Equal Justice For All – Bothell study confirms feasibility of annexation WITH equal service levels for PAA
The City of Bothell has completed a feasibility study revealing that the annexation of Kingsgate, Upper Juanita and Finn Hill would produce positive cash flows while providing EQUAL SERVICE LEVELS FOR THOSE BEING ANNEXED – an achievement that has alluded Kirkland for years. In Kirkland City Hall there is talk of two service levels –one for existing citizens and a lower one for the PAA — as Kirkland grapples to find any way to hold on to the 33,000 people of unincorporated King County to the City’s north.
Kirkland has struggled for years trying to find a financially viable way to annex, but to no avail. What is Bothell doing right? And perhaps more to the point, we must ask the more disturbing question, what is Kirkland doing wrong?
The City of Bothell has done something quite exraordinary. It has achieved what the City of Kirkland has repeatedly failed to achieve over the past several years – Bothell has found a financially viable way to annex Kirkland’s Potential Annexation Areas (PAAs). Bothell has completed an annexation study that shows the PAAs are financially viable meaning that operating revenues will pay for operating expenses. Providing services to the people of the PAA is a top priority of the State and King County. It should be the top priority of everyone, regardless of wether it be Kirkland or Bothell who ends up getting the job done.
The details of the staff report on annexation are quite revealing. If Bothell were to annex the PAAs — known to Bothell as South of Bothell (SOBA) — they would not only produce enough revenue to pay for increased service levels like police and fire, but the study shows there would be ample remaining to cover any unforeseen annexation expenses. Gone is the talk of “second class citizens” and “only getting the services you can pay for” so popular with certain Kirkland City Councilmembers and some posters on this blog. Bothell’s plan provides for equal services for all.
The annexation study relies upon State sales tax incentive program (STI) to provide revenues to balance against projected expenses which are only available to cities if needed to offset operational expenses. This STI program allows a city to apply state sales tax incentive funds to expenses related to the annexation, for a period of ten years. STI is estimated to generate $4,189,604 annually for ten years. STI funds not applied to annexation expenses are returned to the State.
The spreadsheet below is a summary of data taken directly from Bothell’s study and labeled “SOBA Revenues / Expenses”. It shows the application of STI funds to annexation expenses (which are summarized). In Year 1 – 2009, expenses outweigh revenue resulting in a deficit of $3,409,859. Applying that same amount of STI funds nets the deficit to zero, leaving $779,745 of STI funds for unforeseen annexation expenses. You may download the full spreadsheet here. Bothell has a Study Session on annexation planned for their City Council on January 13th.
UPDATE: A reader has sent in this citation for clarification:
The State law explicity says that the amount of the incentive is limited to the amount of the DEFICIT in providing services in the PAA / SOBA after annexation. Each year, the City must certify to Department of Revenue (DOR) the amount of the expected deficit. DOR will send the City up to that amount, and no more. Here’s a direct quote from the law: “The revenues from the tax authorized in this section may not exceed that which the city deems necessary to generate revenue equal to the difference between the city’s cost to provide, maintain, and operate municipal services for the annexation area and the general revenues that the cities would otherwise expect to receive from the annexation during a year. If the revenues from the tax authorized in this section and the revenues from the annexation area exceed the costs to the city to provide, maintain, and operate municipal services for the annexation area during a given year, the city shall notify the department and the tax distributions authorized in this section shall be suspended for the remainder of the year.” (RCW 82.14.415, http://apps.leg.wa.gov/RCW/default.aspx?cite=82.14.415).
Considering that Bothell has completed this study in the span of six months after a request to do so from King County Executive Ron Sims, one must examine why Kirkland has taken so long and not been able to produce a similar result. The answer may be found in the differences between Kirkland’s finances and cost structure versus those of its neighbors. Several individuals close to Kirkland City Hall have estimated the cost of studying annexation to date as being in the range of “a couple of million dollars”. [UPDATE: In February 2008, King County determined that as of that time, the City of Kirkland had spent in excess of $730,000 on annexation.] We have an outstanding Public Disclosure Request with the City, and when we get an answer we will share it. We have also just learned that Bothell has submitted an invoice to King County for reimbursement of half of their total annexation study costs which have come in at around $40,000. King County has offered to reimburse Bothell for those costs. Is Kirkland going to receive a check for $1,000,000 from King County as well? We shall see.
