Mayor Calls Proposed Annexation Sales Tax Credit Cut a "Looming Monster"

Kirkland’s big challenge in 2012 will be fending off the “looming monster” of a cut in the sales tax credit to annexation cities that the state is considering, Mayor Joan McBride told the Chamber of Commerce on Tuesday.

Gov. Chris Gregoire has proposed a 10 percent cut in a 0.2 percent sales tax credit that the state gives to cities that annex areas with at least 10,000 residents, as a way to help reduce the state’s anticipated $1.4 billion to $2 billion shortfall in revenue for the current biennium. The cut would hit particularly hard the city of Kirkland, which , adding approximately 33,000 residents to its previous population of about 48,000.

City Manager Kurt Triplett has said it would reduce Kirkland’s expected revenue by $14 million over 10 years, raising the possibility of cutting positions for police, firefighters and other city staff.

“The sales tax credit was a major reason the city even considered annexation,” McBride said in a state of the city speech to the Kirkland Chamber of Commerce at the . “A promise is a promise, and when we have already budgeted those funds, we need our state to live up to its word.”

The sales tax credit was created in 2006 as a way to encourage cities to annex adjacent areas and ease the budget hardship on cash-strapped counties. Kirkland’s annexation has been the biggest. Last fall Gregoire proposed eliminating the credit entirely, but a recently introduced House bill that she supports would cut it by 10 percent. The bill also caps the amount a city would get based on first annexation year tax revenue. But the way the bill works would cap Kirkland’s amount based on only 10 months of that revenue.

“Preservation of this sales tax credit is the No. 1 priority on our agenda,” McBride said in her third state of the city speech to the Chamber. “We are leaders in a large coalition of cities who have gone on record as opposing any reduction in the sales tax credit.”

Other challenges the city will face in 2012, said McBride, include maintaining its 250 miles of road and creating a 2013-14 budget.

Of the former, the mayor noted that the city is considering the implementation of a Transportation Benefit District that would levy an annual $20 fee on the owners of each car in the city. State law allows cities to do that without a public vote.

The city estimates that it should be spending about $5 million annually on road maintenance, but actually spends about half that.

“A $20 fee, plus our (existing) road maintenance budget, still will not” adequately address all the issues, she said, noting that keeping up the city’s streets is vital to its economy.

On creating a budget for the next fiscal biennium, McBride said any dip in the local economy would make the process a challenge.

“The fiscal situation has stabilized, but another economic downtown would require another round of budget reductions,” she said.

McBride also listed Kirkland’s accomplishments in 2011 and upcoming opportunities. The former included:

• Annexation, which made Kirkland the 13th largest city in the state with some 80,000 residents. “Kirkland is now a major player in this state,” she said, while acknowledging “some glitches; a major one” is the potential loss of the sales tax credit.
• An from the Port of Seattle for $5.5 million. The top priority, she said, is to turn it into a cross-town bike and pedestrian trail as soon as possible. “This will be one of the highlights of my years of service,” she said. “This corridor, along with our string of waterfront parks, will be the pride of our city for countless generations.”

Upcoming opportunities for the city, McBride said, include:

• Bringing a major expansion planned by Google, which , to the city. “We hope to land the next round of Google expansion, which would bring hundreds of jobs to Kirkland.”
• Facilitating the redevelopment of Parkplace Center, downtown Kirkland’s major shopping development, which Touchstone Properties has been planning for years.
• Forming neighborhood and business strategies for the city’s newly annexed neighborhoods of Kingsgate, north Juanita and Finn Hill.