The Washington State Boundary Review Board For King County

REGULAR MEETING

November 11, 2021

Zoom Service

1. CALL TO ORDER

   Chair Hamlin convened the meeting at 7:17 P.M.

2. ROLL CALL

   The following members were present:

   • Evangeline Anderson
   • Sylvia Bushnell
   • Mary Lynne Evans
   • Chandler Felt
   • Marlin Gabbert
   • Jay Hamlin
   • Claudia Hirschey
   • Paul MacCready
   • James Polhamus
   • Hank Margeson
   • Stephen Toy

3. MINUTES:

   Regular Meeting - October 2021

   Chair Hamlin presented the minutes of the Regular Meeting of October 2021 for review and action by the Board members.

   Action: Mary Lynne Evans moved and Chandler Felt seconded the motion to adopt the minutes for the Regular Meeting of October 2021.

   Board members voted seven in favor of approving this record of the Regular Meeting. Paul MacCready and Hank Margeson abstained as they did not attend the Regular Meeting.

4. ORIENTATION PROGRAMS
   History of Sales Tax Credit to Incentivize Annexation Pay-out to Cities to Date (2008-2020) – Karen Meyering, King County Office of Planning, Strategy and Budget

   Ms. Meyering presented to the Board a chart that reports the history of sales tax credit allocations to cities in King County from 2008 – 2015.  The data reflects funds available to cities through ESSB 6186 (later becoming SB 5321) which provided streamlined sales tax funding of between 1% - 2% to communities annexing populations of 10,000 persons or greater.  Funds were available for King, Pierce, and Snohomish Counties. 

   (Note: Historic Data Chart is enclosed as Attachment 1).

   The program was intended to serve as an incentive to support annexations of urban lands to better govern and serve local communities.  While there was some notable progress toward that goal, there were numerous challenges as well.  More specifically:

   • The tax is a credit against the state sales tax, so it is not an additional tax to a consumer. 

   • The tax is collected in the PAA – its is sales tax that is usually sent to the state…but instead of sending it to the state it is distributed to cities that annex an area where the newly received revenues from the annexed area offset the costs of providing services to the area. 

   • There are several requirements that have to be met before a city may impose the tax, the tool is limited to large urban islands only… and the annexing city must commence annexation prior to January 1, 2015 – when this tool sunsets. 

   • The tax rate is 0.85, 0.1, or 0.2 percent for each annexation area with populations greater than 400,000, between 10,000 and 20,000 and areas between 20,000 and 400,000 respectively. 

   • The tool was later modified to allow the City of Bellevue to annex a PAA of 4,000 people and impose the tool at a sales tax credit rate of 0.1. 

   • The tax must be imposed at the beginning of a fiscal year and must continue for no more than ten years from the date it is first imposed. 

   • All revenue from the tax must be used to provide, maintain, and operate municipal services for the annexation area. 

   • The revenues may not exceed the difference of the amount the city deems necessary to provide services for the annexation area and the general revenue received from the annexation. If the revenues do exceed the amount needed to provide the services, the tax must be suspended for the remainder of the fiscal year.

   • This data does not make clear whether RCW 82.14.415.07 (noted below) was applied to any of the annexation areas in the table?

   Also, allocations to communities were inconsistent and did not reliably meet community requirements for long-term funding to local residents and businesses.  In accord with the provisions of ESSB 6186, the rebate system was terminated in 2015.  For example, Ms. Meyering, in considering the Historic Sales Tax Chart, summed the allocation amount between 2008 and 2020 to create the Total Funding column.  Then she divided each City’s Total Funding by the Grand Total in the last row ($148M) to show what share of that grand total each city received.  And, for example, we found that Auburn got 11% of the total whereas Kent got 29%.  Also interesting was the cost per resident (Total City Funding divided by Population) and found that Burien seems to have gotten so much less than Bellevue on a per resident basis.” 