It is a fact that there are many differences between Kirkland and Bothell in how the cities are managed as well as different levels of service provided to their citizens. Bothell is not nearly as far along in the process of studying annexation as is Kirkland, but at this point in the process, the contrast between the two cities annexation studies could not be more stark.
Given the same revenue projections, Kirkland is not able to provide a comparable levels of service. In fact, the Kirkland City Council debated the possibility of providing a two-tiered service level back in the spring of last year. The concept of “two Kirklands” with two different service levels would create “second-class citizens” as one councilmember put it, and that was unacceptable.
Bothell appears ready, willing and able to annex Kirkland’s PAA / Bothell’s SOBA. Kirkland staff is conducting another study of the financial issues and will present it to the City Council on March 3, 2009. This latest study is in light of the Kirkland City Council’s actions to balance a projected $19 million deficit. The City Council voted to lower service levels and raise taxes to balance the budget. With new service and taxation levels, Kirkland is re-examining annexation. The outcome of that study should be informative. Perhaps it will shed some light on the future for everyone living in the PAA / SOBA. Is their future in the hands of Kirkland to the south, or with Bothell to the north?
The point of all of this that residents of the PAA / SOBA need improved services. As such, it should be interesting to see which city will offer the biggest bang for the buck. How will Kirkland compete with what Bothell is able to offer the PAA / SOBA? This is the $1,000,000 question. As of this writing, neither the Kirkland Reporter nor the Bothell Reporter have published anything on this study. It should be interesting to see what they can dig up given their connections, resources and reporting staff (was that a friendly challenge?).
Download The City of Bothell South of Bothell Annexation Area Fiscal Analysis dated December 30, 2008.
Download the Bothell City Council Agenda Staff Report on annexation.
Download the Bothell City Council Resolution No. 1225 (2008) stating the Council’s interest in exploring the feasibility of annexation.
Download the Financial Analysis spreadsheet created by the City Bothell
Download a map showing the potential annexation areas around Bothell
Posted by Rob Butcher on Friday, January 9, 2009 at 12:09 pm
Filed under Headlines · Tagged with Bothell, Budget, City Council, Government, PAA, SOBA
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Rob: This is a major turn for annexation. Personally I don’t know which is better for the PAA but I am happy to have a competition. This is a quote from on e of the links you listed:
“A second potential source of on-going revenue is a card room in the Kingsgate area that
generates approximately $580,000 in annual card tax revenue based upon 11% of the gross; the tax
rate that King County presently charges card room operators. State statute allows the jurisdiction to
impose a card room tax rate of up to 20% of gross operating revenues.”
If this is correct then that explains why Kirkland sees the card room as a source of $1 1/2 million and Bothell has it listed as $580,000. Bothell hasn’t planned on increasign the tax to the maximum while Kirkland has.
Excellent work. G.
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I think the questions you raise are very valid, Rob. Indeed, why can’t Kirkland figure this out? And why does it seem to cost so much more to add a citizen in this city? All a long, those in favor of annexation have said the city’s numbers are not correct. It will be interesting to see what they do now. I do want to point out that King County had intended to provide at least $1,000,000 (if memory serves it might have even been $2,000,000) to Kirkland to offset the annexation process, but that disappeared when Kirkland stalled, yet again. I also noticed the expense of annexation goes down with time in the Bothell analysis, which was not the case in the Kirkland analysis. It seems there would be larger expenses upfront that would equal out, and even fall, with time. One thing I don’t believe Kirkland did was project the growth down the road in their own city and the PAA. Given the open land in the PAA, it seem reasonable the growth would be larger here, providing increased sales tax for building as well as increased property tax revenue, utililtiy tax revenue, etc. I hope Kirkland get’s off it’s duff and get this done, if not, looks like they will be losing to Bothel, who will become a major powerhouse in the region.
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LOL! You’re on – the staff of one (not including the editor) from the Kirkland Reporter is on the case!
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Thanks Kendall, we will all sleep better now.
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Grogan,
I just commented on your point in the annexation posting. You make a very in teresting comment because it looks to me that the casino is now taxed at 11% and Kirkland has planned to tax it at 20%. I not followed Bothell’s city council at all so I don’t know where they stand on casinos. It looks like the $580,000 figure you quoted is for 2009 and it rises each year until it hits $690,689 in the year 2012. The casino is looking like a little cash cow.
