|
Proponents
By Paula Henderson
Stated simply, the proposed City of Fairwood is financially feasible, even in the worst economic scenario. Why? Because the citizens of Fairwood are tax exporters, which means our taxes currently go to King County but are not returned at the financially equivalent service levels. If annexed to Renton, the situation will be no different - we would pay more taxes than we receive in services. If the City of Fairwood is incorporated, the tax revenues remain here and provide plenty to fund a new municipality.
The Fairwood Incorporation Study:
An independent study of financial feasibility of the proposed City of Fairwood was conducted by two separate and independent consulting firms (Henderson & Young, Community Attributes) during the fall of 2008 through the spring of 2009. These companies are experts in municipal finance and planning and were chosen by the Washington State Boundary Review Board (BRB) for their known expertise. The study was contracted by the BRB, which directed the study's scope and format. The consulting firm held two community meetings to solicit input, answer questions and review drafts.
The consultants did not have a stake in the incorporation question - their only responsibility was to study whether financially viable for a City of Fairwood. After pouring over the data collected by the consultants and listening to three nights of public testimony from both those who favor and oppose incorporation, the BRB rejected the numbers created by the opposition and overwhelmingly voted IN FAVOR of Fairwood incorporation! And this was done last spring when the national economy was at its lowest points.
The full text of the final study, entitled "City of Fairwood Incorporation Study: Final Report" is available here for your review.
Two key quotes from the BRB’s Final Resolution & Hearing Decision (June 18, 2009):
- On City Funding: "The Board finds that a new City of Fairwood would have the funding necessary to support basic required and/or expected land use planning, housing, public services, public facilities, and public amenities. Similarly, funding resources would be sufficient to provide for protection of the natural environment."
- On the Feasibility Study: "The Board finds that the Incorporation Feasibility Study contains a thorough examination of revenues and expenditures relating to governance of and service to the Fairwood area. The Study demonstrates that sufficient funds are available, both at current development and with future growth, to create a logical municipal service area."
Economic Model for Fairwood:
The consultants developed an economic model, based upon the City of Maple Valley as the comparable city to determine feasibility. The consultants tested 4 growth scenarios: high, normal (baseline), low and even no growth. Key conclusions:
- a surplus of $1,089,894 for the General Fund was projected for 2010 and more for each subsequent year (pages 49/50 of study). Surpluses were also projected for the Street Fund and the Surface Water Management Fund.
- By the end of 2015, cumulative surpluses, across all three funds, were projected to exceed $25,000,000, for the baseline scenario. These surpluses provide substantial reserves and opportunities to further enhance service levels or reduce taxes.
- Each economic scenario projected substantial revenue for providing services.
An Important Note about Numbers:
The "Go Vote No"/"Choose Renton" campaigns which oppose the idea of creating a new City of Fairwood and favor annexation to Renton have been quick to make accusations that their numbers are superior to those found in the Financial Feasibility Study. It's easy for the annexation proponents to make such claims, but difficult for them to back them up with facts in the face of expertly derived results. At a total of five public hearings, the opponents' claims about "faulty numbers" were repeatedly rejected by the consultants and the BRB, both of whom stand behind the Study and its conclusion: a City of Fairwood would be financially sound, even in the worst-case economic scenario!
In 2006, when the BRB recommend against Fairwood's incorporation, annexation supporters praised the wisdom of the BRB. Now in 2009, with the BRB supporting Fairwood's incorporation based on a more thorough study, the opponents are saying the BRB is misguided and that their expert-created feasibility study is flawed. Yet, while the incorporation opponents attack the expert consultants, for their accuracy in the Fairwood study, the City of Renton retained the same firm (Henderson & Young) to conduct a study on impact fees (March 2009). So Henderson & Young are suitable consultants for Renton’s needs, but not for Fairwood’s? You can't have it both ways!
