UPDATE: Revenue Likely Focus When Lawmakers Discuss Annexation Mar. 19


Print This Post  Email This Post

Screenshot of page 181 from Monday night's Burien City Council packet. Click image to see larger version.

by Ralph Nichols

Burien City Council members are scheduled to discuss at their meeting Monday, March 19, “if and when to act” on a proposed annexation of unincorporated North Highline.

And how annexation of the remaining unincorporated area will be paid for, should that happen, is expected to be a primary topic of conversation during the meeting.

If the council decides to adopt a resolution to proceed, either at their April 2 or 16 meetings, the question likely will be submitted to North Highline voters in the Aug. 7 primary election.

But if they opt not to proceed now, that will either delay or stop the annexation process.

The Burien council would have about two more months to bring the issue to a vote in the November general election, said City Manager Mike Martin.

The state’s Growth Management Act, adopted by the Legislature in 1990 to coordinate urban growth and reduce population sprawl, requires that unincorporated communities in urban areas either become separate cities or be annexed by an adjacent municipality.

But with cities limited by Initiative 747 to a maximum property tax increase of 1 percent per year, how to pay for the transition costs of an annexation during the first few years has become a key concern of municipalities considering it.

Annexation Sales Tax Credit
The Legislature responded in 2009 by granting these cities a state sales tax credit for 10 years following annexation. For Burien, this will be $5 million a year for 10 years if the city annexes unincorporated North Highline.

Maybe.

With the state facing yet another large general-fund deficit, Gov. Chris Gregoire proposed in November eliminating this sales tax credit as part of a long list of suggestions to balance the budget for the remainder of the 2011-13 biennium.

But when the Legislature – which failed to adopt a revised budget to offset the state’s revenue shortfall – ended its 60-day regular session earlier this month, that sales tax credit remained in budgets proposed by Democrats and Republicans alike in both the House and Senate.

Preliminary indications from staff members of legislative budget writers and lobbyists alike are that the annexation sales tax credit will be in the final revised budget, which legislators hope to adopt before the end of the current 30-day special session.

Martin, meanwhile, remains adamant that no state sales tax credit would be a no-go for an annexation by Burien.

“We’ll have to wait and see what the state does,” Martin again told the B-Town Blog recently. “If they don’t include the sales tax credit, we’re done.”

Now that it appears likely the Legislature will keep the annexation sales tax credit in the revised state budget, he is moving the question forward in case council members want to schedule an annexation vote with the primary election.

“If and how to proceed with annexation, that is the council’s decision,” he said.

As for the sales tax credit, “the fact that it remained intact” in all budgets proposed during the regular session is “encouraging that it will remain there … it’s a good sign.”

For All 10 Years?
But keeping this credit in the state operating budget for another year is one thing – especially with additional revenue shortfalls projected for the 2013-15 biennium. The flip side of this equation is what might happen during its remaining nine years of this credit?

Burien council members have expressed concerns about the risk and the negative financial impact on the city that would result if they annex North Highline with the sales tax credit in place this year, but the Legislature eliminates it in a budget-balancing move in 2013 or beyond.

“Anything can happen year to year,” Martin said about that possibility. “We’ve got to work with what we’ve got now.”

He noted that one Legislature can’t tie the hands of future legislatures, but “there may be non-legislative ways to secure it” if the sales tax credit stays in the final state budget this year and Burien proceeds with annexation.

“That’s my hope. For now we’ll wait and see.” But, he added, “I think it’s there. I’m not worried about it nor is anyone else – our lobbyists and other cities,” which have recently completed or have pending annexations.

The annexation sales tax credit has been linked by legislative budget writers with other sales tax provisions that are expected to remain in the final budget.

In the meantime, the city is exploring the “non-legislative” options that might guarantee this revenue source for a full 10 years.

Funding from King County?
King County, some council members suggest, is also a potential source of funds to help cover Burien’s cost of annexing North Highline – especially long-overdue capital improvements there.

