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CITY OF EVERETT FISCAL ANNEXATION ANALYSIS <br /> 6.0 DETAILED FEASIBILITY ANALYSIS: SCENARIOS 3 & 4 <br /> 6.1 Scenarios 3 & 4: Analysis Findings <br /> The analysis suggests that although annexation appears feasible, resulting in the City's overall costs <br /> and revenues being close to balanced, annexation actually yields a small net negative fiscal impact on <br /> the operations of the City of Everett in both scenarios, when considering that without annexation the <br /> City has a small projected surplus (see Exhibit 7). The projected surplus in 2025 for the City without <br /> annexation is 2% of the estimated core revenues. <br /> Exhibit 13 presents the chart of estimated core revenues and expenditures for scenarios 3 and 4, <br /> while Exhibit 14 shows the estimated costs and revenues for Everett, annexation areas, and total <br /> combined area every five years over the study period. <br /> Annexation Outcome for Current City of Everett. The outcome for Everett changes somewhat <br /> with each scenario. As discussed previously, the City without annexation is projected to have balanced <br /> revenues and costs for the majority of the study period, with a small surplus in the later years (see <br /> Exhibit 7). In the tables below the City numbers are different due to added staff in the Fire <br /> Department upon annexation. The City will share costs with the annexation areas for these additional <br /> positions since they will serve both the City and the annexation areas. This, therefore, creates an <br /> additional cost burden on the current City once annexation occurs. <br /> For the current City, the costs are actually slightly lower in Scenario 4. This is because the costs of the <br /> shared positions in Fire are mostly apportioned based on population. For Scenario 4, the current City <br /> is a smaller share of the total population sharing the cost The difference in revenue between <br /> Scenarios 3 and 4 for the City is a small increase in Property Tax that the City can collect on its portion <br /> of assessed value with annexation in Scenario 4. Because the millage rate for property tax is calculated <br /> based on a 1% increase in total revenue plus new construction (and increased assessed value from <br /> annexation is treated as new construction), Scenario 4 allows for a slightly higher millage rate for the <br /> City as a whole. <br /> Scenario 3 Findings. Taken on its own, Scenario 3 is projected to be fairly balanced over the <br /> analysis time horizon. However, considering that the City will experience higher costs due to shared <br /> additional staff in Fire Department, the outcome is slightly worse off than the no-annexation projection <br /> (Exhibit 7). This scenario is potentially feasible, although there are still some risks that need to be <br /> considered, such as capital expenditures. <br /> Scenario 4 Findings. This scenario is projected to be negative immediately after the sales tax credit <br /> ceases in 2018. Similarly to Scenario 3, the City will experience higher costs due to shared additional <br /> staff in Fire Department, and the outcome is worse off than the no-annexation projection. <br /> However, if one looks at the projections for the entire City (including annexation areas), both of these <br /> scenarios are within the 3% threshold of feasibility in terms of impacts on operations. As a result of <br /> this analysis, it is estimated that the City would be eligible for the State sales tax credit, which is <br /> designed to offset deficits associated with annexation. However, this credit is available only for ten <br /> years, beyond which the negative effects of annexation continue. <br /> pi <br /> I DI Final Report:October 2008 Page 21 <br />