Spokane's 210-HOME Kōz Project Uses Parking Tax Incentive

A September delivery receives an October announcement

Catalyst Opportunity Funds and Kōz Development announced October 2 that Kōz on West 5th, a 210-unit workforce-housing development in downtown Spokane, had delivered in September. The sponsors describe a $53 million project built on a former surface parking lot south of Interstate 90.

The new announcement focuses on the financing model and the project's use of Spokane's Parking 2 People incentive. It should not be read as an October 2 construction completion event when the release itself places delivery in the previous month. The release also does not give a full occupancy count or show that all apartments were leased on the announcement date.

According to the sponsors, all 210 units are priced below 80 percent of area median income. They say the development saved an estimated $4.2 million through the sales-tax incentive and describe it as the largest project to use the program to date. Those are sponsor statements rather than findings from an independent rent review or a city audit of the project's tax savings.

Spokane's own program guidance supplies the rules that make the announcement relevant beyond one development. It describes a construction sales-and-use-tax deferral intended to turn underdeveloped surface parking land into housing, with affordability conditions, a completion process and continuing reporting after construction.

The city program implements a state-created incentive

Spokane says the Washington Legislature created the underlying program in 2022 through Senate Bill 5755. The city's guidance places it under Chapter 82.92 RCW and identifies Spokane as the first city in the state to adopt local code enabling its use.

The city adopted a “Pavement to People” ordinance in 2023. Its release described a program that waives construction sales and use tax if a developer maintains at least 50 percent affordable units for ten years. The current economic-development page calls the incentive Parking 2 People and describes its administration as a tax deferral.

Those names refer to the same local incentive framework, but the deferral language is important. A sponsor's shorthand description of a tax exemption does not remove the conditions under which deferred tax may become payable. The city's guidance discusses ongoing affordability and reporting, as well as potential repayment if compliance is not maintained.

The Department of Revenue has a role in issuing the tax-deferral certificate and calculating the deferred tax amount. Local approval alone is not presented as the full state tax determination. Spokane's guidance repeatedly directs owners to coordinate on eligibility and keep the documentation needed for review.

Not every unused lot is eligible

The city identifies eligible land as a surface parking lot that was in existence and use on or before June 9, 2022. Its guidance says the lot must have been open to public use, with or without a charge, and that parking created after that date is ineligible.

The page also says a parking lot does not have to be paved or striped. Those conditions concern the property's actual parking use and access, not simply whether a parcel looks empty or has little development on it. The guidance calls for supporting aerial or photographic evidence when an owner seeks eligibility.

Spokane warns that the Department of Revenue's interpretation affects how much of a site can qualify. If vehicles parked on only part of a parcel, the guidance says the state can approve the incentive only for that portion. A whole development site is therefore not automatically eligible merely because some parking existed somewhere on it.

The city lists residential or mixed-use zoning among the eligible-site considerations. It also encourages early consultation on potential sites. These requirements distinguish the program from a general tax waiver for all affordable multifamily construction, regardless of property history.

The Kōz announcement identifies a former surface parking lot as the project's site. The announcement does not independently prove every site-eligibility element; the underlying application, site evidence and approved conditional contract remain unverified.

At least half the homes must meet the program conditions

Spokane's guidance requires a project to set aside at least 50 percent of its units as affordable rental or homeownership housing. It describes rent at or below the applicable Spokane County fair market rent or home sale prices at or below the county median, alongside the program's income and affordability definitions.

The guidance defines affordable housing by household housing costs, including utilities other than telephone, that do not exceed 30 percent of monthly household income. It refers to low- or moderate-income households and the applicable state definitions. Those program rules are broader than simply repeating a project's promotional use of the term “workforce housing.”

The sponsor says Kōz on West 5th goes beyond the minimum set-aside by pricing all 210 units below 80 percent of AMI. The release does not publish a unit-by-unit rent schedule, household income certification record or explanation of utility charges. The stated affordability profile therefore remains attributed to the sponsors.

The city's program page includes older 2024-2025 income and rent tables. They should not be used as if they were current 2026 dollar limits for prospective residents. The program's stated structure does not make those older rent figures current for the October announcement.

The page also describes layering the incentive with other programs, such as the Multifamily Tax Exemption, while requiring additive affordable units. Its example shows why satisfying one program's set-aside does not necessarily satisfy every program when incentives are combined. The Kōz release does not provide a full property-specific inventory of all overlapping restrictions.

Conditional approval starts before construction

According to the city, a conditional Parking 2 People contract must be approved before a building permit is issued. The application process includes a city application, the Department of Revenue form, site photographs and a state business-license copy.

The city guidance describes conditional contracts as valid for three years and says an owner may request one 24-month extension. It also identifies separate applications for phased developments or different buildings. These are project-development conditions, not a post-completion option to retroactively claim a general affordable-housing exemption.

During construction, the Department of Revenue provides the certificate and identifies documentation needed to substantiate the deferred taxes. Spokane says the certificate expires when the property receives its certificate of occupancy. The fact that construction is complete does not end all of the program's remaining administrative work.

The guidance also addresses ownership changes during construction. It says a change does not automatically terminate the deferral, but requires notification to the city and state and supporting transfer documentation. That is a condition of continuing the incentive, not proof that a buyer can acquire the benefit without review.

The sponsor's estimated $4.2 million savings is relevant to the project's financing story. It is not a substitute for the state calculation based on the actual construction receipts or for the final city review of eligibility.

Final approval and annual reporting follow completion

Spokane says owners must apply for a final certificate within 30 days after issuance of the certificate of occupancy. The submission includes a description of completed work, confirmation that the project remains eligible, its affordable-unit count and construction value.

The municipal requirements likewise call for the city to determine whether completed work and the housing offered remain consistent with the approved application and contract. Construction delivery therefore begins a verification stage rather than proving final eligibility by itself.

The city describes annual compliance reporting beginning one year after the certificate of occupancy and continuing for ten years. It identifies tax reporting to the Department of Revenue and affordable-housing compliance reporting involving the city and Department of Commerce.

The guidance says the annual tax performance report is due May 31 during the required period. It also describes housing information such as leases, income verification, unit rent and changes to the building. Portions of the page note that housing-reporting details were still being developed as of September 2024. That older note should not be treated as a verified statement that no later guidance exists in 2026.

The supported operating point is that the incentive carries continuing reporting and affordability obligations. The property's first report date, issuance of its final certificate and current reporting form remain unverified.

Noncompliance can turn deferred taxes into a liability

The city's guidance says it must notify the Department of Revenue if program compliance is not maintained. It describes all deferred sales and use taxes becoming immediately due and payable, with interest and penalties assessed under the applicable state law.

That repayment possibility is why the incentive should not be described as an unconditional tax exemption. The construction-stage benefit depends on the project maintaining the required conditions over time. An announcement of successful delivery does not by itself show ten years of compliance have already been achieved.

The Kōz release describes the program as essential to making the financing work. That is the developers' assessment of their capital plan, not an independently verified counterfactual showing the property could never have been built by another route.

The announcement nevertheless identifies a concrete 210-home delivery and a specific public incentive connected to it. The broader lesson is in the structure: eligible parking land, conditional construction-tax relief, affordability requirements, final review and continuing reporting. The remaining property-level evidence concerns verified rents, final incentive approval, occupancy and compliance over time, rather than another new construction announcement on October 2.