Councilman Jack Block Jr. was an outspoken advocate of this as Burien lawmakers continued their discussion of the issue last year. He repeatedly maintained that King County – which is also cash-strapped – should compensate the city for absorbing North Highline.

Not only does the county need Burien to take the unincorporated area off its hands, said Block, it should be obligated to pay the city for years of neglect in the maintenance and improvement of roads and bridges and parks there if annexation takes place.

Martin told the B-Town Blog that he is beginning “background discussions” with King County over “specifics regarding annexation, including financing, of concern to the city” – but declined to elaborate.

It is likely that Block will raise this matter during Monday night’s meeting.

Councilman Gerald Robison, perhaps now the leading advocate of annexation on the city council, has been equally adamant that Burien needs to bring the unincorporated area into the city to rein in current land-use practices there.

Robison is concerned that current county land use policies, which allow continued construction of low-income public-housing developments in North Highline, takes property off the tax rolls while increasing pressure on schools, social services and law enforcement.

On the other hand, council members Bob Edgar and Lucy Krakowiak have argued emphatically that Burien cannot afford another annexation at this time, and that those costs will exceed projections even with the state sales tax credit.

A Brief History
The city council approved on Oct. 3 a Notice of Intent to Annex the remaining unincorporated area between Burien and Seattle, which came after several months of lengthy hearings and discussions, including hours of testimony from consultants and local residents.

That measure was approved by a 5-2 vote. Since then, however, Edgar defeated then-Councilman Gordon Shaw, another strong advocate for the proposed action, in last November’s election.

Burien’s notice of intent was submitted to the King County Boundary Review Board, established by the Growth Management Act, which held a public hearing on the matter on Jan. 9-10.

The Boundary Review Board approved the proposed annexation on Feb. 16, noting in part:

The next step is for the City Council to pass a resolution confirming the Board’s decision and requesting that King County set an election date, which could be in August or November 2012.

The City Council is waiting for the state Legislature to approve a state budget before requesting an election.

The Council has indicated it will not proceed with the annexation if the current state tax credit that helps cities provide services to newly annexed areas tax credit is reduced or eliminated from the state budget.

A resolution to hold a special annexation election at the same time as the primary election must be adopted by the city council and received by the King County Clerk by April 25.

Under state law, only registered voters in the proposed North Highline annexation area are eligible to vote on the proposal, regardless of the date for such an election.

Even if the question is placed on an election ballot and approved, the city still retains the option of delaying formal annexation if circumstances require it.

The proposed annexation of remaining unincorporated North Highline was a volatile issue even before Burien lawmakers began considering it last spring – after the Seattle City Council backed away from the once-contested area.

In 2009, voters in the southern part of unincorporated North Highline approved a proposal for annexation by Burien. That area became part of the city – now known as North Burien – on April 1, 2010.

Print This Post  Email This Post

Comments

13 Responses to “UPDATE: Revenue Likely Focus When Lawmakers Discuss Annexation Mar. 19”
  1. mike says:

    I don’t want the annexation. I’m even more opposed after speaking with a commercial property owner friend who told me Burien just doubled his property taxes. It appears as though all the talk of not having to raise taxes to sustain the recent and future annexation is just BS. It sounds as though Mr. Martin is he!! bent on annexing with or without the state revenue source since he is now beginning “background discussions” (more like backroom) with King County. The state revenue may dry up since the budget is in the tank. Martin seems to dismiss this with his full steam ahead attitude to vote ASAP on annexation. Martin seems to be heading Burien into the path of a train. I think if the area Y citizens knew these and other disturbing facts they would all vote NO.

    Rate: Thumb up 0 Thumb down 0

  2. J Lutz says:

    I hate to doubt your friend but my property taxes did not double. I think the people in Area Y know what it is like to be in Seattle and they want nothing to due with it. Eveyone I talk to in Area X is so thankful they got annexed to Burien.
    Here we go again, every time annexation is mentioned the false rumors start. We heard all the same stories about anti annexation when Burien was incorporarted and when Area X was annexed. Both of those worked out great but the rumor mongors still flap their jaws.