   Mrs. Meyering reported that she is creating a briefing paper to try to make the case to pursue the sales tax credit again at Legislature 2022.  When the tax was first proposed it was a general proposal based upon information received by the Legislature reporting that cities seeking to follow WAC guidance for providing governance to local urban areas were in need of financial support to achieve these goals.  The legislation (ESSB 6186) was based upon a general formula to fit the gap between the revenues that the city needed and the revenues that it would generate.  It would have been difficult to establish specific formulas as a city may not be aware of revenues and expenditures incurred with an annexation until a fiscal study is required in conjunction with a Notice of Intention submitted to various government agencies and to the Boundary Review Board.  ESSB 6186 served as an incentive to move forward -- on the assumption that the benefit was the best/only route to receive sufficient funding to launch an annexation. 

   Ms. Meyering stated that, because the formula for assessing and receiving funding is not sophisticated, equity was not really a part of the conversation in 2008.  An illustration is found in the disparate allocations between Burien and Bellevue.  Additionally, Auburn got 11% of the total funds, whereas Kent got 29% of that funding source. 

   Additional matters of interest occurring in conjunction with annexations in general and ESSB 5186 in particular related to  zero sum revenue.   The magnitude of funds generated through ESSB 6186 was substantial – and based upon monies that otherwise would have gone to the State coffers.  There were several fiscal notes that estimated costs to the existing departments. But they were not made available to the County or to the Boundary Review Boards.  There was no reliable analysis of the impacts of fund allocations -- gains and losses – to various State agencies.  

   Further ESSB 6186 effectively served only King County communities.  However, even in this County, ESSB 6186 ceased being a useful tool based upon the waning of interest in larger unincorporated urban areas.  This incentive was open to other counties, but it was difficult to annex areas with sufficient population (a minimum of10,000 people) to enable access to funds available from ESSB 6186.

   This issue was a huge topic at the Puget Sound Regional Council (PSRC) Growth Management Policy Board from 2017-2019.  Efforts were made to include fiscal benefits in Vision 2050.  Pierce County was the most vocal county seeking this legislation to enhance their communities.  This interest was the basis of a request for PSRC to seek support from legislators for incentives to support annexations in urban areas throughout the State of Washington.  Kitsap County was interested in support for annexation of the Silverdale Area.  Snohomish County qualified also. 

   ***

   Mary Lynne Evans and Lenora Blauman reported that, at the present time, the American Planning Association-Washington Chapter (APA-WA) Legislative Committee is working to propose new legislation establishing sales tax rebates from the State to communities annexing lands to support streamlining the annexation and governance of urban area Sales Tax Chart.  King County is in favor of such legislation as well.  It is intended that new programs would be well able to be coordinated with other types of systems to support communities over a reasonable timeline.  This action is necessary based upon information gleaned from communities (e.g., Auburn) in which immediate funds from ESSB 6186 were an excellent launching tool -- but were time limited and therefore caused fiscal challenges over time for provision of a full array of essential services/levels of services.  

   A key issue has been related to the need for requirements for communities seeking boundary changes to conduct fiscal studies to determine near-term and long-term revenues/expenditures to provide suitable and governance to local communities.  APA-WA (with guidance from the State Association Legislative Committee) worked with Legislature 2021 to approve SSB 5368 (initially entitled Rural Economic Development) to ensure that such fiscal studies are required for all communities proposing incorporation or annexation.

   ***

   Ms. Meyering reported that there are a range of fiscal issues based upon differences among cities. She stated that it would be highly desirable to secure information that addresses the causes for differentials.  For example, a lot of these annexations were residential areas (of various value); some areas did have some business cores.  Information about proportional value would be useful.  The Department of Revenue is also an important participant in the matter of addressing revenue and expenditures.  This data would provide an opportunity for a tool much more successful than SSB 6186.  

   Mary Lynne Evans reported that, under ESSB 6186, cities were to collect money from the State Office of Management and Budget (OMB).  She stated that there was another issue at the Department of Revenue relating to allocation of funding based upon calendar dates.  Specifically, an annexation must be completed by a date certain (December) in one calendar year to receive funds beginning on the following March 1.  Failure to meet the December closing date caused funds to be delayed to March in a future year.  That delay was a real problem for the cities, who went ahead with the annexation when the process was completed to the satisfaction of the State.  In that circumstance, the money was delayed substantially.  Also, there were few cities that were able to obtain the funding during the life of the program (ending in 2015).  

   Also, while some jurisdictions did receive funding, the allocations were generally insufficient to support communities over the longer term.  It is also possible that some jurisdictions did not receive funding.  It is not clear whether any jurisdiction receiving funding were allocated funding exceeding its allowable net costs.   It would be valuable to have such data. 

