2008/10/15 Council Agenda Packet

CITY OF EVERETT FISCAL ANNEXATION ANALYSIS Budget Structure While the model is not fund-based, it does isolate the components of the City's budget that are funded through general tax and fee revenues, which in the case of Everett, includes functions and departments within the City's General, Parks and Recreation, Library, Municipal Arts, Streets, Property Management, Senior Center, Emergency Medical Services, Criminal Justice, and Police and Fire Pension Funds. The model does not include utility enterprise funds (such as surface water management) or the Transit Fund. The utility enterprise funds are self-supporting through utility revenues and the City has considerable discretion in how it might adjust transit services in response to any future annexation. Increases in transit sales taxes are estimated and can be used as a guide for City transit planners in the event that one of the annexation scenarios moves toward implementation. In Everett's budget, the City makes use of a fund accounting system. To the extent that these funds are used for core City operations and would be affected by annexation, the costs and revenues are included within the model framework of estimating core costs of service, or capital costs and revenues (including all funds listed above). In instances when these funds are not used for core operational expenditures and are not expected to be affected by annexation (e.g. Community Center Fund), no cost impact of annexation is estimated. Capital cost implications are specifically included only for the equipment and fleet costs necessary to support the increasing staff levels associated with annexation. Capital cost implications related to facilities and new public infrastructure are excluded from the analysis, but a high-level estimate of the future capital-restricted revenues for the annexation area is provided. Overarching Assumptions The analysis that is summarized in this report is shaped by the following key overarching assumptions • The proposed annexation is assumed to take effect in January 2009. • The current level of service, staffing and expenditures in Everett (as defined in the 2008 budget) are the benchmarks for projecting comparable levels of service, staffing and costs in the annexation area. This study does not evaluate whether Everett's existing levels of service, staffing, or expenditures are acceptable or sustainable with existing resources and staffing. This study projects costs for statutorily mandated City services, and outlines potential policy choices the City should consider for elected services, such as library, parks, and transit. • This fiscal analysis excludes local services that are assumed to be unaffected by the annexation decision including water and sewer services, public schools, and health services. • While the model is not fund-based, it does isolate the components of the City's budget that are funded through general tax and fee revenues, as discussed above. The model does not include utility enterprise funds, since these funds are not tax-supported. • This analysis assumes that all initial annexation-related full-time equivalents (FTEs) are hired and are in place for the date of annexation. In reality, the City will likely ramp up its hiring more slowly over time for all departments and phase in many costs and services based on available revenues and the availability of qualified staff. The annexation transition period could include contracting with service providers while the City builds up its own staffing capabilities. la Final Report:October 2008 Page 7