Gov. Gregoire Now Proposes Cutting Annexation Sales Tax Credit By 10 Percent
Gov. Chris Gregoire proposed $1.7 billion in state budget cuts Nov. 21 – including a 10 percent reduction in the sales tax credit that help Burien and six other cities pay for annexation of neighboring unincorporated areas.
This credit allows cities that annexed an area with a population of at least 10,000 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.
Late last month, Gregoire released a detailed list of Budget Reduction Alternatives to offset the $2 billion shortfall in anticipated revenues for the current fiscal biennium, including elimination of the state annexation sales tax credit.
But mayors from 115 cities statewide – including Burien Mayor Joan McGilton – responded with a letter to Gregoire, stating they were “extremely disappointed with the depth and breadth of your ‘preliminary choice’ budget cuts targeting cities and towns.
“These deep cuts are intolerable and, we feel, do not reflect our longstanding partnership…. Given our partnership, we want to work with you to help the state meet its economic goals. Instead of firing salvos at one another, we should be working together to stimulate economic recovery.”
“One major concern raised in the letter relates to the Governor’s proposal to eliminate the state sales tax credit that is helping several cities such as Burien that have recently done annexations,” Burien City Manager Mike Martin said earlier.
“For example, for the first North Highline annexation the city has received a total of $584,000 to date to help the city provide services in the North Burien annexed area,” Martin noted. “This funding was anticipated to last 10 years following annexation, but would be eliminated under the Governor’s [initial] proposed cuts.”
The mayors also noted that the responsibility for implementing and enforcing many laws enacted by the Legislature falls on local governments.
Neither McGilton nor Martin were immediately available for comment about what is now a proposal by Gregoire to cut by only 10 percent the state annexation sales tax credit to the seven cities in King, Pierce and Snohomish counties.
The governor’s new budget cutting proposals would also reduce by $43.8 million liquor profits sharing by 39 counties and 281 cities and towns, eliminate state liquor excise tax revenue sharing ($26.4 million), and reduce by 10 percent ($2.2 million) streamlined sales tax mitigation to two counties including King, 51 cities and seven transit districts.
The Legislature will convene in special session Nov. 28 to offset the $2 billion revenue shortfall to balance the budget through June 2013.
Burien, which has taken the first two steps toward annexing the remaining North Highline unincorporated area, anticipates receiving $5 million a year from this sales tax credit for 10 years to offset the costs of a second annexation.
If this proposal of Gregoire’s is approved during the special session, Burien would get only $4.5 million a year for the costs of annexing unincorporated North Highline.
The state’s Growth Management Act requires the annexation or incorporation of all currently unincorporated urban communities.
After Gregoire initially proposed eliminating the sales tax credit, opponents of this annexation intensified their objections to the move, saying there was no way the city Burien then could afford it.
In early October, the Burien City Council adopted by a vote of 5-2 a resolution to proceed with annexation of the remaining unincorporated area. A notice of intent to annex then was submitted to the King County Boundary Review Board, as required by state law.
The Boundary Review Board will hold a hearing on Burien’s proposal Jan. 9 (read more about that here).
In proposing her budget reductions Monday, Gregoire said, “No governor in modern times has had to weigh cuts of the magnitude I am proposing. But I have no choice…. Over the past three years, we have had to reduce existing and projected spending by nearly $10.5 billion. And now we must cut even deeper.”
In addition to $1.7 billion in state budget cuts, Gregoire is proposing some fund transfers – and asking state voters to approve a temporary half-cent increase in the state sales tax, which would generate an estimated $494 million through 2013. The tax increase would expire in 2015.
If the Legislature approves that request, she wants a special election for a public vote on the tax hike in March.
Gregoire said the majority of the money it raises would go to K-12 and higher education and restore public safety funding.