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City of Seattle

March 19, 2:44 PM click here to comment > 0

Acting City Budget Director Beth Goldberg gave a statement before the City Council today on a possible North Highline Annexation

Good afternoon. My name is Beth Goldberg. I am the Acting Director of the City Budget Office. I am here to provide an overview of the financial assessment of the potential annexation of the northern portion of North Highline (also known as Area Y). I am joined by Greg Doss from my office, who is available to provide a more detailed explanation of the details of this financial assessment. We also have department representatives here to answer questions.

Thank you for the opportunity to speak with you today.

In recognition of the principles of the Washington State Growth Management Act, Mayor McGinn has indicated his interest in giving the citizens of North Highline an opportunity to vote on whether they wish to annex into the City of Seattle. The Mayor recognizes that cities are generally better positioned to provide local services to residents of urban unincorporated areas than the County.

With this in mind, the Mayor asked the City Budget Office to conduct an updated financial assessment of the impact of the potential annexation of Area Y into the City of Seattle. Over the course of doing this work, the City Budget Office has been in regular communication with City Council central staff.

It is important to note that the last full financial assessment of the potential annexation of Area Y, conducted in 2005 by the previous administration, assumed a barebones level of service for this area. When considering Neighborhood Policing and other recent city initiatives, it becomes apparent that the previous analysis will result in lower service levels for this area than provided to other areas in the City of Seattle. Understanding this reality and recognizing that a decision to put the annexation of Area Y on the ballot this November requires a relatively quick decision, the financial assessment that the City Budget Office recently completed was designed to provide an initial analysis of the range of costs that could result of the citizens if North Highline were to vote in favor of annexing into the City of Seattle. This initial assessment is designed to provide bookends on the potential range of costs of this annexation – to not only inform decision makers of the financial implication, but also to facilitate a policy discussion about the levels of service that can be assumed in the event of annexation.

On the low end of the range, the City Budget Office used the same service level assumptions that were prepared on behalf of the previous administration. Again, we are describing this as the low end of the range because it assumes lower service levels than other areas of the City. As another example, it makes assumptions about condition of the North Highline roads and provides a lower level of street maintenance services than provided in other areas of the City. Assuming these levels of service, the ongoing net impact of annexing Area Y would be costs exceeding revenues by an estimated $2.6 million. In addition, in the first year of the annexation, the City would have to assume at least $4.9 million in one-time costs.

In order to show the full range of potential costs resulting from the annexation of Area Y, this initial financial assessment also attempts to define a “higher end” estimate. This higher end estimate assumes, among other things, the implementation of neighborhood policing and SDOT service levels that are comparable to other parts of the City. When considering this range of higher costs, the ongoing net impact of annexing Area Y would be $12.6 million. In addition, the City would need to assume $8.7 million in one-time costs.

It is important to note from the outset that this initial assessment – on both the low and high ends – does not include the full range of costs that the City of Seattle might assume should annexation occur. Given the short timeframe for this initial analysis (prepared in less than a month), the City Budget Office was not in a position to explore the full range of costs that could result. For example, there was not time to do a full assessment of the capital or human service needs of the area. In addition, these estimates do not assume a full analysis of the impact of recent levies in the costs (e.g. Families & Education Levy, the Housing Levy, or the Parks Levy). To do this more in-depth level of analysis would require more time. The “bookend analysis” was designed to assist decision makers in making a threshold decision on whether to refer this issue to Area Y voters in November 2010.

Based on this initial analysis and in the face of the City’s projected $50 million deficit for 2011, I am here today to announce that Mayor McGinn does not support a November 2010 vote. An annexation taking effect in 2011 would require us to make additional and painful budget reductions beyond the projected $50 million deficit.

While our current financial circumstances argue against the near-term annexation of this area, Mayor McGinn remains interested in exploring annexation when we can provide services to the area without having to make additional budget reductions. In order to make this a financially viable option, the Mayor believes we will need more support from the State or region, perhaps in the form of increased sales tax credits, or financial incentives from the County, or for the economy to recover sufficiently so that we can meet existing and prospective financial obligations.

So, if not a November 2010 vote, when might the City of Seattle again consider placing the annexation of Area Y on the ballot?

February 2011 is one possibility. In order to get this issue on the February 2011 ballot, the City Council would have to decide to go to the Boundary Review Board this June. At this time, we do not believe we will have enough additional financial information to allow us to reassess the financial viability of annexation for a February 2011 election. The June deadline for going to the BRB is well before we’ll know how to close the 2011 deficit and before we will have the opportunity to ask the Legislature or King County for additional financial support.

A November 2011 election, on the other hand, would give us the time we need to do a comprehensive financial analysis of annexation, including capital costs, as well as time to understand the City’s budget for 2012 and beyond. We are committed to completing the financial analysis that would be needed to put this issue on the ballot. We are also committed to doing this work in collaboration with Council staff. This information will be essential to our ability to ascertain whether we have the financial resources to consider the annexation of this area on the November 2011 ballot.

Thank you again for the opportunity to speak to you today.

Posted by: Beth Goldberg