SUMMARY OF THE MEASURE

The proposed new City of Fairwood is a 6.27 square mile residential area southeast of Renton with a population of approximately 25,000. Under the Washington State Growth Management Act, unincorporated areas of significant population are encouraged to either annex to existing cities or incorporate as new cities. A group of residents of Fairwood, the “Fairwood Municipal Initiative,” filed a notice with the Boundary Review Board (BRB) describing the intent to incorporate a new city and successfully circulated petitions to place an incorporation proposal on the ballot.

A financial feasibility study, required as part of the process and conducted by Henderson & Young Co, offers evidence that the city would be financially feasible, using a “comparable city” analysis based on nearby Maple Valley. This method assumes that the new city would operate in much the same way as the one chosen as “comparable” and creates a model of the new city’s revenues and expenditures based, as closely as possible, on the other city’s operations. The study projected future development in Fairwood and, to allow accumulation of financial reserves, a limited range of city services immediately following incorporation.

The BRB concluded that if a new City of Fairwood is formed, “its citizens would be provided with a full array of essential public services, facilities and infrastructure either directly by the city or by service contract,” and the proposal would “create a logical municipal service center.”

A similar proposal for incorporation was narrowly rejected by voters in the area in 2006; a portion of the area included in the previous proposal has since been annexed into the City of Renton. The feasibility study prepared by a different firm at that time suggested a less promising financial future for the proposed new city. Both the BRB and the Municipal League recommended a ‘no’ vote on the earlier proposal.

The 2009 consultants’ study reports:
•    The Fairwood area is composed of several single-family neighborhoods, with residential land uses accounting for the majority of the community’s land area.
•    The most likely population growth rate is the “high growth” scenario of 1.8% per year. This assumes that population and the number of housing units will continue to grow at the same pace in the future as it did from 2000 to 2007.
•    There are 410 acres of vacant and 906 acres of “redevelopable” land within the boundaries of the City of Fairwood.
•    Under the high growth scenario, between 174 and 190 housing units will be built in the Fairwood area each year. On this assumption Fairwood could expect to receive between $336,000 and $367,000 per year in construction-based sales tax.
•    In 2007, nearly 800 firms doing business in Fairwood generated gross taxable sales of roughly $110 million leading to a forecast that an incorporated Fairwood would receive roughly $1.16 million in retail sales and use tax revenues annually from local businesses.
•    Under a change in Washington law, “Streamlined Sales Tax” revenue is directed to the taxing district where goods or services are delivered even if sold elsewhere; for the City of Fairwood the effect of this change is estimated to be $378,000 in additional annual sales-tax revenue.
•    A city can establish a utility tax; at the 2.25% rate charged by Maple Valley, the estimated utility-tax revenue for the City of Fairwood rises from $769,601 in 2010 to $840,470 in 2015. 
•    It is expected that Fairwood will continue to be served by Fire District 40 after incorporation.
•    The principal general fund expenditures of the City of Fairwood would be for public safety, public works, community development (planning, zoning and permitting), and administration.  These expenditures are estimated to rise from $7.5 million in 2010 to $8.1 million in 2015.
•    General Fund revenues are estimated to exceed expenses by $1.09 million in 2010 and by $1.28 million by 2015.

Another group of residents in the Fairwood area has been advocating for annexation to the City of Renton. Some of the members of this group have formed a committee to oppose incorporation under the slogan “Go Vote No.” Renton has already annexed an adjacent area to the west of the proposed city (“Benson Hill”) and is reported to be willing to consider annexation of the Fairwood neighborhoods if the proposed incorporation is not approved.  The current proposal includes all the land area in unincorporated King County in the vicinity of the proposed City of Fairwood; if incorporation is approved no unincorporated areas will remain within the urban growth boundary in this general area.

ARGUMENTS FOR THE MEASURE

The proponents of the new City of Fairwood made the following arguments for the measure:

•    Fairwood is a community with its own identity. Incorporation would strengthen that local identity and preserve what is good and unique in the area.
•    Residents of a new City of Fairwood will have control over their own decisions about taxation and public services. Smaller cities are more efficient and responsive to citizens’ preferences, especially with respect to land use and community character.
•    The new city government is financially feasible. It is projected to have revenues that could yield cash surpluses totaling more than $25 million across three funds by 2015.
•    The new city would remain a participant in the King County Library System and thus continue to support its local branch, which offers a high level of service.
•    The new city would contract for police services with King County and proponents expect doing so would allow an enhanced level of service.
•    The city would retain the same fire district and school districts. Fire District 40 offers a high level of service and programs that residents value.
•    Annexation to Renton would allow the city to divert revenues derived from Fairwood to support services in the downtown area.
•    Adding the population of Fairwood to Renton’s would create a city larger than Bellevue; the government of Renton is not ready to assume this level of responsibility.