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This is very interesting to read about how Kirkland wants to keep the casino. When this first started they told us in High Woodlands that the casino would be closed if they annexed the PAA. They would not allow a casino in the City of Kirkland. However, I see why the have changed their mind.
Personnally I would rather be annexed to Bothell. Much better place to live in my opinion.
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My take is that the annexation doesn’t live or die with the casino revenue. I think Kirkland will be forced to continue with the 11% to avoid the casino opposition they saw last time. Al
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“A second potential source of on-going revenue is a card room in the Kingsgate area that
generates approximately $580,000 in annual card tax revenue based upon 11% of the gross; the tax
rate that King County presently charges card room operators. State statute allows the jurisdiction to
impose a card room tax rate of up to 20% of gross operating revenues.”
This quote and the track record of elected officials reveal a flaw in your logic, Al. How could Kirkland be forced to continue with the 11% tax to avoid the casino opposition? I don’t get it. If the capacity to tax is there, Kirkland will use it regardless of what promises it’s elected officials make. It will be just like on the state level when within days of winning reelection, Governor Gregoire went back on countless promises made days earlier. Kirkland may promise anything they want, but only the naive will believe it.
But I still don’t see how Kirkland would be “forced” to do anything. I don’t get it.
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H.P.W.,
Kirkland will be forced if Bothell does a couple of things: First, they move forward with the economic plan that has been published that shows that they can annex and have money left over (I’m not holding my breath that plane actually flies!) Secondly, if they say they can do it at 11% tax on the Casino vs the 20% that Kirkland could levy. The Casino really doesn’t care whose City they are in as long as they are given a guarantee that they will be. They would throw Kirkland in front of the train in a minute (as would any other business facing the same conditions) and lobby Bothell in a heartbeat. That’s what I meant by “forced”. Of course that only works as long as Kirkland is in the game.
Al
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We live between Bothell and Kirkland and everything in this story directly affects my family. What does this all mean? Can someone please explain this to me? It sounds like the county has dropped the ball, kirkland can’t or wont annexation us and bothell is studying it. Do we the people actually living here and paying taxes here and not represented here get to choose? I am told we wont be getting a choice because of some reason or another which i don’t understand. It stinks.
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I as well live in “sandwich land”. At this point it doesn’t seem that we don’t get to vote since it is up to the Kirkland City Council to make a decision on putting the issue on the ballot. Bothell seem to be the “Rebound City” if annexation were to fail to get on the ballot with Kirkland. I think Bothell is a nice town but provides by most measure somewhat less service for roughly the same cost that Kirkland provides for services.
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Actually Bothell has lowers taxes, less debt and provides the same level of services…Kirkland has a huge deficit and Bothell has none. There are arguments for both cities but only one (bothell) has the financial stability to pull it off. Either way we WILL have a say (if Kirkland annexs or let’s Bothell annex) because a vote is required to annex into either City.
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Actually if I recall correctly citizens in both cities pay roughly the same in taxes. Service levels are less in Bothell than in Kirkland ( a little longer fire response time and a somewhat longer police response time) not to mention other services, They do have less debt and I agree at this point they have a nice progressive vision for the future growth of their city. However it seems that Bothell may be missing some capital expenses in their cost estimates that are required to annex.
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In the first meetings held in High Woodlands by Kirkland they told us we would have a vote as to whether we wanted annexed by them (kirkland) Has this fallen by the wayside?
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Hi Pete,
To answer your question, the Kirkland City Council controls everything with regard to annexation as it will be their decision alone which determines what happens next. They recently denied a request for letting the citizens of Kirkland vote on annexation. If the Kirkland City Council approves annexation anyway, then the people of the PAA will have a vote on becoming a part of Kirkland. If the Kirkland City Council concludes it cannot annex at this time, then Bothell has signaled it is willing to step in and annex the PAA. If Bothell were to proceed, you would then get a chance to vote to become a part of the City of Bothell.
Thank you for your comments.
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Perhaps I’m missing something here. I thought gambling venues were outlawed in Kirkland.
Could someone please explain if the card room will become legal when the annexation happens so that Kirkland can increase revenue? Is it legal or not? Personally I don’t support gambling because it is very addictive and families suffer when a father or mother becomes addicted. I think it is important to look at the other side of how gambling can have a strong effect on a community rather than looking at what a city gains by taxing a card room. If one card room is legal and brings cash flow into the city why not open a few more?
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