   It was not possible to resurrect that program because by 2015 the State was having some pretty serious fiscal issues.  It could not be determined whether this sales tax streaming program was responsible at any level for the State funding challenges.

   Challenges also occurred with respect to equity in funds distribution (per resident).  Prescient data emanates from fiscal studies conducted by local jurisdictions to establish cost bases.  Results among cities can provide disparate conclusions. For example, if you compare Bellevue and Burien, it will be seen that Bellevue is already providing a high level of service of police, fire, and other essential services.  Perhaps the city is also able to pay employees at a higher rate.  Based on the higher cost, the city would receive more money -- i.e., revenue -- then than a city, such as Burien, which has never been able to afford as high level of service and, thus, cannot show the level of costs as Bellevue.  Thus, under ESSB 6186, Burien would not receive sufficient funding to allow enhanced levels of service.

   A similar challenge has occurred with Renton which has been asking King County to revise County development standards to meet their own municipal standards.  This request is made in order to support city efforts to provide appropriate services and levels of service.  This has been a matter of concern as the County does not customarily have funds to underwrite city capital improvements and operations.

   Lenora Blauman noted another challenge (occurring in approximately 2017) relating to fiscal data requirements for creation or changes to jurisdictional boundaries.  At that time the State Office of Management and Budget (OMB) initiated legislation that would have required jurisdictions proposing boundary changes to provide fiscal studies to OFM – and to receive approval by OFM – of that study prior to submitting a Notice of Intention (NOI) to a Boundary Review Board.  The proposed legislation did not include a prescribed review period.  It was withdrawn by OFM when it was recognized that RCW 36.93 requires that the NOI be fully reviewed and receive a final action document within 45 days.   

   OMB interests could be – and have been – addressed by Boundary Review Boards as these agencies call for fiscal studies as a requirement for an NOI.  King County has this requirement in place.  Boundary Review Boards in other counties have similar requirements – supported by a variety of legislation and local requirements.

   ***

   Board members stated that the past ESSB 6186 implementation and proposed legislation to establish legislation similar to that bill, leads to some interesting research questions.  

   Ms. Evans noted that there is expressed interest in working on such a research project by and with King County, the Washington State Association of Boundary Review Boards (WSABRB), the Municipal Research Services Center (MRSC), and American Planning Association Washington Chapter (APA-WA) work collegially to identify and resolve issues as necessary to encourage Legislature 2022 to provide support for annexations in keeping with the priorities of APA-WA.  There is currently expressed interest in consideration of legislation to support annexations by Senator Patti Kuderer and by Senator Liz Lovelett. 

   ***

   Ms. Evans reported that the foundation for the interest in annexations lies with Road Map III program (supported by APA-WA Legislature 2022 Priorities) supporting efforts to retool the Washington Administrative Code (WAC) – and therefrom the Growth Management Act.  Road Map III is a current project that is planning the future of Washington based on Road Map Washington I and II studies conducted by Joe Tovar under the aegis of University of Washington to examine current status of and goals for communities throughout the State).  The Road Map III project is being directed by a task force from the State Commerce Department (led by Clay White). (See Attachment 2).

   Ms. Evans stated that APA-WA Legislative Priorities (Priority #7) address Annexation Reform.  The priority is focused on the enhancement of annexations – particularly redoing some of the required legislative processes to enhance coordinating of jurisdictions (e.g., special purpose districts) to more efficiently and effectively govern and serve communities.  These topics will be considered both in Legislature 2022 and Legislature 2023. (See Attachment 3 and 4).

   The project statement reports the importance of new funding and there is verbal support for necessities (such as housing, transportation, infrastructure, climate change).  However, at present, there is only a requirement (via RCW 36.93 and SB 5368) for fiscal studies to be provided by proponents seeking annexation.  There is no direct acknowledgement of an interest in the sales tax credit or any other current recommended mechanisms (e.g., transfer of funds) for fiscal benefits to annexing communities.  It is very likely, however, that this will begin to be a topic of discussion at Legislature 2022.

