2008/10/15 Council Agenda Packet

CITY OF EVERETT FISCAL ANNEXATION ANALYSIS What this means for Washington cities is that under the sourcing provisions of the agreement, the "source" of most delivered goods will shift local sales taxes to the place of delivery, and the potential exists for substantial shifts in revenues from jurisdictions with businesses that involve delivery of goods to customers in other areas (such as software sales and warehouses that deliver goods like furniture to retail customers outside the jurisdiction). The analysis done for this study did not assume any change in revenues resulting from the implementation of sales tax streamlining. However, the Washington State Department of Revenue is estimating that the City of Everett will see a loss in sales tax revenues from this rule change of approximately $1.5 million for State fiscal year 2009. Considering that the annexation areas are primarily residential in character, these areas are generally going to be small net winners in streamlining and may help offset some of the City's losses. 5.0 SCREENING OF SCENARIOS 5.1 Initial Screening of Scenarios As mentioned in the Approach section of this report, we conducted an initial evaluation of each scenario by generating draft operating revenue and expense estimates. Upon completing this analysis, each scenario yielded a "negative" result, projecting the City to be fiscally worse off with annexation than without, even including the impact of state sales tax credit revenue for first ten years of annexation. Exhibit 8 and Exhibit 9 below demonstrate the initial analysis results for each scenario. Exhibit 8 Total City Deficit/Surplus by Scenario C $30 —— O No Annex $20 Scenario I With Sales Tax Credit Scenario 2 S10 - . . . . . - - - - - - - Scenario 3 2009 2012 —20 15 2021 2024 2027. Scenario 4i Scenario 5 S(20) / Scenario 6 H Without Sales Tax Credit I Scenario 7 -_ _ I Source:Berk&Associates analysis, 2008 Its Final Report:October 2008 Page 15