Annexation: Asset or Liability?

Yesterday, I attended a Futurewise event along with some like-minded folks who are very interested in managing our growth better here in Whatcom County. These are people dedicated to 'walking their talk', and I am gratified they are! Since Bellingham represents about 40% of Whatcom County, the City represents a big dog in that hunt. As the biggest population center in these parts, and therefore the strongest potential ally of the County, it is in both the City's and County's interest to work together closely on reasonably resolving how future growth will be managed.

Growth and its management has been a dominant issue during my nearly 9-year tenure on the City Council, so I have learned much about it. But, Lord knows, I don't claim to have all the answers. What I do have is a good grasp of the principles that can lead us in the right direction, and some of the obstacles that work against them.

One topic I have researched and written about is annexation, that oddly obscure, but potentially valuable tool in the GMA toolkit. The article below was published in The Whatcom Watch early last year, which I believe explains the role annexation can play in sorting out what course of action the City and County ought to take. It's lengthy, but the 'Sidebar' is excerpted -at the end of my writing- straight from the Annexation Handbook, published by the Municipal Research Service Center [MRSC] one of our State's most valuable resources in understanding our relatively complex system. These comprise a very good summary of the Pro & Con arguments regarding annexation.
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Annexation is a concept that provides two important functions; it determines which jurisdictional rules and regulations will govern development, and it determines how revenues from development will be split. If annexation decisions are prudently and consistently made over time, growth can be concentrated in appropriate urban areas as the Growth Management Act [GMA] requires, minimizing costly sprawl.

Periodically, the County and City agree on those areas, contiguous to city limits that are best suited for future urban levels of growth. These areas are deemed “Urban Growth Areas” [UGA] and remain in the County until annexation to the City occurs. Now, during our periodic Comprehensive Plan update, it has been determined that the city has insufficient build-able land for its fair share of future growth, which means additional UGA land must be identified.

It has also been determined that existing UGA land has not been used as efficiently – as densely - as it should have been. Part of the reason is directly attributable to the city’s continuing practice of discouraging or not requiring residential annexations, particularly at the time when water and sewer services are extended - the time of its greatest leverage! Unnecessary sprawl, loss of revenue to the city, poor traffic circulation and lack of amenities like parks and trails in developing neighborhoods are all part of the cumulative results of this habitual short term thinking.

Every city or town in Whatcom County besides Bellingham annexes residential areas as a condition of extending utilities. The same is true for cities and towns in the entire state of Washington! What ‘secret’ does Bellingham know, that other municipalities in the State of Washington do not seem to know?

Pro and Con Arguments

Annexation always has its advantages and drawbacks, and these are supposed to be weighed in a thorough cost/benefit analysis whenever an opportunity presents itself.
During 2004, the City of Bellingham sponsored and facilitated a study by an intern, which examined the various factors that contribute to whether annexations can be fiscally justified. The results of this study verified what we already knew; that industrial and commercial annexations usually have a demonstrable fiscal payout for the city, while residential-only annexations do not. Another finding was that early annexations result in less cost to the city and more certainty for the city, developers and future inhabitants and business owners that the area will be used efficiently with urban service levels provided.

What has consistently not been factored into this analysis is the future potential livability of the UGA developing area. If quality of life [QOL] is important to folks, shouldn’t this also be considered, along with the more easily quantifiable economics? After all, shouldn’t people who will work and/or live in a newly developing area have a voice in city issues that will impact them? In the spirit of ‘full cost accounting” maybe we need to factor in future QOL. There is a responsibility under the GMA for cities to adequately plan for accommodating future growth and provide urban levels of service. Nowhere is there a requirement that this exercise must be economically attractive to cities, particularly for residential areas. By carefully combining mixed uses and timing annexations, financial drains on cities can be minimized or eliminated. This requires cities to exercise consistent good judgment in realizing their adopted plans and goals.

