2008/10/15 Council Agenda Packet

CITY OF EVERETT FISCAL ANNEXATION ANALYSIS Exhibit 18 Scenario 3 - Everett Projected Property Tax Millage Rate Assuming Annexation in January 2009 $2.500 • $2.000 ' • $1.500 • • • • $1.000 • • $0.500 $0.000 11 i 1 1 1 1 1 T I I 1 1 1 I I II 2009 2013 2017 2021 2025 Source:Berk&Associates analysis,2008 Because of the method for calculating a city's property tax levy (1% of the previous year's levy plus new construction), the amount of new construction in a city is important to a city's ability to limit the erosion of its millage rate over time. A typical measure of the level of new construction activity in a city is the percent of a city's total assessed value that comes from new construction in a given year. For both the current City of Everett and the potential annexation areas, construction rates are based on development assumptions for parcels that are vacant, redevelopable, or already planned or permitted by Snohomish County. For the City of Everett, the projected average rate of construction in the City is estimated at approximately 1.3% of assessed value in 2008. Due to lags associated with annexation and levying, the City would not begin to receive property tax revenues from the annexation area until 2010. Between annexation and 2010, however, the City would receive revenues associated with the County road and fire district levies. Assuming annexation is completed January 1, 2009, the City would receive these levies for the full year of 2009, currently estimated at approximately $3.2 million for Scenario 3 and $6.7 million for Scenario 4. The road levy revenues must be limited to transportation-related capital expenses. To offset these capital revenues, the City would have flexibility to adjust the portion of general fund subsidy currently allocated to capital back to the General Fund during 2009. Retail Sales Taxes One of the key revenue sources that cities rely on is Retail Sales Tax. However, of the areas analyzed in Scenarios 3 and 4 (Eastmont, Hilton Lake, Rugg's Lake, and Larimer) only Rugg's Lake has some commercial development capacity (approximately 8,000 square feet). Retail development is estimated to generate approximately $200 of taxable retail sales per square foot, and office development approximately $25 per square foot. These per square foot estimates are based on an overall average for "typical" retail activity. Actual sales tax impacts could be higher or lower depending on the actual types of tenants that might locate in these areas. Final Report:October 2008 Page 29