BREAKING: Gov. Gregoire Proposes Eliminating Annexation Sales Tax Credit

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by Ralph Nichols

Burien’s proposal to annex the remaining North Highline Unincorporated Area took a major body blow Thursday (Oct. 27).

Only time – and anticipated negotiations between city council members and state legislators and King County officials – will tell if this hit proves fatal.

That blow is included in Gov. Chris Gregoire’s proposed Budget Reduction Alternatives to offset another $2 billion shortfall in anticipated revenues for the current fiscal biennium.

Gregoire’s budget-cutting plan was submitted to legislators this morning. A special session of the Legislature to deal with the state’s latest budget crisis will be held in late November.

Under “Local Government Revenue Sharing,” the governor proposes elimination of the state annexation sales tax credit, which her budget office projects would save $17.8 million, effective Feb. 1.

This would terminate “a tax credit that benefits seven cities in King, Pierce or Snohomish counties,” Gregoire reminded the Legislature.

“Under the credit, cities that annexed an area with a population of at least 10,000 are allowed to retain 0.2 percent of the state’s sales tax generated in the city to fund the cost of extending city services to the annexed area.”

For Burien, the sales tax credit, if it remains on the books, would bring the city an additional $5 million a year for 10 years to offset the costs of annexing North Highline.

Without a guaranteed sales tax credit for the full 10 years, even some ardent supporters of annexation on the city council have questioned whether it would pencil out.

In her message to legislators, Gregoire said, “These budget alternatives will impact real people. They’re all around us. They’re in our neighborhoods, on our streets, in our schools – and they have needs the state will no longer be able to meet….

“This is a beginning,” she continued. “I expect additional feedback from communities and various stakeholder groups that I will certainly consider before I present a more complete budget next month. This list will likely hange before then. But not much – our options are limited.

“We’ve already cut $10 billion from state government over the last three years, which leaves very few options moving forward. I said the work of slashing our budget by another $2 billion would be dreadful, and that’s what it is. Washingtonians are going to get a lot less of what they need.”

More details will be posted on The B-Town Blog later.

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19 Responses to “BREAKING: Gov. Gregoire Proposes Eliminating Annexation Sales Tax Credit”
  1. That certainly changes things.

    I would still urge the council to continue the process, have the vote then table the motion of incorporation until we get what we need from the State and County to make incorporation work.

    Tabling the incorporation vote would keep Seattle from ever annexing the area and put pressure on King County/ the State to give us what we need to make this work.

    The question I have is if there is a statutory deadline in incorporating North Highline into Burien and what the legal ramifications are of tabling indefinitely. Or could the incorporate vote be tabled, essentially, forever?

    King County would still run North Highline during all of this process.

    Joey Martinez

  2. Christine says:

    Many of us are not sure annexation is a good move for the city…I am actually hoping this may stop the process.

    • William Forest says:

      Without the tax credit annexation is a cooked goose.. The fuzzy math has now become crystal clear because without this tax credit even the most ardent supporters of annexation are not going to be able to canoe down this creek without a paddle!

  3. I would agree that many are against. I also hope you can see that many are for annexation.

    I would hope you you consider the following regardless of who wins/loses the election.

    This is my scenario in 3 pro-candidate win.

    If the vote is allowed to proceed and North Highline votes to annex into Burien:
    1) If the tax credits are not there, I don’t believe the current makeup or “pro-annexation” sweep will vote to incorporate the area. This would be the last step (other than setting the date).
    2) this keeps North Highline out of Seattle’s hands forever (as I have yet to find anything to force the final vote on incorporation in WAC, RCW, or King County Codes). I would like a confirmation from the State AGs office on that…

    This does two things. It placates a small part of my wanting to annex North Highline.

    It gives Burien an advisory voice (though I don’t believe it’s legally binding) on zoning in the North Highline area. King County would need to check with Burien on any zoning changes, though they are not legally required to follow our wishes.

    Something to think about.

    Joey Martinez

  4. Get a clue burien city council says:

    Where did all the people go that said this wouldn’t happen?

  5. Greg Duff says:

    I have said from the very start of my campaign that I support annexation only if it is financially viable for the City of Burien. A big part of that financial viability is the sales tax credit. Let me be very clear. If the sales tax credit is not on the table, I will not support annexation. The governors proposed budget reduction is just that, proposed.
    There will be a lot of negotiations about annexation before a deal is either approved or rejected. The City of Burien is not obligated to follow through with annexation until the council feels it is a good deal. King County is forcing the annexation and the removal of the tax credit will stop any city from wanting to further annexation. You can rest assured that King County, Snohomish County, and officials from all 7 cities affected will be having meetings with the governor. The Burien City Council has said from the start that there will be a lot of negotiations before a deal is finally struck and this is just one more item that we will have to work out.