ARGUMENTS AGAINST THE MEASURE

Arguments against the measure were articulated by the opponents of the new City of Fairwood and by members of the Municipal League:

•    The new city would be financially marginal and would struggle to provide the services its residents would expect.
•    With a very limited commercial tax base, the proposed city could not rely on sales tax receipts as a significant source of revenue.
•    Fairwood would face similar challenges as other recently incorporated small cities with a predominantly residential base.
•    Estimates in the consultants’ study for property, sales and real-estate excise tax receipts are unrealistically high. The study relies on growth statistics from the early to mid 2000s and does not take into account the recent reductions in real estate valuations and activity.
•    The land within the proposed new city is fully built out and has little potential for new development or growth.
•    The study does not make allowance for extraordinary start-up costs nor allow for inflation in the costs of services in future years.
•    The new city would be required under the Growth Management Act to develop a comprehensive plan. The expenditure estimates in the consultant’s report do not include this expense.
•    The consultants’ study does not recognize the difference in age between the infrastructure of Maple Valley (which has grown rapidly in recent years) and Fairwood and hence underestimates the costs of repair and rehabilitation of infrastructure such as streets and culverts.
•    The feasibility study assumes that the City of Fairwood would not incur any costs for parks and recreation services.  However, King County has made clear statements of its intention to divest park lands which would include Petrovitsky Park in of the new city.  Proponents argue that the County would continue to operate this park even though the County does not fund any other regional parks inside the borders of cities.
•    In general, many elements of the current feasibility study appear to overestimate projected revenues and understate predictable costs in a way that presents an overly optimistic picture of the financial prospects for a new city. A study based on the actual budgets and current revenue and expense forecasts of several similar small cities would offer a more realistic basis for projecting the financial future of a City of Fairwood.
•    This incorporation would divide a greater community which shares common social and economic interests. In 2006, the BRB concluded that “incorporation of a new City of Fairwood…would fragment rather than preserve connections within the greater neighborhood.”
•    A better option for the Fairwood area is to annex to the City of Renton. A separate annexation vote would likely occur if the proposed incorporation does not take place.
•    Renton is a strong city experiencing significant growth and a growing commercial base; it has an existing functioning municipal government and well developed public services and programs.
•    Renton would receive state sales tax funds to offset the costs of annexation; such start-up funds are not available to newly incorporated cities.
•    Renton is preparing for a February 2010 vote to merge its local libraries into the King County Library system and hence the Fairwood library would not necessarily experience any change if Fairwood annexed to Renton.

POSITION and RATIONALE

The Municipal League opposes the incorporation of a new City of Fairwood.

Significant islands of population remain unincorporated in the urban areas of King County, wedged between growing regional cities.  The proposed Fairwood incorporation is such an area.  It has long been costly and inefficient for King County to continue to serve such areas and residents increasingly expect urban levels of service.  The Municipal League supports the goals of the Growth Management Act and believes that completing the annexation and incorporation of the remaining areas is appropriate. 

The Municipal League found that while the proposed new city might be financially viable, it would be so only in comparison to the limited current services it receives as an unincorporated area of King County and would likely need to forgo provision of parks and recreation and human services that are routinely expected by residents of similar areas.

The feasibility study conducted in connection with the current incorporation proposal does not make direct projections of the costs that would be incurred by a new city and is based on the experience of the neighboring City of Maple Valley.  It does not make allowance for extraordinary start-up costs nor allow for inflation in the costs of services in future years. This study relies on growth statistics from the early to mid 2000s, does not take into account the recent reductions in real estate valuations and activity; it appears to over-estimate the availability of buildable land within the proposed city in developing its projections of real property, real estate excise, and sales tax revenues.

Annexation to Renton is preferable for several reasons: the larger city’s more diversified tax base can accommodate future service and infrastructure expenses more reliably; residents of Fairwood would receive urban services – public safety, jails, animal control, etc. – directly from the City of Renton without the expense of a new layer of administration and the complexity of contracting.

The League recognizes the desire of residents in Fairwood to maintain their identity as a local community and to have a role in self-government.  We honor their persistence in pursuing incorporation a second time after the previous ballot’s narrow defeat.  However, we believe this goal could be accomplished as strong and vibrant neighborhoods within a growing regional city. The numerous homeowners’ associations within Fairwood clearly already provide a self-governance mechanism that allows its residents a decision-making role in local affairs and the shaping of the community’s identity.