Revenue-sharing revisions will alter Kitsap County annexation process

The annexation of Kitsap County land into city limits has become commonplace, with municipalities expected to steadily continue expanding into urban growth areas.

In anticipation of this, both the county and the cities are re-examining the revenue-sharing process necessary when property shifts from one jurisdiction to another.

But this transfer, once a straightforward process, has become complicated by the slow economy and the fact that cities are no longer able to take responsibility for providing services when they’re not immediately reimbursed.

The initial revenue-sharing agreement was brokered by the Kitsap Regional Coordinating Council, (KRCC), which is currently scheduling meetings between Kitsap County and the affected municipalities — Port Orchard, Bremerton, Poulsbo, and Bainbridge Island — with an eye toward renegotiating the percentages.

“When we first established these agreements, there was a different set of expectations than what exists today,” said KRCC Executive Director Mary McClure.

Local revenue-sharing agreements, first established in 2002, are intended to ease this transition by staggering the amount of tax revenue allocated to the annexing body.

During the first year after the annexation, the cities are to receive 25 percent of the revenue, followed by 50 percent and 75 percent in following years.

Under this structure, it takes three full years for the annexing city to begin collecting the full amount.

Specifically, the annexing body is immediately responsible for providing full services during the time that it is only receiving a percentage of the taxes.

This was more easily achieved in a healthy economy, when cities had multiple revenue sources.

Today, negotiations are necessary to complete the annexation.

For example, the county has collected revenues and committed to certain repairs on the Bethel Corridor. If Port Orchard were to annex that area today, it would be responsible for those improvements.

In anticipation of this, Port Orchard gave notice in October that it wanted to be released from the revenue-sharing agreement in one year’s time.

The agreement then expires this October, after which the city will begin receiving the full amount of property and sales tax revenues immediately.

Annexations are citizen-driven, with the cities taking a passive role in the process.

While individual council members can speak out for or against an annexation, the city staff does not play an advocacy role.

With regard to Bethel Corridor, council support was less enthusiastic than for last year’s McCormick Woods action, since the expiration of the agreement wasn’t seen as an insurmountable obstacle to annexation.

On the other hand, Port Orchard Mayor Lary Coppola is eager to renegotiate the agreement before it expires.

“If the county thinks it’s getting a fair shake, then it will be less likely to challenge the annexation before the Boundary Review Board,” Coppola said.

Coppola met informally with North Kitsap Commissioner Steve Bauer earlier this month to pave the way for a smooth transition for the Bethel annexation.

At the same time, the ideas emerging from that meeting will help to set the stage for all future actions.

“We need to create an outline that can be used in every annexation,” Bauer said. “It’s critical that when we begin an annexation that we determine what the specific needs are for that particular area and make sure that all sides are clear about the outcome.”

“This is an organic process,” said Kitsap County Special Projects Manager Eric Baker. “So we don’t really know exactly what we’ll be negotiating for each city. But the goal is to develop a more equitable distribution of tax revenue to the different jurisdictions.”

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