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LUTC MINS 05-15-2006G:\LUTC\LUTC Agendas and Summaries 2006\05-15-06 LUTC Minutes FINAL.doc City of Federal Way City Council Land Use/Transportation Committee May 15th, 2006 City Hall 4:30 pm City Council Chambers MEETING MINUTES In attendance: Committee Chair Jack Dovey; Council Member Linda Kochmar; Committee Member Dean McColgan; Mayor Michael Park; Council Member Jeanne Burbidge; Interim City Manager Derek Matheson; Community Development Director Kathy McClung; Community Development Deputy Director Greg Fewins; MS Director Iwen Wang, Associate Planner Isaac Conlen; Public Works Director Cary Roe; Public Works Deputy Director Ken Miller; City Traffic Engineer Rick Perez; Deputy City Attorney Karen Kirkpatrick; Administrative Assistant II Marianne Lee. 1. CALL TO ORDER Councilman Dovey called the meeting to order at 4:35 pm. 2. APPROVAL OF MINUTES The May 1st 2006, minutes were approved. The agenda was amended to move Item A, Annexation of the PAA, to the end of the agenda. The agenda was amended to remove Item B, Joe’s Creek, to a future LUTC meeting. 3. PUBLIC COMMENT None 4. BUSINESS ITEMS A. Annexation of Potential Annexation Areas (PAA) Kathy McClung introduced the item and said Council and Committee Members should see a memo at their places; staff have gathered information up until the last minute. Most information will be covered by Iwen Wang because the interpretation of the new legislation is being done by the Department of Revenue. Ms. Wang had a meeting with them late last week. One of the outstanding questions from the last LUTC meeting was the concern over the cost of the actual annexation itself. Questions included: What’s the cost this year? What is the balance of the cost and can that be included in the budget discussion for 2007-2008? Staff were able to determine that, if the Council decided to proceed, then the City would just need the money for preparing the legal descriptions for the resolutions and preparing the packet for the boundary review board (BRB). That’s a matter of a few thousand dollars. The balance of the cost, the bulk of the money, could be included in Council discussions on the 2007-2008 budget as a new program. Before Council makes their decision, and Ms. Wang will be presenting additional information in a minute, Ms. McClung raised a couple of points. One of them is that, if the Council decides not to go through with this and not to do the studies, then there are other projects that staff could be working on and staff would rather do that then spend the time on something that is not going to go forward. Another thing Committee Members should know or think about is that King County is pushing very hard to get cities to take their PAA areas. They contributed to the legislature’s adoption of the tax incentive (mentioned at the last meeting) and if the carrot doesn’t work, they’ll probably be back later with the stick. A third thing is that there are, most likely, going to be groups of people within the PAA that will approach the City from time to time and want to annex. It’s going to be a financial deficit. Is the Council going to be willing to say ‘No’ to those groups? The other downside is that, that would have staff going through the annexation process a number of times instead of once. Those are a few other things to think about when making your decision. Land Use/Transportation Committee Page 2 May 15th, 2006 G:\LUTC\LUTC Agendas and Summaries 2006\05-15-06 LUTC Minutes FINAL.doc Chair Dovey asked, if the 0.02% sales tax is the carrot, what’s the stick? Ms. McClung responded that she did not know what the stick would be, but if the carrot does not work, there’s a good chance that King County be back, trying to think of a stick. Chair Dovey asked if King County can force a city government to annex something they don’t want to. Ms. Wang said that one thing staff does know is that in the Growth Management Act (GMA) the State has considered putting some more “Stick” in there. For example, they can with hold your state shared revenue distribution and other state revenue. So it probably won’t come from King County directly, it will come from the State. It will be State action rather than County action. Committee Member Faison said that that has, in fact, happened in jurisdictions that did not comply with the GMA. They have withheld funds. Ms. Wang said that those jurisdictions failed to plan based on the GMA. Committee Member Faison continued saying that, ultimately, the state has the authority to draw city boundaries. Ms. Wang provided the Committee with some information that staff did not have a good understanding of before on Bill 6686. Staff had a meeting with Dept. of Revenue (DoR) on May 11th. Even with that meeting, DoR has warned staff that they need to treat the current interpretation as preliminary as they are still refining it. The final version will be posted on their website. However, based on the discussions staff feels pretty comfortable, but knows there are some changes to the information Council was briefed with previously. One is that, if the City does decide to go to incremental annexations and does 10,000 plus annexation the first time and a 10,000 plus annexation the second time, the 0.1% and 0.1% sales tax are additive so you do end up getting 0.2% sales tax by annexing two areas, each over 10,000. The law states that if you annex 10,000 you are eligible for 0.1% sales tax and if you annex 20,000 you are eligible for 0.2%. Staff thought that was a clear incentive for cities to annex in one lump sum but DoR’s interpretation is that they are additive. The second is there was great concern about the city’s current population count of the PAA being too close to 