    Rate: Thumb up 0 Thumb down 0

    • raquel davis says:

      For Burien to annex Area Y while hoping for a sales tax credit paid over a ten-year period wouldn’t be a good thing. In my humble opinion, it wasn’t a good idea to annex Area X. All of those additional people require services which don’t go away like the sales tax credit will. Most likely well before the 10-years is up.

      Rate: Thumb up 0 Thumb down 0

    • mike says:

      Lutz,
      Doubt if you want. I looked it up on his commercial parcel. Burien doubled his land value, he has $0 improvements. Ten years it stayed virtually the same and burien takes over and his property doubles in value? Come on Lutz. I don’t know the property tax cycle for burien, but could it be possible your commercial property value was not re-assesed this time around? How would people in area Y know what its like in seattle since they receive no services from them? I’ve spoken to many people in area Y that are against burien annexation. Have you? These are not rumors Lutz, these are facts. Where are your facts about how thankful people are for burien? Doesn’t look like the majority on BTB are in favor annexation from all the posts I’ve read in the past.

      Rate: Thumb up 0 Thumb down 0

    • william forest says:

      If as you suggest Lutz >>> the annexed area residents are SO HAPPY they got annexed by Burien then how about telling your buddy Mike Martin.. (you know that guy you sit next too at the White Center Unincorporated Area Council meetings).. to hold the election in NOVEMBER instead of suppressing turnout by holding it in MID SUMMER!

      It also seems like you are indicating that you have a commercial property stake in the proposed annexation area.. If thats true I assume you are expecting to benefit financially by being annexed by Burien? Is that one of the carrots that Manager Martin is dangling?
      If thats the case my friend, then think again because being annexed by Seattle, your property in the long run would yield much greater returns on your investment.

      Mr Martin I fear is a fair weather friend and once he’s got what he wants from you he is going to move on and white center will be stuck with the same unresponsive city government and dysfunctional city council the current residents of Burien are stuck with.

      Rate: Thumb up 0 Thumb down 0

  3. publiusII says:

    A very informative article by Ralph Nichols again. I would note one very important part that needs clarification. In discussing the sales tax credit Ralph states that , “For Burien, this will be $5 milion a year for ten year… ”
    Nothing could be further from the truth. In a Nov 21, 2011 article Ralph correctly reported Mike Martin as stating that Burien “has received a total of $584,000 to date … ” in the form of the sales tax credit.

    $584,000 is no where near $5 million. It never will be. And Burien will NEVER receive anywhere near $5 million because the calculations for this credit based upon state law will NOT allow Burien to receive $1 million let alone $5 million. This credit is a SALES TAX credit. Burien simply does not have sufficient sales tax generated to receive even $1 million in credit.

    Again let us look at history in Burien. For annexing the first part of North Highline Burien RECEIVED only $485, 000. How could anyone expect Burien to receive much more that that for the second part of North Highline?

    They can’t and they should not. Any discussion by public officals pertaining to the potential for Burien to receive $5 million in sales tax credit is an fraud upon the people. I only hope that our council members are sufficiently educated in mathematics to understand that a real $485,000 check does not equal $5 million.

    Rate: Thumb up 0 Thumb down 0

  4. Ralph Nichols says:

    Just stopping by on a Saturday night, so to speak, so this is just trying to recall quickly. BUT, it seems that the $485,000 for the 1st NHL annexation was based on a different formula and credit from the Legislature. I will check this out and clarify on Monday – along with clarifying a couple of points that are blurred in the 1st post above. Regardless of one’s position on annexation, hopefully this will help the discussion.

    Rate: Thumb up 0 Thumb down 0

  5. Coverofnight says:

    All these numbers……! You guys are making the issue clear as mud. I need to see the real breakdown from Joey Moretaxes. I’ll then know where he stands – and I can take the opposite position.

