Title
SE Annexation Options Recommendation
Recommended Action
Committee Recommendation:
Approve staff recommendation to continue more detailed analysis of annexation options and refer to a City Council Study Session.
City Manager Recommendation:
Approve staff recommendation to continue more detailed analysis of annexation options and refer to a City Council Study Session.
Report
Issue:
Whether to continue analysis of a potential annexation of the City’s Southeast Urban Growth Area (UGA).
Staff Contact:
Tim Smith, Planning and Engineering Manager, Community Planning and Development Department, 360.570.3915
Presenter(s):
Tim Smith, Planning and Engineering Manager
Background and Analysis:
Annual annexation updates to the Land Use and Environment Committee (LUEC) have been provided over the past several years. The purpose of these updates are to discuss whether any areas may be ready for annexing into the City. State law provides a framework that cities must follow to annex land. Land must be within a City’s unincorporated Urban Growth Area (UGA). These are areas where the City expects to grow and extend utilities such as sewer and water to serve growth and accommodate the projected population forecast. UGAs are set by the County in consultation with the cities in Thurston County. Housing densities, transportation plans and other element of the City’s Comprehensive Plan are then adopted by the City Council to ensure future growth is directed into urban areas and away from rural areas, as required by the State Growth Management Act.
The most common method of annexation in the State of Washington for cities is called the Petition Method. Annexations of this type require a petition with signatures of property owners representing 60 percent of the assessed value of an area proposed for annexation. There are properties outside of city limits and within the City’s UGA where property owners connect to city services such as city water. At the time of connection, the property owners must sign a “waiver of protest” form that gives the city the right to sign a petition for an annexation. Once the City has sufficient forms that represent at least 60% of the assessed value of the area proposed for annexation, the city can then initiate an annexation.
The City has been studying its UGAs in the Northeast, Northwest and Southeast areas. The Northeast and Northwest areas have environmental constraints, fairly low-density development and are not generally developed with urban services such as sewer and water. The Southeast UGA, however is generally developed with urban services. The area is comprised primarily of single-family homes at urban and suburban densities with commercial developments along Yelm Highway. Most of the public infrastructure has been constructed to ‘modern’ standards, although many streets lack sidewalks. The City owns the undeveloped Ward Lake Park within this area, and has purchased the 82-acre former Zahn site for a future park. The City has also purchased the LBA Woods property to expand LBA Park located immediately north of and adjacent to the study area.
Staff provided an annexation update to the LUEC in late 2018 and received direction to add an annexation feasibility study to the Community Planning & Development (CP&D) work program for 2019. The purpose of the study was to look at overall costs and potential revenues for annexing the SE UGA, in addition to the boundary that could serve for an annexation. The City subsequently hired the firm Local Planning Solutions and a draft study was completed in late 2019 (attachment 1).
The draft study analyzed a potential annexation in two phases: a north phase consisting of land north of Yelm Highway, and a south phase comprised of properties in the UGA south of Yelm Highway. There are advantages to the city for annexing the entire Southeast UGA at the same time. Annexations take significant time and staff resources. Staff anticipates an annexation will take a minimum of six months to process. Public outreach and communication throughout the process will be needed. A public hearing before the City Council is required. Once approved, an annexation must then be filed with the Thurston County Boundary Review Board. This can add another three to six months to the process. Once the annexation is completed, the City must conduct a post annexation population census for the area to meet the requirements of the State Office of Financial Management.
There are also advantages to annexing in two phases. One of the major findings of the study was that in order to extend City Fire Department services and maintain Fire Department response time standards, annexation of both phases at the same time would require another fire station that is more closely located to Phase 2. The closest fire station to the annexation study area is located at the corner of 22nd Street and Boulevard Avenue. The Fire Department has indicated that it currently has the ability to provide service to the Phase 1 - North Study Area and still maintain its response time standards.
The study concludes that to provide fire service to the entire study area, any future annexation will require a strategy to ensure that services will be maintained, while ensuring that costs are minimized and, if possible, spread out over a transition period. The two most likely scenarios, at least with respect to fire and emergency medical services, would be as follows:
• Just annex Phase 1 - North Study Area. This would not require the construction of any new facilities.
• Annex the entire study area but enter into an interlocal agreement (ILA) with one or more fire districts. An ILA could mitigate impacts to Fire District 6 in particular, in addition to the city. An ILA could allow for a gradual transfer of responsibilities, as well as lessen the immediate fiscal impact to both jurisdictions.
Other one-time capital costs identified in the study for the provision of City services in a newly annexed area will be highlighted in the presentation at the meeting.
With regard to ongoing operations and potential impacts to the City’s General Fund, the City’s Finance Department recently completed an additional financial analysis. Attached are a chart and graph for two scenarios that illustrate a potential range of estimated operating revenues and expenses over time for the entire study area.
Scenario 1 assumes a more immediate transfer of full services to the City after annexation. For example, the chart shows a large increase in operating expenses after year 2029 for the Fire Department. This assumes that a full transfer of operations to the City from the fire districts occurs at that time. In this scenario, operating costs initially exceed revenues, but over a long period of time revenues more closely align to costs of service.
Scenario 2 assumes operating expenses are spread over a longer time period following annexation. For example, it assumes the City will contract with Fire Districts 6 and 3 to continue to provide fire services. In this scenario, operating costs more closely align with revenues than in Scenario 1. Revenues begin to exceed operating costs between 2035 and 2041.
City staff recommend a more detailed phasing plan for services should be completed as a next step in this process. A consulting firm with expertise in annexation fiscal analysis would need to be retained to work with service providers to develop a multi-year phase-in plan for providing ongoing services to the annexation area. This information could then be presented to the City Council at a study session in 2022 in preparation for a decision of whether and how to proceed with an annexation process. The consultant could also begin initial public outreach to community members about the annexation scope and process.
Neighborhood/Community Interests (if known):
Annexation proceedings generate substantial agency, property owner, resident and business interest. For any annexation proceeding, the City would follow a process that ensures all interested parties are well-informed and have an adequate opportunity to participate.
Options:
1. Approve staff recommendation to hire a consulting firm with expertise in annexation fiscal analysis to work with service providers to develop a multi-year phase-in plan for providing ongoing services to the annexation area.
2. Table discussions of annexation and bring back to the LUEC at a future date.
3. Provide different direction to staff.
Financial Impact:
Community Planning & Development has requested a budget enhancement for consultant work on a phase-in cost of service plan and to lead an annexation process in 2022.
Attachments:
Annexation Feasibility Study
Operating Revenues and Expenses Scenarios