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CITY OF EVERETT FISCAL ANNEXATION ANALYSIS: EXECUTIVE SUMMARY <br /> Scenario 4: Sales Tax Credit <br /> 12,000,000--- — <br /> o Available Credit <br /> ■Credit Used rw. <br /> 10,000.000 '�' <br /> r° s <br /> PM F€F <br /> 8,000.000 i t <br /> v <br /> 6,000,000 <br /> 4,000,000 <br /> III <br /> 2,000,000 <br /> liii Ii i <br /> 0 <br /> 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 <br /> Source:Berk&Associates analysis, 2008 <br /> Substitute Senate Bill 6686 includes limits on how revenues from the sales tax credit can be used. <br /> According to the statute: <br /> "All revenue collected under this section shall be used solely to provide, maintain, and operate <br /> municipal services for the annexation area." <br /> Based on this language„ a general consensus among a number of cities around the region has <br /> emerged that the following costs are likely eligible for sales tax credit support: (1) direct operating <br /> impacts from annexation, (2) allocation of a portion of fixed costs (such as Fire Chief's salary) as <br /> these are directly related to providing services in the annexation area, (3) annexation-related <br /> equipment costs, and (4) annexation-related additional facility costs, to the extent these are related to <br /> housing annexation-related staff or to otherwise support annexation-related services. To be <br /> conservative in estimating potential sales tax credit revenues, capital infrastructure costs (road <br /> construction, surface water management, etc.) are assumed to not be eligible, as these costs are less <br /> directly tied to providing municipal services. <br /> As Exhibit ES-3 demonstrates, Everett would likely not need the full amount of sales tax credit <br /> available in all years. It is best to think of the potential availability of additional state sales tax credit as <br /> an added level of insurance to mitigate potential financial risks associated with annexation. For <br /> instance, police facilities are currently at or exceeding capacity and would require additional <br /> investment, and there may be additional significant transition costs that are not modeled in this <br /> analysis.The City may want to use the sales tax credit capacity to mitigate these annexation costs. <br /> ru <br /> EL Final Report:October 2008 Page ES-6 <br />