   Lenora Blauman reported that funding discussions will be supported by the APA-WA Legislative committee is working, via Road Map III, with the Department of Commerce, focusing on the Growth Management Act and conversion of WAC from policies to rules.  While this refinement project will be launched in 2022, it is highly likely that Legislature 2023 will be creating the official legislation that supports GMA and WAC revisions (perhaps including funding mechanisms for planning and development -- such as, but not limited to, sales tax streamlining for annexing communities.

   Ms. Evans and Ms. Blauman reported that the Road Map III project will also investigate systems to streamline the processes for achieving annexation or incorporation of urban areas.  This investigation will be coordinated with the central GMA and WAC program.  This project – at present – seems to be focused on two areas:

   ·       Consolidating and coordinating Special Purpose District annexations.  

   ·       Consideration of means to improve services/levels of service for annexing cities.

   There is interest, as well, in investigation (and perhaps refinement) of basic requirements for creation of an NOI under RCW 36.93 for review and decision-making for proposed changes to jurisdictional boundaries.  At present there has been no discussion with respect to consideration of processes before the Boundary Review Board.

   ***

   Road Map III program participants include the Washington State Association of Counties and the Association of Washington Cities.  The participants may include Puget Sound Regional Council and perhaps communities in Eastern Washington based upon the differing array of urban and rural interests.

   ***

   Karen Meyering reported that this discussion has been very useful to enhance her understanding of the various Road Map III, APA-WA, and related projects.  She stated her intention to gather comprehensive information establishing costs and benefits related to creation of/change boundaries both at present and past (also in conjunction with ESSB 6186).  This report will endeavor to also address impacts from both the 2008 recession and the recovery therefrom.  It will ideally also consider means — including incentives --for achieving high quality services/service levels.  

   Ms. Evans offered – on behalf of the WSABRB Legislative Committee – to work with this team to create an information bank and recommendations to support funding for jurisdictions seeking to create or change boundaries.   This information package could be coordinated with work by Mrs. Meyering.

   ***

   Board members expressed appreciation to Ms. Meyering.  Future reports will be most desirable and welcome.

5. ADMINISTRATION:

   1. Chair’s Report

      General Business

      Chair Hamlin and Lenora Blauman reported that the Board staff is currently working on several projects including: (1) coordination with King County Executive/Council Work Program; (2) coordinating activities with the State Association; (3) pre-development review for future Notices of Intention; (4) planning of orientation programs for 2022; (5) implementation of the 2021-2022 Biennial Budget; and (7) planning for the 2023-2024 Biennial Boundary Review Board Budget.

   2. Committee Reports

      • Personnel Committee

        Sylvia Bushnell reported that the Board has been notified that James Polhamus, (Fire District) has been elected to serve as a Sewer District Commissioner in King County.

        Robert Kaufman reported that RCW 36.93 prohibits elected officials to serve on a Boundary Review Board.  As such, Mr. Polhamus will be required to resign from the Board effective January 2022.  Mr. Polhamus reported that he has really appreciated the opportunity to serve on the Board.  Members extended their congratulations and good wishes to Mr. Polhamus.

        The Board is working with the Fire District Commission of King County to select candidates to be considered for service to our Board.

      • Budget Committee

        Claudia Hirschey and Lenora Blauman reported that work is now underway to complete the 2021 review of the 2021-2022 Biennial Budget.  The Board is well within the allocated funding for this year – which totaled approximately $360,000.

      • Legislative Committee: King County Board/Washington State Association of Boundary Review Boards; Legislative Committee: American Planning Association – Washington Chapter (APA-WA)

        Note:  This report was integrated into the discussion in conjunction with Karen Meyering’s presentation concerning the History of Sales Tax Credit to Incentivize Annexation Pay-out to Cities to Date (2008-2020).

   3. Committee Reports

      • Budget Committee

        Lenora Blauman reported that the King County Council has officially adopted the Boundary Review Board’s 2021-2022 Biennial Budget Proposal.

        Office relocation may be required to reduce King County’s costs for facilities.  It appears that such relocation of Yesler Building tenants is planned to occur in late 2021 or in 2022.

        For the duration of the implementation of Boundary Review Budget, staff will work with Jim Record to determine the best plan for structuring and allocating our budget.