    Rate: Thumb up 0 Thumb down 0

  6. william forest says:

    WHATS THE RUSH..??? I

    WHY is MIKE MARTIN, who is a failure by any measurement at managing finances, pushing for an annexation election AS SOON AS POSSIBLE??

    If DEMOCRACY is truly to be served then the annexation vote should be scheduled for NOVEMBER at the same time as the federal election for President and congress. Holding it at that time would ensure the MAXIMUM number of residents participating..

    Holding it in August is the same old slimy trick Martin used in the last annexation election which its very possible the majority would have opposed but the voter turnout as one would expect in midsummer was very low.. This was intentional on the part of Martin and the pro annexation members of the council.

    Frankly if I lived in either annexation area I would have voted against Burien because it has an out of control incompetent money wasting city manager and a dysfunctional city council.. Seattle would be a much better steward with much deeper pockets and much more scrutiny of how and why city funds are spent.

    IF Martin proceeds hell bent for leather for annexation WITHOUT knowing what the final decision on the tax credit will be then HOLD THE ELECTION IN NOVEMBER!

    Rate: Thumb up 0 Thumb down 0

  7. Debi Wagner says:

    But Seattle looked at the costs and decided they could not afford to annex the area. If Seattle can’t with their much larger tax base how can Burien? If the costs are really only 5 million per year, Seattle could run it on the premise the tax credit will cover it unless the costs are much higher than Berk, the council and supposedly neutral citizens claim who are pushing forward on this crazy path right? Seattle was mostly concerned about the capital improvements which are not eligible for the state sales tax reimbursement. Their capital improvement estimate at 77 million could not be covered. Berk has it at 34 million and does not propose any way of paying for it throughout the life of the sales tax credit bump. As John and Linda point out in their letter, Burien was supposed to develop a long-term business plan which identified needs and allocated potential funding resources to pay for them. They have not provided this plan. Burien also has an obligation to fund an immediate $5 million dollar improvement in area Y according to their own Berk report which also is not in the budget analysis.
    Burien tax collection is going down because Burien property values dropped so dramatically while Seattle is not nearly so badly affected by the recent assessment changes. So if pro-annexation people are consistent then Seattle’s analysis was also biased, and they are bigots also…right?

    Rate: Thumb up 0 Thumb down 0

    • raquel davis says:

      No, they made the logical decision. Servicing Area Y will be a nightmare plain and simple.

      Rate: Thumb up 0 Thumb down 0

  8. Ralph Nichols says:

    As noted in a preliminary observation posted later Saturday evening, there is some confusion and/or misinformation that is, once again, being circulated as part of some arguments in the North Highline annexation debate. And, as also noted then, whether one is for or against bringing the remaining unincorporated area into Burien, only accurate information, clearly stated, constructively advances the debate and thus helps avoid confusion.

    The first post to my advance article on tonight’s (March 19) Burien City Council annexation discussion blurred the lines between the state annexation sales tax credit, and potential discussions with King County over the possibility of financial assistance from the county for capital improvements in North Highline should that area become part of the city.

    The annexation sales tax credit was enacted by the Legislature to help cities that annex adjacent populated areas offset their transition costs from annexation for the first 10 years. It was made law not just for Burien but for a number of cities, many of which, as did Burien, have already completed annexations. The current status of the annexation sales tax credit is detailed in that article and will not be revisited here.

    On the other hand, the question of soliciting financial assistance from King County is not a backup plan for Burien should the annexation sales tax credit. It is misleading to confuse the two. And even supporters of annexation on the city council are adamant that, without this credit, annexation won’t happen. The question of financial assistance was publicly raised first by Councilman Jack Block Jr. during a council meeting last year.

    Block’s position is that King County has long neglected making capital improvements in the unincorporated area, where many upgrades need to be made to roads, bridges and parks. (This, too, was noted in that article.) He maintains, therefore, that the county now has a financial obligation to assist the city make those improvements that it didn’t do, in the event of annexation.

