Whatcom County leaders will decide whether economic development funds should be used to help spur construction of affordable rental housing.

The County Council on Tuesday, July 10, after discussing the proposal as a committee, voted 5-0 to delay consideration until the July 24 meeting. Council members Kathy Kershner and Carl Weimer were absent Tuesday, and council member Ken Mann said he wanted to hear opinions.

In 2011, the council approved designating $1.2 million in Economic Development Investment funds to pay impact fees and utility connection fees for homes that are priced such that low-income people can afford to buy them. EDI funds are sales taxes rebated to the county by the state.

The program aims to aid developers, likely nonprofits, in constructing new housing by reducing up-front development costs. Under the current program, EDI funds must be repaid in 50 years or when the home sells at market rate.

Supporters of the program say it will yield economic development benefits by spurring construction and providing housing for employees in sectors that don't pay enough to afford market-rate housing, stabilizing the workforce. Critics say the funds are intended to be spent on brick-and-mortar projects that attract living-wage-paying companies.

So far, four or five homes have had their fees paid through the program, said Greg Young, city administrator for Ferndale, which administers the program on behalf of the county. Demand is higher now for rental homes.

Ferndale is proposing to expand the program to allow EDI money to pay fees for building rental homes. The EDI board in June recommended the council approve the expansion.

"I think that it meets the intent of what we're trying to do," county Executive Jack Louws told the council's finance committee Tuesday.

Two members of the council, Mann and Sam Crawford, weren't convinced.

"I've had a hard time finding the philosophical justification for paying the impact fees for affordable housing," Mann said. This is another step away from the intent of EDI funds, he said.

Crawford said the council concluded last year there's little economic development benefit from the program; he supported it then because the funds would be repaid. He thinks encouraging home ownership is good, but he doesn't support using EDI money for more taxpayer-funded rental housing.

"I think we're crossing the line from the hand up to the hand out," Crawford said.

Council member Pete Kremen spoke in support of the change. The demand for rental housing right now is high; people, despite record low interest rates, still can't afford to buy homes, he said.

"You basically have to prove to the bank that you don't need their money in order to get a loan," Kremen said.

This change doesn't require the county to fund rental housing's impact fees, Kremen said, because each case would still come to the council. But it opens the options.

"We've made a commitment to reduce the number of homeless people in our community," Kremen said, and this is one tool they have.

Last year, the council didn't include rental housing in the program over concerns there wasn't a mechanism to ensure the county fund would be repaid, Young said. Since then, officials have learned that it's standard practice for rental property owners to refinance 15 years after construction. State and federal rules require it to repay public financing, and it frees up money for necessary building repairs, Young said.

The new proposal would require EDI funds be paid back after 20 years, when the refinancing would occur, or when the homes are no longer priced at a rate low-income people can afford, whichever is sooner. A deed restriction would ensure money is repaid.

PROGRAM DETAILS

Click here to read a copy (PDF) of the proposal to add rental housing to a program that uses Economic Development Investment funds to pay fees for housing.

Reach JARED PABEN at jared.paben@bellinghamherald.com or call 715-2289. Read the Politics Blog at blogs.bellinghamherald.com/politics.