Writer's Bio:
Paula Henderson currently is the Finance Director for the City of Des Moines. Paula has 20 years of experience in government finance. Prior to joining the City of Des Moines, Paula was Treasurer and former Acting Controller for Sound Transit, a $1.8 billion regional transit authority and was instrumental in the start-up of the accounting structure and investment program for the agency. Prior to Sound Transit, she spent eight years with the City of Renton, the last four years in the position of Financial Planning Manager. Paula is a licensed CPA and earned a Bachelor of Arts in Business Administration at Western Washington University.
REBUTTAL
Those who oppose Fairwood's incorporation continue to play with numbers but lack the logic to support claims about how home sales adversely impact incorporation. Again, EVERY independent expert has dismissed the opponents’ figures and overwhelmingly supports Fairwood’s financial viability. Apparently, the opponents suddenly have the credentials to refute the study and outsmart known experts in the field of municipal finance.
Incorporation opponents consider the feasibility study flawed because it uses historical growth rates to project future growth. The study states reality: "An analysis of normal times assumes that over long periods of time, pluses and minuses will more or less offset each other." Even in a "no growth" scenario, future revenues exceed future costs. Regardless of the growth forecast or inflation, we can afford higher government service levels with the same tax dollars. The reductions recently seen in property tax assessments still remain above the 2007 level upon which the study is based. Due to the current climate, the comparable model city, Maple Valley, made modest budget adjustments while Renton has been forced to take much more drastic action to balance their budget.
The fears of the opposition are not founded in sound, expert economic analysis. Even their threat about Petrovitsky Park is a non-issue as per the King County website, “voters overwhelmingly approved two modest property tax levies that help secure the future of King County's 25,000 acres of parks…that includes matching grant money for open space and trails within King County cities.”
Unfortunately, the Municipal League (representing Seattle’s “big government” mentality) fell into the same trap as the opposition (the Municipal League sometimes just gets it wildly wrong, like their support for the 20 cent grocery bag tax!). We are confident in Fairwood’s viability, based upon expert in-depth analysis and our understanding of current economic conditions.
Fairwood Incorporation Position Statements
Week One: Financial Viability
September 21, 2009
NOTE: Rebuttals for each week's position statement will be posted the week following the original post. Find rebuttals following each corresponding position statement.
Opponents
By Bryce Nelson
Hello Fairwood! Let’s talk about Tami’s first point of discussion: the financial feasibility of the proposed City of Fairwood. Is it financially feasible to start a new city from scratch? No. “But Bryce,” you’re saying to your screen, “there was just a study that said Fairwood was financially feasible.” Well, not really.
Instead of asking if Fairwood is feasible right now, the feasibility study asks a very different question: “In theory, how could Fairwood be feasible?” The answer? By underestimating costs, leaving important portions of city government unfunded, and drastically inflating revenues. In other words, if we’re unrealistic about most aspects of the city’s government, Fairwood appears to pan out.
Since Fairwood will have the lowest sales tax revenues per capita of any city in King County, incorporation proponents have created a financial model for the proposed city that will require building new homes. Lots and lots of new homes – 174-190 each and every year, or a neighborhood the size of Woodside every 2 ½ years. Those new homes provide quite a bit of money for both the operating and capital budgets of the proposed city – a minimum of about $1.3 million each year.
Assuming that we’ll build a Woodside every 2 ½ years doesn’t reflect reality. Since 2006, less than 10 new homes per year have been sold in Fairwood. There are no new homes being built right now, so claiming that we’re going to ramp up to 190 next year isn’t realistic. Do you think that in 2010 if we incorporate we’ll all of the sudden have a neighborhood the size of Woodside under construction in Fairwood?
Even if there was a market for these new homes, there simply isn’t room for that level of real estate construction around here. So the minimum of $1.3 million that incorporation proponents assume will come from new homes in 2010 doesn’t reflect reality.
On top of those non-existent revenues from new homes, property taxes are declining. Fire District 40 is facing a drop in property taxes of somewhere around 15-20% next year. So would Fairwood, compared to the numbers in the feasibility study. Do proponents account for this drop in property taxes? Nope – they assume that property tax revenues will increase every year.