20,000. Our current estimate is that there are 20,152 people in the PAA area, less than 1% difference from the allowed amount. If the post-annexation census said Federal Way had only 19,500 new citizens would the City then be ineligible for the 0.2%? The answer is no. DoR’s interpretation is that they can use the City’s estimate at the time we initiate the annexation as a base. Even if the post- annexation census has a different number it is OK. They recognize that planning happens at one time, annexation happens at one time and populations can change. We can move forward based on the City’s estimated population count and do not have to worry about being penalized. Kathy McClung said that the City fully intends to do a public process; there is some that’s required but staff also see that they would have to do a lot of public information before any kind of a vote could be taken. That has not been fully developed but staff has built it into the time plan and work program, if the Council decides to come forward. But, staff can come back to the Council with that fleshed out and then get more ideas for what Council thinks is good if Council decide to move forward. Ms. Wang’s third point of clarification is how long the City will be eligible for the 0.1% or 0.2% tax. It is understood that it is for a 10-year period that the City will be eligible for a tax credit, but the ten years starts when the City first imposes the tax. So if the City does two separate annexations and one 10,000 annexation occurs in 2007 and starts imposing the new 0.1% tax and then two years down the road does another 10,000 person annexation and adjusts the tax rate to 0.2% at that point, the second portion (0.1%) will only have eight years left. That’s why doing the annexation in one lump sum gives you the maximum ten years for the full 0.2% possibility. You can do it incrementally but you need to know that the second annexation cannot get the full ten years of financial support. Chair Dovey asked for clarification on when Ms. Wang says the City imposed the tax, is this an additional tax up and above what the people are already paying or is it offset by what the state’s collecting so it’s revenue neutral to the individual. Ms. Wang responded that it is revenue neutral for the consumer. Chair Dovey said that when we do this, taking in the sales tax revenue for the whole City, we are still upside down? Ms. Wang said yes, by about $200,000. Estimating the revenue is about 2.8 million dollars based on 2005’s sales tax collection and our total cost is estimated at about 3 million dollars. This is based on the 2003 annexation study with recommended staffing increase. Chair Dovey asked, at what point does it cross over where we would break even or be ahead of the game? What does our sales tax have to do? Ms. Wang replied that our expenditure growth rate is about 4% and so if our sales tax grows at the same rate then it will cross but if our sales tax does not grow then it may not cross. The projection is that it will. Land Use/Transportation Committee Page 3 May 15th, 2006 G:\LUTC\LUTC Agendas and Summaries 2006\05-15-06 LUTC Minutes FINAL.doc Committee Member Dean McColgan asked for confirmation that the 0.2% sales tax would come from current residents. Ms. Wang agreed, saying it will also come from consumers and the new residents in the annexed areas. Mr. McColgan asked if that was taking revenue away? Ms. Wang said no, it is not. The State us putting up the money. Mayor Park noted that the current tax is 6.5%. Ms. Wang confirmed it will reduce to 6.3%. Then in 10 years, Chair Dovey said, it will switch back. The state will again get 6.5% and the City will go back to where it is now. Chair Dovey asked staff to walk through where the costs actually occur in the timeframe. Kathy McClung reviewed the handout on the PAA annexation from the last LUTC meeting (May 1st) and the table included in it. It has the election cost at a little over $10,000. $61,000 was allocated to staff resources; however, a majority of that is already folded into the action you took on the Senior Planner position. Then there is the post-annexation census; that’s where the majority of the money goes. That’s a ball park figure between $118,000 and $140,000. That would depend on whether you were trying to do the whole area or a portion of the area and we would only have to pay it if the annexation area gets approved because if it doesn’t, there’s no reason to do a census. There were miscellaneous fees of $19,000 for mailings, preparing the packet for the BRB, and preparing the legal descriptions. The total is $208,000 to $230,000, however you can subtract the majority of the staff resources from that because that’s already paid for. Chair Dovey asked that if the annexation goes to vote and it’s turned down, then there’s no law that says we have to do it again? Then we’re only out the cost of the election and the staff time to get it to an election, which will not cost $61,000, will it? Ms. McClung responded that there is some cost to other departments; for example, if the Community Development (CD) dept. goes out to public meeting they take representatives from all departments with them. Then there is the cost of preparing information for staff reports and public flyers, etc. Committee Member McColgan asked about the negative capital needs. How do we balance… there is a 1.3million dollar capital deficit here. How do we account for that? Ms. Wang replied that, unfortunately, at this time there is no additional assistance that we know of. The City Council will have quite a bit of discretion in terms of how much capital you want to put in. The majority of the capital is for parks, if you look at the detail parks capital is about 1.5 million. Then