Senate bill takes aim at potential annexation tax credit
February 4, 2014
By Peter Clark
Annexing Klahanie would be much less palatable for Issaquah if a bill introduced by state Sen. Andy Hill (R-45) is approved.
Hill, who represents the northern half of Sammamish, introduced a bill Jan. 29, which would mean a drastic reduction to Issaquah’s expected revenue from an annexation.
Councilman Don Gerend said the Sammamish City Council did have a hand in bringing the bill to the Senate, and to Hill, chairman of the Senate’s budget-writing committee.
“We had talked with the senator about it,” Gerend said. “The senator’s concerned about the state budget. So, any way to save money for the state budget is of interest to the senator.”
The bill is narrowly tailored to affect only Klahanie. If approved, Issaquah would lose a state sales tax subsidy, which it was counting on to help defray the costs of annexing the Klahanie area.
A city-commissioned study to determine the costs and benefits of an annexation revealed the city should expect a net gain. However, that gain depended upon the state subsidy.
Annexing the area would lead to $6 million in start-up costs for Issaquah, which the city planned to amortize over five years. After the city paid those costs, it would see more revenue than expense from the area. Issaquah’s Finance Director Diane Marcotte said without the subsidy the city would still end up ahead, it would just take longer to get there.
Under current law, if a city can prove that absorbing an area creates a financial burden, the state provides a credit on .1 percent of sales tax, for up to 10 years.
Hill’s bill would exempt Issaquah from receiving the credit in the case of Klahanie.
Sammamish has expressed strong interest in annexing the Klahanie area and stated numerous times it would do so without the state subsidy.
Gerend said the state had the opportunity to forgo giving Issaquah the tax credit in favor of financially stable annexations, though he said he could not recall who had the idea.
“It was the whole council that took it to him,” Gerend said.
State Sen. Mark Mullet (D-5), who represents the Klahanie area, did not greet the bill warmly.
“It’s horrible,” he said. “It’s Sammamish’s really lame attempt to keep us from getting the state credit.”
Mullet said the bill invalidated Issaquah’s investment in exploring annexation and hurts Klahanie-area voters.
“There’s a state support system in place,” he said. “This would completely remove their option to choose Issaquah.”
Issaquah City Councilman Tola Marts said the action burned some newly built regional bridges.
“I think it undoes a lot of the good that has been accomplished recently between the cities of Issaquah and Sammamish,” he said, listing Eastside Fire & Rescue negotiations and Sammamish Plateau Water and Sewer District agreements as examples.
Marts said the bill could take the decision away from Klahanie-area voters if passed.
“It disenfranchises them,” he said. “It says, ‘It doesn’t really matter what you guys want.’ I don’t understand why it was written and I don’t understand why it was presented.”
Some pro-Issaquah Klahanie-area residents expressed dismay at the bill’s introduction.
“That potential tax credit has been around for a long time,” resident Mike Foss said. “I think Sammamish is using the Senate to bring a bill up to kill this vote.”
Resident Dick L’Heureux said he could give the “Reader’s Digest” version.
“What the senate bill says is, ‘If you win, you lose,’” he said. “That’s what it really says.”
Opponents to the bill worried it signified the beginning of Legislature encroachment on annexation practices of the Growth Management Act.
“We have a very well-established scheme for annexation in Washington,” Marts said. “We have potential annexations areas and a Boundary Review Board. If any municipality could veto an annexation, the PAAs and BRB would lose any meaning in the process.”
Mullet said he did not believe the legislation had any real future in the Senate and he chastised Hill for playing politics in an election year.
“I’m disappointed that this bill was dropped,” he said. “I think Hill’s doing something that only benefits his district at the detriment to a neighboring city. I think he’s trying to court votes instead of forwarding good policy.”
Marts chose to stay positive.
“I’m looking forward to happier times with our neighbor to the north,” he said.
The bill (SB 6487) was sent to Hill’s Ways and Means Committee. A public hearing was scheduled for Feb. 4.
Hill did not return repeated calls for comment.
Voters in the Klahanie area will cast their ballots in the Feb. 11 election on whether to join Issaquah.