      • Legislative Committee: American Planning Association – Washington Chapter (APA-WA)

        Yorik Stevens-Wajda reported that for 2021, APA-WA is cognizant of the fact that the Legislature will clearly be prioritizing challenges raised by Covid – in terms of both health management and economic issues.  As Mike Shaw reported, further attention will likely be focused on the many immediately competing challenges occurring with respect to policies/ funding for such priorities as climate change, housing action, and transportation

        Mindful of the Legislature’s program and the likelihood that no omnibus bills will be provided a forum, nonetheless, the Updating Washington's Growth Planning Framework project (under the aegis of Joe Tovar) remains underway with a final report/proposal due in December.  The team of hard-working planners continues to craft broad agreement on updates to Washington's growth planning framework and deliver those proposed updates to the Legislature for consideration in 2021.  

        Mr. Stevens-Wajda concluded that, based upon the above-reported agenda for the Legislature, it is unlikely that this major package can be considered in 2021.

   4. Executive Secretary’s Report

      • WEST HILL ANNEXATION

        Karen Meyering and Lenora Blauman reported a plan by the King County Council to conduct a public information meeting concerning future governance for the West Hill community. Councilmember Girmay Zahilay has called for this meeting on November 18. The purpose of the meeting is to address interest by community members about options for local governance through annexation or incorporation. There will be a brief presentation about options and then encouragement for discussion about the benefits and costs of these governance options.

        There is known interest in looking at a West Hill annexation to Renton or Seattle. There is also an interest in exploring incorporation. Councilmember Zahilay and Councilmember Prince (from Renton) will be participating in this meeting. Councilmember Prince will be joining in his individual capacity (and not speaking on behalf of the city), to help provide some history and context of what the city has done historically and generic information about the City of Renton.

      • ORIENTATION PROGRAMS

        Ms. Blauman is continuing planning for a new future cycle of orientation programs in 2021 -- either on-site or by remote connection. Suggestions include the following topics/agencies:

        • King County Local Services Department

        • Suburban Cities Association

        • Puget Sound Regional Council – Vision 2050

        • Municipal Research Services Center

        • WAPA Legislative Team

   5. Correspondence:

      General Correspondence

      Chair Hamlin reported that there has been correspondence of general interest referred to the Board for this Regular Meeting.  Specifically, there is an article concerning a proposal by the City of Enumclaw to investigate opportunities to leave King County and join Pierce County.

      Jay Hamlin stated that the City is reportedly well-informed about the opportunities and challenges relating to the proposed project.  City officials remain interested in going forward with an investigation.

      Ms. Blauman reported that the regulatory protocols and processes require action by the State, both counties, and the city.  The investigation will be complex, expensive, and extensive.  Past endeavors for other jurisdictions have had limited success.

      In the event that Enumclaw is permitted by law (and chooses) to proceed with an application for the change of jurisdictions, the proposed action must be heard by both the King County and Pierce County Boundary Review Boards.

6. NEW BUSINESS:

   1. 2021-2022 MEETING SCHEDULE/ORGANIZATION

      Chair Hamlin requested that the Board members indicate interest in having an in person December, 2021 Regular Meeting. The Board members support that option if logistics can be managed appropriately.

      In January 2022, the Board will consider remote/in-person Regular Meetings in 2022.

   2. Future Files

      The Board has also received one preliminary file for informal consideration in advance of the proponents’ submitting completed Notices of Intention.

      • Auburn (2 files)
      • Black Diamond (2 files)
      • Carnation (1 file)
      • Enumclaw (8 files)
      • Issaquah (2 files)
      • Maple Valley (3 files)
      • North Bend (4 files)
      • Renton (6 files)
      • Seattle (4 files)
      • Tukwila (2 files)
      • Water District No. 90 (1 file)
      • Bellevue (4 files)
      • Bothell (1 file)
      • Duvall (5 files)
      • Federal Way (3 files)
      • Kent (5 files)
      • Milton (1 file)
      • Redmond (4 files)
      • Sammamish (2 files)
      • Snoqualmie (4 files)
      • Vashon Sewer District (1 file)

      Note: There are 13 unincorporated urban areas in King County that are not assigned to a Potential Annexation Area.

7. ADJOURNMENT

   Chair Hamlin adjourned the Regular Meeting at 8:27 P.M.