the street-related capital, which is service level, signals, widening,, and those kinds of service improvements, is about $850,000/per year (annualized). So the timing is a Council choice, and the Council will need to make some service level decisions for the capital projects. She said it is no different than today’s capital needs that the Council needs to prioritize. Committee Member McColgan said on of the reasons to annex is to realize some of the benefits of better infrastructure: better parks, better roads, but in looking at a 1.3 million dollar deficit Council may decide not to make those improvements. The City should be upfront with people voting for annexation that the City may not get to the same level of standards in the new area for a while because of the need to find the 1.3 million to do that. Council Member McColgan wants that to be part of the conversation. Ms. Wang said if you look at park’s capital deficit it alone is 1.5 million. So if you do everything on the transportation side and hold off on the parks side you will about break even on the capital needs. Ms. Wang said the operating/maintenance for the parks is funded as part of the operating study. The approach the 2003 annexation study took was they didn’t just take a straight line, a proportion of what current City expenditure is times the population number there. They instead looked at each area to see what there were deficient in. So some areas will have a higher factor for public safety, for example, than other areas. Some areas will have a higher public works cost than some others. So they took different information, based on population, geographic areas, the existing amount of infrastructure, etc, to come up with the direct service costs. Then for support service, it’s based on the direct service increased need in proportion to the current level of service. Most of them are based on the evaluation of the area where they are needed. Committee Member Faison noted that it’s important that we not lose sight here that the County still has the $10million dollar fund. Have we had any conversations with them about how much they’re willing to contribute? Particularity Committee Member Faison would be interested in having them pay for all the costs of putting this on the ballot. Ms. McClung responded that the City has not had any contact with the County over the ten million dollar fund. She had talked to the Planning Director from the City of Auburn. Land Use/Transportation Committee Page 4 May 15th, 2006 G:\LUTC\LUTC Agendas and Summaries 2006\05-15-06 LUTC Minutes FINAL.doc They have had that conversation and were told that this legislation was supposed to take care of it. Committee Member Faison asked if there was any rush to rule on this issue tonight. Ms. McClung said there was not. Committee Member Faison urged that before the Committee goes on record moving something forward they put a little pressure on the County, saying the City is not interested in moving forward unless the County is willing to pay for some of it. Committee Member McColgan said he may be wrong but he understands that that proposed $10 million dollar fund has not been approved in their last budget, he thinks. Ms. Wang replied that when they first talked about this the money was not released by the County Council. There was supposed to be a follow-up meeting in response to the County Council on how they are going to use that $10 million dollars. She does not know if that occurred and does not know if it’s ever been released or is in their budget or not. Committee Member McColgan agrees with Committee Member Faison that if there is money available they should tap into it. However, he is not sure if that $10 million dollars was not approved therefore they went to the state as another way to get money towards the annexation. Chair Dovey said he agrees with Committee Member Faison that perhaps right now they not take action and go after the question. Chair Dovey returned to the question about the parks. I know neither of you (Ms. McClung & Ms. Wang) are in charge of parks so this might be hard to answer but, if we were to annex the east side we would pick up Lake Geneva, that new baseball field over there, Five Mile Lake, I think, and a few others. I picture the 20,000 people and the size of those parks and then I picture our parks over here, & where is the real deficit? Ms. Wang replied that the deficit is in two key areas. One is the trails. They don’t have any trail system in the unincorporated area now that meets the City standard. Our standard is 2.2 miles per 1,000 in population. Currently, within the city limits, we are not meeting our standard. The other is neighborhood parks. They have five parks there. Two of them, Bigaman and Camelot parks, are open space oriented. They are considered ‘passive’ parks. Lake Geneva, Five Mile Lake and the ball field are all ‘active’ parks; they are all in the south side. In this budget, he continued, is there enough money to maintain those parks? Ms. Wang replied that the maintenance costs are built in to the $3 million dollar annual operating costs. Council Member Kochmar asked if it would be more realistic to revise this analysis so it’s more in incremental stages. Wouldn’t we want to just provide basic services initially? Look at the roads, provide police, and then add additional services at a later date when the money is available? Ms. Wang responded that there are a couple of things to consider. One is that, the amount that the City will actually get from this tax credit, or tax transfer, depends on how big the gap really is. We can reduce our costs but we will not be getting more money to offset. The maximum we can get is the amount of our operating deficit. Council Member