    A later post presented wrong information about the annexation sales tax credit and the amounts received to date. The first state annexation sales tax credit, which was in play when Burien annexed the southern area of North Highline on April 1, 2010, will provide the city with $500,000 a year for the first 10 years of annexation. For six months of 2010 (July 1-Dec. 31), the city received $249,805 in sales tax credit money. For all of 2011, Burien received $514,635 in sales tax credit money.

    (The amount received by a city is based on actual sales tax receipts, which in turn are determined by set formula. Amounts can be marginally lower or higher, but only by a very small margin, in any given year.)

    Since Burien’s first annexation, the Legislature increased the amount of the annexation sales tax credit. This was initially done to accommodate Seattle, had that city annexed North Highline. However, Burien officials successfully convinced legislators that basic costs of annexation would be the same regardless of which city eventually annexed the remaining unincorporated area,

    As a result, the state annexation sales tax credit, at least for North Highline, is $5 million a year for 10 years ($50 million total), which Burien will receive if it annexes the area. Currently the credit remains on the books and in the state budget. (This, too, was noted in that article.) The fact that Burien is not receiving this money at this time is due to the single fact that Burien hasn’t annexed the remaining unincorporated area at this time.

    Related to all of this are some misstatements in a Letter to the Editor posted earlier today on the B-Town Blog. What is noted below is not all the clarification of facts that would be useful. However, three items jumped out.

    First, the letter begins, “Why Annexation of White Center Should not be Put on the Ballot.” This is misleading The area in question is not just the few commercial blocks identified as White Center, but a much larger residential area as well – comprising in total the remaining North Highline unincorporated area.

    The first point in its text says, “The Sales Tax Credits from the state have not come through to support the annexation of this area. There is no money.” See above, and see my article. The credit remains available at this time if Burien annexes North Highline, which means at this time the money is there.

    And Point 7 says “Burien does not have enough money to fund Human Services, Legal Services, Senior Services and Animal Control….” The recent Boundary Review Board hearings are cited. This, however, is an incomplete statement. Some services will be funded through property and other taxes collected there, not now received by Burien. And it has been documented on more than one occasion that Burien’s costs of human and senior services don’t match those Seattle would spend in the area because Seattle provides a lot more programs paid for with higher city taxes.

    As noted above, whether one is for or against this annexation, accuracy and clarity are a vital part of constructive debate.

    Rate: Thumb up 0 Thumb down 0

    • Debi Wagner says:

      Just a couple of points Ralph that I would like to discuss with you. You talk about clarification on differentiating between discussions with the county for financial aid or services for the annexation area and the sales tax credit without ever mentioning that the county has already publicly stated to Seattle and Boundary Review there are no resources available so no help can be expected from the county on the 77 million in needed repairs. You also fail to mention it is a possibility admitted to by Mike Martin (he claims it is unlikely at 1%) at last nights council meeting that the sales tax credit still might be eliminated. It can be eliminated next year, the year after, it also can be reduced. It is not a guaranteed sure thing. Burien is depending on this money and it shouldn’t. The area should be financially sustainable and it is not. Burien is dependent on the state, somewhat on the county and on it’s own revenues for support because area Y cannot support itself. This is a risky proposition when the state and county are drastically cutting services to try and balance their budgets. Burien will own it’s financial problems in the future if these state and county budget problems continue.
      Lastly, you intimate that Seattle’s costs for human services are higher than Berk’s estimates because they provide a lot more programs paid for by higher city taxes. You took this right out of Berk and must not have closely looked at Seattle’s. Although Seattle’s report admits a higher level of service than what is already present in the community, elsewhere in their report they contend they used existing county figures to provide a basis for their estimates. And the law requires Burien to provide the same or a higher level after annexation. I very much doubt the difference between Burien’s $100,000 per year and Seattle’s 1.7 to 1.9 million can be justified by the blanket statement you make. Surely the county would release this information to you, an investigative reporter since they won’t provide it to me and you could tell all of us what the real differences are. But to use Berk’s own statement and ignore the problems with such large disparities between figures is really not in-depth reporting and does not appear to me to be objective.

      Rate: Thumb up 0 Thumb down 0