    Once again let say very clearly that I will not support annexation if it is not financially viable for the City of Burien.

    Greg Duff

    • SD says:

      Greg, can you address my question below?

      Can anyone tell me whether the City is counting on the annexation tax credit for the area they recently annexed– or was the population for this area less than 10K?

  6. Neil says:

    I will still urge caution. Do not drop your guard for a second. Canditates that are being funded by outside influence ie. Builders Association (remember the robo calls) are still a danger to our city. They didn’t pour thousands of dollars into our small city election to just walk away and those candidates that took the money are nothing but “Manchurian Candidates” Once elected they will serve the hand that fed them, not the citizens they are supposed to represent. That is the way politics work. Just look at the sorry state of politics at the national level if you need an example. I personally cannot risk voting for any candidate that is pro-annexation.

  7. Bobby Leon says:

    Neil You seem to be stuck on “outside funding” Name any of the construction projects that happened in Burien that was from a Burien based company (there are none). Outside funding happens. I did my research on the candidates instead of just making generalized statements. I went to the PDC and went to Mr. Duff’s web site and looked at who supports him. He has a TON of local support including the King County Police and their Chiefs, Burien Fire Department, Highline Fire Department and their Chiefs, and (the most impressive) 5 out of the 7 current Burien City Council Members. He also has the support of the Ed Dacy and Joey Martinez Campaign. Mr Duff is definately local and has a strong record for fighting for all the citizens of Burien. He has said all through his campaign that he support annexation IF it is financially viable for Burien and I believe him. I have know Mr. Duff a long time and he is one of the most honest and caring man I know. I am proud to support him for Burien City Council.

    • Neil says:

      Bobby Leon, I have no problem with outside companies doing construction projects in our area. It boosts our local economy and I am happy to see investments in our city. I do have issues with lobbying arms of certain special interest groups funding our candidates. In this case my concern is with the Builders Association giving substantial amount of money to Gordon Shaw. Ask yourself why? If we have construction needs in our city or the potential annexed area we will have to use a construction company. Pretty much all of them are members of the Builders Association. They dont have to pay us to get our business. So why are they showering Gordon Shaw with all this love? It’s to influence him and any other candidates that they support with what type of projects they want to do in our area. That takes us, as residents of the area out of the debate on what we want build in our city. My previous comments said nothing personally about Mr. Duff. I am NOT going to vote for him but you can.

      • William Forest says:

        I am voting for Lucy K , Bob Edgar and Debbie Wagner.. As has been mentioned a number of times on the blogs.. Annexation although the most important is not the only issue before the city council . Its a no brainer for me that these 3 candidates will think of the residents first rather than pushing a personal agenda.
        I also think that we are much more likely to get more stringent oversight over Mike Martin from Lucy Bob and Debbie ,which imo is required.. Martin has basically been handed the keys to the kingdom by the current majority on the council and this needs to be mitigated immediately.

        • Neil says:

          Amen to that William. Mike Martin needs oversight or shown the door. Like you my vote is for Lucy K, Bob Edgar and Debbie Wagner. This election is too important to let the snakes in.

    • William Forest says:

      We need change on the city council and the fact that the majority support Mr Duff imo is a negative not a positive.. Of course they want another good ole boy to join their club..
      The support of Joey Martinez imo is also a big negative because frankly I don’t think this dude is firing on all cylinders.. (just my opinion)
      Oh and my grandmother is honest and caring.. but that does not mean I would vote for her for city council as she would make a terrible council member.

  8. TcB says:

    Nothing has been set in stone so this doesn’t change things .. yet.

  9. SD says:

    Can anyone tell me whether the City is counting on the annexation tax credit for the area they recently annexed– or was the population for this area less than 10K?

    • William Forest says:

      Good point will the half a million dollar revenue stream Burien is getting for the annexation of North Highline dry up also?

  10. elizabeth2 says:

    Just a question – if the move by Gov. Gregoire makes the annexation no longer a financially viable option, why the heck do some of the people posting want to make sure that we “would keep Seattle from ever annexing the area “…. “this keeps North Highline out of Seattle’s hands forever”….?????

    If they have reason for wanting it and feel they can make it work, let them move in that direction. Wny do we need to keep them out forever?

  11. Jay says:

    It’s not just the sales tax revenue that’s at stake. The state is proposing to stop sending cities and counties a share of the the liquor profits and excise taxes. More good news in the fight against annexation. Let’s see how the city will balance it’s budget with declining revenue from the state. How about a comment from our brilliant city manager.

    • William Forest says:

      You pose a good question.. One that the current city council needs to address with Mr Martin and ask for a detailed cost impact study.. Lets watch and see how the majority on our current city council exercise their duty in oversight and fiduciary responsibility. However if past performance is any measurement of that.. don’t hold your breath!

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