Kochmar said that first, they have to agree, second, we have to decide on the level of service. It would appear to her that it should be structured it so that they are bearing more of the burden of the costs. In order to do that they have to have more retail. Wouldn’t the City want to re-look at that zoning? Ms. McClung said that would be a Council decision. Staff looked at it a couple of years ago and that was the whole point in looking at it as we looked it, so that people in that area would know what t hey could count on, one way or the other. Just like inside the City limits, we get requests every year to change the zoning. It would happen naturally anyway. Once that area is incorporated they do get the permits here. They do get the inspections here. They are going to expect the potholes to be fixed there. Code compliance. Those things… obviously police, that’s on the top of the list, but those other services also have to be provided. That is not optional. Council Member Kochmar says she agrees with that, she’s just thinking that we should re-look at the analysis and phase in some of the other parks and so on that might not be basic services. Council Member Faison said he thinks we should maximize the services because the state’s going to pay for it. So for that ten year period it seems like we should put as many services as we can in up to whatever the State’s willing to pay because, they’re paying for it. Council Member Kochmar asked if the 0.2% is based on the maximum services. Is the State going to ask us if we’re providing maximum services? Council Member Faison said that the 0.2% is based off of the services the City provides versus the revenue the area generates. Council Member Kochmar said she thought the 0.2% was generally, for over-all. Mayor Park said that the State will pay for the financial gap whether it’s 0.2% or under 0.2%. Council Member Kochmar said that’s the first she’s heard of that; so you mean they could give us less than 0.2%? Ms. Land Use/Transportation Committee Page 5 May 15th, 2006 G:\LUTC\LUTC Agendas and Summaries 2006\05-15-06 LUTC Minutes FINAL.doc Wang and Mayor Park said yes. If our financing gap is less than 0.2%. Council Member Burbidge said she would also encourage some additional conversations with King County. This is going to make a big difference in their responsibilities, if we annex these areas. Mayor Park asked Ms. Wang to explain her revenue projection on the utility tax. Ms. Wang said that the City is assuming, under this analysis, half of the city’s utility tax will be designated for capital purposes. So, that is part of the capital revenue. Mayor Park said that means that half of the 6% currently? Ms. Wang confirmed that and said it is an assumption. Mayor Park said that, if we the City changes that at a future budget discussion, it will apply? Ms. Wang said yes; it is totally City policy. Mayor Park said that means it can be changed after the budget discussion? Ms. Wang confirmed that it can be changed. In reality, Mayor Park asked, what’s the actual accounting process? We are looking at 0.2% or 2.7 million based on our projections. So, the State is willing to pay for our revenue and the projected expenses? Ms. Wang said that the new legislation specifies that the City needs to do annual accounting to see what we actually incur as costs. How much revenue are we actually bringing in from that area? So staff will need to annually report the gap to the state and whatever they distribute will be the gap up to 0.2% or 0.1% of the tax. So if the gap is higher they will only give us whatever our tax is and if it’s lower they will only give us the gap amount. Mayor Park asked about the revenue expenses projection today is pretty similar to the projection staff did a couple of years ago. Ms. Wang responded that it’s pretty consistent; with the exception that staff did update the FTE ratio for the police department, for example. Staff used a more current number for the police officer per thousand ratio. The revenue is coming in pretty much as staff projected. Staff has not seen any big surprises in the property tax area. However in Community Development, for example, the City did not add staff but are starting to do the new resident’s permits, so that is something that needs to be looked at in the budget process. Ms. Wang said that as long as it continues to be a residential area staff expects it to be a deficit. What may change the equation is the streamlined sales tax. When you move to a destination based sales tax and if more and more people continue to use the online purchasing then that can balance that somewhat. But until we have that law in place, until we see some revenue generated from that, it’s risky to anticipate. Chair Dovey asked if any other Council Members had any questions. He said that he has heard from two of his colleagues at least, on this committee, and thinks they will postpone making a decision until after King County has been contacted. We will bring this up and figure it out when we talk about it. Thank you. Cmte did not take action on this item. They postponed future action until after the City has more information from the County. B. Joe's Creek Salmon Habitat Restoration Project - Bid Award This agenda was amended to remove it from tonight’s agenda and send it to a future, unspecified, LUTC meeting. C. Setting a Public Hearing for the TIP 2007-2012 Rick Perez introduced the topic. This sets the public hearing for July 18th, 2006. This is its second LUTC appearance. Moved: Faison Seconded: McColgan Passed: Unanimously Cmte PASSED Option 1 on to the June 6th, 2006 City Council. RESOLUTION 5. FUTURE MEETINGS The next scheduled meeting will be June 5th, 2006. 6. ADJOURN The meeting adjourned at 5:30 p.m.