Common Pro and Con Arguments about annexation have been summarized by the Municipal Research Service Center and posted on its website. This information is shown in the sidebar for reference. [http://www.mrsc.org/Publications/textah.aspx]

The City’s Annexation Practice

The City of Bellingham’s practice has been to treat annexations as a mixed blessing; choosing those judged to have a projected financial payout as desirable and those without to be avoided. This ‘cherry-picking” approach has resulted in the build-out of commercial and industrial areas first, with residential areas often relegated to pockets of urban density located on County land. The city has allowed this level of development to occur by extending its water and sewer lines outside city limits.

Extending limited water and sewer services outside the city limits means new water and sewer facilities will have to be built sooner, financed by city residents. A significant aspect of the economic equation is that the Public Works Department has come to rely on the additional revenues generated by charging 150% of city costs to water and sewer customers living outside the city limits. This seems a shortsighted and extremely regressive policy, falling heavily on those essential services needed by people, many of whom live in multi-family housing.

The cumulative result of these practices is that about 12,000 residents [17% of Bellingham’s population] now live in the UGA, more than enough to form another Ward if the entire area were annexed. At current ratios of people per household this is equivalent to almost 5400 homes or apartments, all dependent upon city services at some level without paying taxes to the City. In terms of property taxes alone, about $2.5 million per year is not being collected by the City. Could this be part of the reason the County has not raised its property taxes in 10 years?

About two years ago, the City Council changed its former policy of not requiring annexation upon extending water and sewer services, but the effects of this change have not yet been evidenced in results. Extensions for residential development are still being granted without requiring annexations under a few “loopholes” in the adopted policy. In one recent case, a developer was willing to annex a contiguous area where 68 new homes were to be built, but was allowed water and sewer extensions without annexing. This decision alone was estimated to cost the City about $2 million in lost sales taxes.

On the positive side, some developers do seem to have gotten the message and are now actively advocating annexation concurrent with extension of utilities - in return for including new areas into the UGA. Perhaps this change in perspective will result in a more rational approach toward annexation over time, as new neighborhoods are developed with more careful planning and amenities that are conducive to our valued quality of life. Another kicker is that the City’s overall tax level is actually lower than taxes in the UGA, outside City limit! Go figure.

Future Direction

It seems logical that the City of Bellingham will soon meaningfully change its policy regarding annexation in the future, but there are still those who will oppose this change for questionable reasons. By not requiring the use of urban planning standards in the UGA, the City has effectively doomed those areas to a life without affordable urban amenities. The annexation laws in Washington are relatively weak and largely depend upon both property owners and the community instinctively doing the right thing, consistently and in a timely fashion. To best knowledge, every other community in the state already does this in some version. Why Bellingham - considered a leader in many areas - has lagged so far behind in the area of annexation policy and planning is largely inexplicable. Perhaps it is because the realities of explosive growth have only recently been in evidence here.

By actually seeing the failures resulting from its past annexation policy, Bellingham may benefit in ways that other communities might not. The need for regional planning is now more critical than ever before if we are to sustain our desirable QOL, and there are clear signs that this is under threat. Developing neighborhoods need to have a voice in determining what their “character” will be, and this can best be done by giving residents of our UGA true citizen status; allowing them to vote in City elections and bond issues, run for office, and have a stronger voice in deciding how Bellingham will develop in the future. One would expect most UGA residents want to make decisions on issues like fluoride, a new Library, Greenways levies and their elected representatives. Hopefully, our current citizenry will see the merit in such an approach and help our elected officials get on with the business of including UGA residents as legitimate, full membership in the Bellingham community.

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Sidebar:
[Quoted from the Municipal Research Service Center website @http://www.mrsc.org/Publications/textah.aspx]

Annexation: The Pro and Con Arguments

There are certain basic arguments, pro and con, that invariably surface during the course of an annexation attempt. Some of these may be based on fact, such as, "the annexing city, by extending its services to the new area, can avoid duplication of facilities." Some concerns may be more difficult to demonstrate, such as, "urban areas must develop as a unit because their social and economic parts are interrelated." Others may be related to partisan interests, such as, "Special Districts and their attendant influence must be retained." Still other arguments may reflect fear of change: "the community to be annexed may lose its individuality and identity." As noted above, however, many of these arguments will no longer be applicable in GMA counties after the establishment of urban growth areas.

