Who Cares About Port Orchard’s Annexations?
April 22nd, 2010 by Chris HenryIf you’re a property owner/taxpayer in unincorporated Kitsap County, you may want to be heads up — regardless of what area of the county you live in — about a meeting on April 29 between city of Port Orchard and Kitsap County officials on an inter-local agreement regarding annexations.
The meeting does not, to my understanding, involve a quorum of either government, so may not be open to the public. I will be following up on the results.
The long-standing agreement between the county and Kitsap’s cities addresses how transfer of responsibility (and tax revenue) will take place when unicorporated areas are annexed into cities. Port Orchard, which has had a number of significant annexations over the past year or two, is particularly interested in the aspect of the ILA that involves revenue sharing.
The city wants immediate access to tax revenue from annexed properties, especially businesses along the Bethel corridor. The ILA now states that the revenue will be shared over a period of three years after annexations, with the county getting 75 percent, 50 percent and 25 percent in each year before all of the revenue goes to the city in the fourth year and thereafter. City officials have given formal notice that they would opt out of the ILA if negotiations don’t meet their desired result.
The county has been analyzing the potential impact of the loss of revenue on the county’s budget. The question county taxpayers’ may ask themselves is, “How will this affect me?” Will my taxes go up, down, sideways or what? Hopefully all that will be clarified by county officials in the upcoming weeks and months.
Even if you’re not a property owner, you may want to know how the potential loss of revenue will affect the county’s ability to deliver services, including the building of roads and other infrastructure, law enforcement and so forth in all areas of the county.
From the city’s perspective, they say access to the full amount of revenue is needed if they are to provide adequate police patrols, roads and other infrastructure to the newly annexed areas.
Port Orchard’s annexations have recently drawn some interest from outside Kitsap County. I got an e-mail from Thomas W. Bradbury, a real estate analyst with Private Valuations Inc. of Bellevue, who asked how the Bethel North annexation is progressing.
I asked Tom what was his interest in the Bethel Corridor. He told me, “I’m appraising some proposed improvements on Bethel Road and needed to know if the parcel would be part of the city for the appraisal date.”
If you remember, Bethel North was the humongous proposed annexation representing the largest part of the Bethel Corridor. The total assessed value of the land in the 555-acre annexation area is $145 million.
After checking with Port Orchard’s development director James Weaver, I reported to Thomas that the Bethel North annexation was dead in the water.
On Feb. 5, annexation backers were still hopeful they could get enough signatures for the required 60 support, even though they had only collected 53 percent as of that date. They had six months to gather enough signatures for approval, with the first signature dated July 29. Their strategy was to “roll-over” signatures in order to keep the annexation petition alive, basically approaching those who had already signed and asking them to sing again once their signatures had expired, all legal according to the city attorney. They collected signatures representing 57 percent of the property but were unable, however, to bring the last 3 percent on board … at least at this time.
The largest (and key) hold-out property owner was Walmart, which is part-way through permitting for an expansion, Weaver said. According to Weaver, the company did not want jeopardize the forward movement of permitting by switching horses in mid-steam, so to speak. This does not preclude another attempt at annexation some time in the future, however.
Weaver said the “silver lining” for the city in the annexation failure is that if the Bethel North folks want to try again later, the effective date of the annexation would likely be after Port Orchard pulls out of the revenue sharing agreement (PO has until November to decide if they will do so). Hence the city would have immediate access to what’s sure to be a honking big chunk of sales tax revenue (my words BTW, not Weaver’s).
This is not to imply that city officials did anything other than comply with state statutes and the GMA in accepting the Bethel North annexation proposal, Weaver said.
The Bethel North annexation, sweet as it would be for the city (my words/ not Weaver’s), is “citizen driven. It’s citizen initiated,” Weaver said. “If the citizens don’t have the desire to continue it, it’s out of the hands of the city.”
The latest annexation in the works in the Blueberry Road annexation consisting of 57 parcels on 49 acres. The city council recently accepted property owners’ notice of intent to annex. Now they have to gather the required signatures in the required time frame.
Here’s the city’s map of annexations completed, in the works and possible future annexations.
