Not only would annexing White Center and the remaining North Highline unincorporated area be financially viable for Burien, it could generate an ongoing operating surplus of $2 million, thanks to a sales tax credit from the state.

The state sales tax credit of up to $5 million per year for ten years Burien would receive for annexing the area would provide “greater flexibility to manage expected future fiscal challenges.”

That’s the conclusion of a consultant’s financial feasibility study released this week. The Berke’s Associates study commissioned by the city of Burien is available online at http://www.burienwa.gov/CivicAlerts.aspx?AID=365.

The findings contrast sharply with a study by the city of Seattle that concludes if Seattle annexed “Area Y” it would result in an ongoing yearly deficit of $1.7 million to $16.7 million.

Burien City Council members will discuss the report with the consultants at their regular meeting on Monday, Aug. 15 at 7 p.m. in council chambers. A special meeting will also be held a week later on Aug. 22 at 7 p.m. to talk about annexation.

Councilman Gordon Shaw declared at the Aug. 1 council meeting that the more times the council can meet to talk about annexation and ask questions about it the better.

Shaw noted he did not expect a council decision on annexation until late September or early October.

The Burien consultants reported the biggest differences in the two studies are because of the scope of services offered by the two cities as well as the revenues and costs projected.

They note that Seattle must operate its own fire and library services while Burien is part of the King County Fire District and the King County Library System. Burien also has a much smaller human services component than Seattle, the consultants added.

There is a wide disparity in what the two studies estimate the additional costs to the two cities would be to annex White Center.

Seattle officials estimate that just for added fire and human services would cost Seattle $4.4 million-$6.2 million per year.

Burien officials figure fire and human services costs for Burien would only be $100,000 per year.

While the Seattle study estimates there is $77 million worth of deferred maintenance that would have to be done in the unincorporated area, Burien officials figure the five-year cost of maintenance would only be $23 million.

Seattle would plan to resurface arterial and non-arterial streets while Burien would apply an asphalt overlay over the streets deemed most in need. Other street projects would be completed on a priority basis.

The Burien study estimates Burien would fill 37 additional full-time positions while Seattle says it would need 103-138 more workers.

Ongoing costs for Burien are estimated at $7.1 million per year. The Seattle study says the costs would be $19.2 million to $28.7 million, mostly for police and fire services.

The Berke study estimates ongoing revenues at $9.1 million per year, which includes $3 million a year from the state sales tax credit. That leaves a surplus of $2 million of revenues over costs.

However, the Seattle study estimates that city’s ongoing revenues would be $11.9 million to $17.4 million, including using the maximum $5 million state sales tax credit. Seattle’s projected deficit is $1.7 million to $16.7 million.

The Burien consultants issued several findings based on their research.

The first finding is that Burien currently faces structural financial changes due to lower tax revenues and escalating costs. A voter-approved initiative passed statewide forbids cities from raising their property tax rate more than one percent from the year before.

With revenues not keeping pace with costs, Burien faces a budget shortfall of 8 percent in 2013, up to 23 percent by 2023, according to the report. City staff and lawmakers would have to find ways to balance the budget.

The Berke consultants did find that the state sales tax credit Burien would receive for annexing White Center would cover the city’s new costs related to annexation for the 10 years the credit is in place.
Burien could even recoup some of its current fixed costs if such costs as the city manager and council through the tax credit.

In fact, the consultants reported the tax credit for annexation would help Burien with its budget problems.

“…annexation provides additional general fund revenue to the City during the ten years of the credit, and buffers the City against its pressing fiscal challenges,” the consultants wrote.

Even if Burien did not use all of the $5 million per year tax credit, the city could have the rest as insurance to mitigate potential financial risks, the consultants noted.

“The analysis suggests that the primary impact of annexation is to provide the City with greater flexibility to manage the expected future fiscal challenges during the period of the credit,” the report declares.

While annexation may actually result in a positive cash flow for Burien during the ten-year tax credit period, according to the report, over the long-term it would probably be fiscally neutral for Burien, the consultants wrote.

The Berke consultants noted that annexation would bring additional capital facility needs as well as revenue.

The city would need an estimated 13 non-police full-time positions as well as 24 police officers, according to the report. The current city hall can accommodate the increased staff but about $40,000-$60,000 in capital improvements would be needed.

The report also estimated that White Center would need up to $46.3 million in capital improvements to roads, parks and stormwater.

Unless there are significant capital needs not known, the improvements could be paid for through user fees and the real estate excise tax, the report concluded.