The following list of arguments should assist in anticipating issues that may arise during annexation proceedings. City officials may want to carefully consider what facts exist to prove or disprove each argument, what special interests underlie some arguments, and what misconceptions may require correction.

A. Arguments Favoring Annexation

1. After annexation, the new territory will obtain its necessary services from city departments that are professionally staffed and experienced. Duplication of services can be avoided. Considerable economies can result from the coordination of services over a larger area.

2. When the interrelationship between the city and the fringe area is close, there is need for unified planning and zoning. By means of annexation, a city's zoning ordinances can be extended to adjacent areas in a logical manner, thus helping to assure orderly growth. Coordinated action is much easier to achieve if the fringe community becomes part of the city.

3. Annexation gives suburban residents a voice in the government of the larger community in which they live. County dwellers can be substantially affected by actions of the central city, but they have no participation in its affairs.

4. Business, professional, and community leaders who live in the fringe area can have a more direct role in community affairs by being elected or appointed to public office in the city.

5. Annexation eliminates the need to form a new city government with its attendant "start-up costs," or to continue reliance on costly special districts.

6. Annexation leads to a unified community and can prevent the fragmentation of local governmental authority among a large number of special districts. Fragmentation may cause "conflicts of authority and the absence of cooperation, political irresponsibility, a long ballot, duplication of services, inadequate service levels, lack of effective area-wide planning and programming, financial inequities and other problems."

7. Political boundaries will, after annexation, more nearly reflect the true and existing sociological, economic, cultural, and physical boundaries of the city. The fringe and the city are inextricably bound together.

8. Annexation increases a city's size and population, and in some instances raises its level of political influence, its prestige, and its ability to attract desirable commercial development. It may also increase its ability to attract grant assistance.

9. Annexation can protect, or enhance, a city's tax base. The increased valuation of the city will result in a greater bonding capacity.

10. Annexation may force new industry to develop in the city, and thus create additional jobs, revenues, and commercial opportunities.

11. Unified political representation, sound economic development, enhancement of property values, and high service levels at minimum costs can best come from total comprehensive planning that avoids duplication and conflict of authority.

12. City and county boundaries can be squared off and made orderly and logical, eliminating a hodgepodge and resulting confusion as to whether a particular parcel should look to a city or to the county to obtain services. Fire and police departments, in particular, can determine whether calls are within their respective jurisdictions.

13. Annexation may bring about lower utility rates, since city utility surcharges to unincorporated territory would be lifted. Annexation also often results in lower fire insurance premiums. As more improvements and urban utilities are made available, real estate values and marketability may improve.

14. Additional services may become available, such as sewer, water, ambulance, transit, and drainage control.

B. Arguments Opposing Annexation

1. Annexation may be considered unnecessary if the community's needs, or resources, are limited. It may be unwise if the community is not physically, economically, or socially related to the annexing city.

2. Residents outside the city may argue that they chose to build and live there in order to avoid taxes for services they do not want. Industry and commercial businesses may state that they located outside the city to avoid certain business and property taxes.

3. Residents may wish to retain the community's "rural" character and, for this reason, may oppose annexation as a step toward greater urbanization. There may, for example, be a strong opposition to municipal animal controls-both leash laws and restrictions on large animals.

4. The city's ordinances, regulations, and license requirements may not be appropriate for a particular fringe community.

5. Residents may desire a higher degree of community identity than they believe they will enjoy as part of a large city. They may want to retain special districts and their attendant influence. A larger municipal government may be less accessible to the people.

6. There may be distrust of the government and politics of the city to which annexation is proposed.

7. The city may not be able to finance the additional services expected by residents of the area proposed for annexation, and territory that is annexed to a city may be a financial drain upon it for many years. Services may not be available for extension without adversely affecting in-city service levels or without utility rate increases. Existing police or fire forces may be overextended, reducing the level of protection to the entire community.

8. There may be fear that annexation may lead to a geometric progression of municipal problems. It cannot be presumed that it will be more economical for a city to provide services to a larger area. Extending the service area may cost much more for each unit than the existing per unit cost.

9. Since most annexations are very small, annexation does not satisfactorily address community and regional concerns.

10. Interest in annexation may be limited to a select group of citizens and not shared at the grass roots level.
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