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April 22nd, 2010 at 2:41 pm
I will be interested in seeing whether my understanding of the effect of annexation is close to being accurate.
The only county tax revenue for the county’s operating costs that appears to be affected by annexation of unincorporated areas into Port Orchard is the sales tax revenue collected within the annexed areas. (I haven’t looked to see what effect there is on things like the REET that is used for capital expenditures. I would guess the county gets less, since the city needs such revenue for capital purposes too; but I don’t know the specifics.)
The county’s “current expense” and “conservation futures” property tax levies are paid to the county on property within the city just as they are paid on property outside the city. Annexation into the city makes no difference. (In fact, the county may benefit, since some of the costs of things like law enforcement that are paid from the current expense levy become the city’s responsibility–the same or more revenue and less cost for the county.)
The county’s “road” levy is not paid on property within the city, but annexation still makes no difference in the county’s revenue. The property still in the unincorporated areas pays the total levy after some property is annexed into the city and taken off the rolls for the road levy. The tax rate can go up to offset the removal of incorporated areas from the rolls until it hits the maximum statutory rate of $2.25 per $1000. The tax rate this year is a little less than $1.33, so there is plenty of room to rise when cities annex land that had been subject to the road levy. (In fact, the county probably benefits from these annexations, since roadway maintenance becomes the city’s responsibility; yet the county experiences no loss of road levy revenue–the same or more revenue and less cost for the county.)
Taxpayers in unincorporated areas would feel the impact when the county road fund levy has to be paid by those still in unincorporated areas. The burden is lifted from those who are annexed into a city, and the whole burden is carried by those not living in a city.
The county’s sales tax revenue is affected to an extent.
The tax for CENCOM (0.1%) is unaffected, and of course that revenue makes it possible for the county, cities, and fire districts to use their other revenue sources for other things rather than CENCOM.
The tax for the jail and juvenile detention facility (0.1%) is unaffected. The county gets this revenue from both incorporated and unincorporated areas.
The tax for “criminal justice” purposes (0.1%) is unaffected, so far as I can tell. It is distributed among the county and cities, with a share going to the county, then the rest is divided among the county and cities based on population.
Of course, the Kitsap Transit sales tax (0.8%) is unaffected; and I’m not sure anyone thinks of it as county or city tax/revenue even though mass transit would have to be paid by them from their other revenues without this specific tax source.
The one county sales tax that is affected by the city’s annexation of land is the “basic & optional” sales tax (1%). The county gets the whole collection from unincorporated areas, but only an amount equal to a rate of 0.15% from within incorporated areas.
This reduction from a county sales tax rate of 1% to a rate of 0.15% when property is annexed by a city can be a big change in revenue; so naturally it would be good if the shift of costs roughly equals the shift in revenue from county to city.
April 22nd, 2010 at 8:52 pm
It should be very interesting. Fewer voters in the unincorporated areas to vote on County issues. Higher costs to unincorporated residents, those in the “rural” areas of Kitsap County. But then more protection by the Sheriffs Department since it has less area to cover.
With the South Kitsap F&R annexing Port Orchard a few years ago and the “rural” taxpayers again picking up the tab, maybe Port Orchard could put more in the pot since they seem to have more of the services.
Just think, with Breemrton wanting to annex more areas and the “City Of Silverdale looming in the near future, it will be real bleak for those of us left in unincorporated Kitsap. Maybe it is time to move the County Commissioners closer to their voters and taxpayers? Say a nice office in unincorporated North or South Kitsap. Maybe a nice condo/garage near Lake Flora and Dickerson Rd, maybe they could pick up the ghost sounds of the almost Nascar track at a nightly BBQ.
No matter what, those left in unincorporated Kitsap will face higher taxes and less service as all the attention is directed to the “growth” areas, much like how attention and funds are poured into downtown Bremerton and all else is ignored.
Roger Gay
South Kitsap
April 29th, 2010 at 7:12 pm
[...] from revenue-sharing issues that came up during Port Orchard’s annexation of McCormick Woods. She blogged about it, indicating the meeting was not public. But this week Port Orchard Mayor Lary Coppola told Chris [...]