Senate Bill 5368 had its public hearing in the House Committee on Local Government on Tuesday after passing through the Senate almost unanimously, 44 votes in favor and only 4 against the bill. The votes against the bill that would encourage rural economic development came from Democratic Sens. Steve Conway, Bob Hasegawa, Christine Rolfes and Jesse Salomon.

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This bill, originally sponsored by Sen. Shelly Short (R.), would allow code cities to collaborate with the county or counties where the code city is located to form an interlocal agreement regarding annexation of unincorporated territory within an urban growth area boundary. 

This interlocal agreement must address the balancing of annexations of commercial, industrial and residential properties so any potential loss or gain is considered and distributed fairly as determined by tax revenue. The agreement must also address the development, ownership and maintenance of infrastructure; and the potential for revenue-sharing agreements. The agreement for annexation will qualify the city for the annexation tax credit.

It would also allow the Growth Management Act (GMA) planning jurisdictions to apply for a determination of compliance from the Department of Commerce for certain actions under the GMA and the State Environmental Policy Act.

When testifying on the bill, Short said:

This bill is not just a rural bill anymore, but I do believe there are elements that do help our counties through the challenging planning process, the comprehensive planning process … The annexation piece has brought forward one of the unintended consequences of comprehensive planning, has been that in the urban growth planning a lot of [the tax revenue] gets put into the cities, and the cities end up having the revenue but the counties end up providing the infrastructure and not having the revenue coming back to them. So this annexation piece would set up that potential revenue sharing.”

Short also said she relied on the counties’ input while developing the bill. Paul Jewell, policy director for the Washington State Association of Counties (WSAC), testified in support of the bill. 

Jewell said county governments have had concerns about fiscal stability for many years now, and that this bill starts to address some of their concerns.

Counties are highly dependent on property taxes. We’re severely limited in our ability to grow that revenue source, and the way that the GMA is designed a lot of the benefit for growth and development goes into urban areas and urban growth areas. And we’ve seen some disparities existing over the last several years with annexation and how revenue producing properties tend to get taken into cities really quickly, leaving counties with fewer resources.”

Jewell likened this program to a carrot, not a stick, because the cities have little incentive to adopt an interlocal agreement where they may lose revenue. 

It’s a voluntary process that provides incentive to the city. My understanding is that the previous program was very popular, so we expect some uptake on this. However, if it doesn’t work, if counties continue to have problems, they can always revert to reinstating their boundary review board.”

Mary Lynne Evans, a spokesperson for the Washington State Association of Boundary Review Boards, says that they support the cities and counties efforts to make the annexation process simpler and that counties are losing revenue to cities.

In the original Senate hearing process, Evans said that they lobbied for the public hearing portion to be added to the bill, so that they could ensure that the public has access to the annexation process. And she asked that the language adding this provision be kept in the bill.

Carl Schroeder, a spokesperson for the Association of Washington Cities, also testified in support of the bill, and lauded Short for her work to make this bill broader and able to address, not just rural issues, but the issues that cities and counties share.

On the annexation piece, we view this as a powerful option to encourage collaboration, that aims to speak to the types of issues that have tripped up cities and counties with disagreements on the implications of potential annexations.”

This bill is scheduled for an executive session on Wednesday at 10 am and Friday at 8:30 am.

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