote he may halt his project amid worries over competition and risk.

Assembly members said they were sympathetic to Debenham’s concerns but saw the measure as a first step. The ordinance includes a pledge to extend the tax incentive to other parts of Anchorage in the future.

“For me it comes down to, should we do something to encourage activity that is not happening now?” Assemblywoman Suzanne LaFrance, who represents South Anchorage, said during the meeting. “This is worth a try.”

She added: “This is a trial run, and downtown is the right place to start.”

The new law applies only to developments with four or more units of new housing, among other provisions. If the new development includes commercial space, only the housing part will be exempt from taxation. The property owner also will still have to pay taxes on the land.

Only properties within the boundaries of what’s known as the “central business district” are eligible. The zone spans west of Ingra Street, north of Ninth Avenue, east of the bluff that runs along Coastal Place, M Street, N Street and O Street; and generally south of Ship Creek.

Other taxpayers won’t see higher taxes while the tax break is in effect for a given property, said city development director Chris Schutte. At the end of 12 years, the property value will be added to the tax rolls like any other new construction, Schutte said.

At least one developer, Nick Mystrom, had said the tax break could make a planned luxury apartment project more viable.

The law calls for annual reports to the Assembly. Assembly members said they would track it closely to make sure the tax break was achieving a range of new housing options.

“It’s intended to spur development downtown and make sure we have a vibrant downtown,” Berkowitz said Tuesday night. “If we have a vibrant downtown, it energizes the rest of the city."

Debenham said the measure jeopardized other projects elsewhere, like his firm’s planned 100-unit development off Northwood Drive, which was set for groundbreaking this spring. He said he competes with large properties near downtown for renters. He had proposed the city extend tax breaks for large-scale residential development to all parts of Anchorage.

“The problem isn’t a dying downtown, the problem is a dying Anchorage Bowl,” Debenham wrote in an email to Assembly members. “Simply put, Anchorage desperately needs more housing (not just downtown).”

Right now, new large-scale residential projects are rare in Anchorage. Builders more often turn to fourplexes and duplexes.

Another major multifamily developer, Weidner Apartment Homes, has stalled out on new projects, spokesman Greg Cerbana said in a February interview. He said the tax tool could help if Weidner planned to develop downtown. In general, the Berkowitz administration has been looking at ways to get housing built, Cerbana said.

“It seems to me the city has been talking about trying to develop in the downtown area for years now, and that just hasn’t happened,” Cerbana said.

Anchorage’s plans call for more focus on areas like downtown, said Schutte, the city development director. Officials do not believe the market will naturally lead to more housing construction there, Schutte said.

The city’s goal also isn’t to produce as many residential units as possible, Schutte said. He said the city wants to target “disincentivized and disinvested” areas outlined in city plans.

“We need to pour our attention and resources into those areas,” Schutte said.