Sales tax revenues are also in decline. Maple Valley, the city deemed most comparable to Fairwood by incorporation proponents, has seen their sales tax revenues drop by 15% or more from 2007 through 2009. Yet what year do incorporation proponents use to estimate revenues? 2007 – inflating sales tax revenues by 15-20% over reality.
So we know that revenues simply aren’t going to be as high as incorporation proponents assume. What about expenses? Incorporation proponents do a good job of holding projected expenses down – largely because they again make assumptions that don’t reflect reality.
Proponents assume that Fairwood’s costs won’t increase with inflation – an assumption contrary to the experience of every other government both regionally and nationally. I know from first hand experience as a county employee that local governments are facing significant increases of over 10% a year in the cost of providing health care for their employees. Other government employees for agencies that incorporation proponents plan to contract with for services – like King County Sheriff’s Deputies – have built in raises of 5% a year for the next several years.
These increased costs would be passed on to Fairwood. Yet incorporation proponents assume that Fairwood won’t have to pay these increases – that inflation won’t increase Fairwood’s costs, and they’ll be the same every year into the future. This isn’t realistic, and it makes costs look a lot lower than they actually will be.
Additionally, incorporation proponents leave big chunks of city government unfunded, like parks, recreation, and human services. Proponents assume that King County will continue to operate parks within the City of Fairwood – an unrealistic assumption, given King County’s past and present history of transferring parks to cities. King County doesn’t operate a single large regional park inside the boundaries of a city – yet incorporation proponents assume that they’ll do that in Fairwood with Petrovitsky Park.
Overestimated revenues, underestimated costs, and lower service levels than what we get now from King County, with the added bonus of higher taxes. Fairwood simply doesn’t have the revenues to provide for the services citizens want. Why pay more and get less? Don’t start a city that has insufficient revenues to survive and is destined to fail. Vote against incorporation. www.govoteno.org
Writer's Bio:
Bryce Nelson has lived in the Fairwood area since '89. He grew up in Redmond and attended Pacific Lutheran University for undergrad and Seattle University for law school. He's been a prosecutor with Pierce County for the last 6 1/2 years and is currently assigned to the Special Assault Unit prosecuting sex and domestic violence crimes. His wife is a teacher at Nelsen Middle School in Renton, and they live in Woodside with their 16 month-old daughter, who he says "keeps us busy and always makes sure the inside of our house looks like a toy store exploded!"
REBUTTAL
The King County Municipal League is a non-partisan group with no stake (financial or otherwise) in the proposed Fairwood Incorporation. They are the only neutral third party to review Fairwood’s viability. Their recommendation? That we vote no, because annexation to Renton is a better choice. You can see their decision here.
What the Muni League discovered is what we’ve been saying all along: that Fairwood’s feasibility study underestimates costs, overestimates revenues, and makes land use assumptions that simply don’t reflect reality. It’s easy to hide behind the BRB’s study and claim Fairwood is feasible. But when neutral, unbiased groups look in greater detail, the reality is obvious: Fairwood is not feasible, and voters should vote against incorporation.
Is Fairwood a tax exporter? No. Renton’s fiscal analysis, which you can see here, shows that’s simply not the case. Renton anticipates that revenues that come from Fairwood would not be sufficient to cover costs. That’s because Renton makes realistic assumptions about revenues and costs, unlike incorporation proponents.
Essentially, what proponents of incorporation are asking you to believe is that when the economy is bad, and every city in the country is facing challenges, Fairwood alone would be different. Fairwood would have significant financial surpluses when other cities don’t. That a city with the lowest sales tax revenues per capita in King County would have the highest revenue surpluses of any city in the county. That’s simply not credible.
Just ask Paula Henderson. In 2006, Des Moines, the city she works for as finance director, had its citizens vote to increase property taxes in order to prevent layoffs at its police department. Why? Because in Des Moines, a city with significantly higher sales tax revenues than Fairwood, expenses were greater than revenues.
Don’t create a city that’s destined to fail. Vote against incorporation.