HomeMy WebLinkAbout05/14/2014 AGENDA CITY COUNCIL 345 6th Street, Suite 600, Bremerton, WA 98337 C Phone (360) 473 -5280
MAY 14, 2014
CITY COUNCIL STUDY SESSION
Beginning at 5:00 PM in COUNCIL CONFERENCE ROOM 603
The Study Session is open to the public but there will be no opportunities for input or participation; no
action is anticipated during the Study Session; and the content of these items is subject to change. If
approved by the City Council, the items will be placed on the May 21, 2014 Council Meeting Agenda...
A. INFORMATION BRIEFING
1. Gorst Urban Growth Area (UGA) Annexation Fiscal Analysis — Andrea Spencer, Community
Development Director
B. NO PRESENTATION PLANNED — The following items are budgeted items or have already
been reviewed by the appropriate Council Committee:
2. Professional Services Agreement with FCS Group to conduct a General Facilities Charge
and Fee Study for the City of Bremerton
3. Purchase for replacement of one 2014 JD -6105 Tractor with a mid -mount 22' Boom Mower
from Sonsray Machinery of Auburn, WA
4. Purchase for replacement of one 2015 Ford F550 4x4 Service Truck for the Water
Department from Cobalt Truck Equipment of Spokane, WA
5. Contract Award to JCI Jones Chemicals, Inc. for purchase of 12.5% Bulk Sodium
Hypochlorite Solution for the Westside Wastewater Treatment Plant
6. Additional Rate Advancement for Kevin Matthew, Information Services Manager
7. Appointment of Michael Riley, Jr. as the Assistant Director of Financial Services at a Step
higher than Rate 1 in Pay Band 16 of the 2014 City of Bremerton Management Salary Plan
8. Grant Agreement with the State of Washington Recreation & Conservation Office (RCO) for
Kiwanis Park Phase II Improvements
C. BRIEFINGS & FULL PRESENTATIONS
9. Proposed Public Hearing and Resolution to approve the 2015 Bremerton /Kitsap County
Block Grant (CDBG) Policy Plan and 2015 Kitsap Coordinated Grant Notice of Funding
Availability (NOFA)
10. Consultant Contract Award to Parametrix, Inc. for the Design of the "Washington Avenue
Sidewalk Connector" Project
11. Contract Award to Pivetta Brothers Construction, Inc. for Construction of the "Evergreen
Rotary Park Renovation" Project
12. Contract Award for Pool Upgrades at the Glenn Jarstad Aquatic Center
D. GENERAL COUNCIL BUSINESS
• Public Works Committee Briefing (5106114 Meeting) — Dino Davis, Chair
• Audit Committee Briefing (5108114 Meeting) — Leslie Daugs, Chair
• Public Safety and Parks Committee Briefing (5114114 Meeting) — Leslie Daugs, Chair
• Other General Council Business (As necessary...)
E. ADJOURNMENT OF STUDY SESSION
® Americans with Disabilities Act accommodations provided upon request. Those requiring special accommodations
should contact the City Clerk's Office at (360) 473 -5323 at least 24 hours prior to the Council meeting.
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CITY OF BREMERTON
FISCAL ANALYSIS OF
GORST UGA ANNEXATION
FINAL REPORT
MAY 14, 2014
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Table of Contents
1.0 INTRODUCTION ................................................................ ..............................1
1.1 Study Purpose ......................................................................... ..............................1
1.2 Study Area Description ........................................................... ..............................1
1.3 Report Organization ............................................................... ............................... 2
2.0 STUDY APPROACH .......................................................... ..............................3
2.1 Approach and Methodology ................................................... ............................... 3
2.2 Assumptions ........................................................................... ............................... 4
2.3 Data Sources ........................................................................... ............................... 5
3.0 SUMMARY OF KEY FINDINGS ......................................... ..............................7
3.1 Baseline Budget Assumptions (No Annexation) .................. ............................... 7
3.2 Annexation is Estimated to Provide a Net Fiscal Benefit to the City ................. 8
4.0 SHORT -TERM ANNEXATION IMPACTS ........................... ..............................9
4.1 Short-Term Operating Impacts .............................................. ............................... 9
4.2 Short-Term Capital Impacts ................................................... .............................15
5.0 LONG -TERM ANNEXATION IMPACTS ............................ .............................17
5.1 Operating Impacts .................................................................. .............................17
5.2 Capital Impacts ....................................................................... .............................17
INTRODUCTION
1.1 STUDY PURPOSE
The City of Bremerton is considering annexation of the Gorst Urban Growth Area (UGA), and this
analysis was conducted to assist the City in assessing the fiscal implications of such an annexation. The
purpose of the analysis is to give the City an understanding of specific incremental fiscal impacts — costs
and revenues — of annexation during the first five years after annexation.
In addition, the City was interested in potential long -term fiscal impacts of annexation. This analysis
assesses high -level potential impacts over the next 20 years to identify long -term risks, opportunities,
and uncertainties the City of Bremerton should consider.
1.2 STUDY AREA DESCRIPTION
The study area consists of the existing Gorst UGA, shown in Exhibit 1.
In 2010, the Gorst UGA had a population of 222 residents and an estimated 237 jobs. Under the
Preferred Alternative from the Gorst Subarea Plan developed in 2013, the UGA is planned to evolve into
a complete community with places to live, play, shop, and work in a waterfront setting. Mixed uses
would be allowed through much of the UGA. The waterfront area would allow lower intensity
commercial uses with smaller impervious footprints interspersed by trails, parks, and reclaimed
shoreline habitat. Under this alternative the UGA is assumed to add 1,060 people and 298 additional
jobs by 2035.
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
Exhibit 1
Gorst UGA Map
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Ocity Limits
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Gorst• UGA
Source: Kitsap County, 2013; BERK, 2014.
1.3 REPORT ORGANVATION
This report summarizes the findings of the annexation analysis and is divided into the following sections:
2.0 Study Approach. This section introduces the approach and methodology of this study, and provides
some additional background information in the purpose of the analysis.
3.0 Summary of Key Findings. This section presents the high -level findings around net fiscal impact of
the annexation.
4.0 Short -Term Annexation Impact. This section presents the detailed findings for operating costs and
revenues and capital costs and revenues for the first five years after annexation.
5.0 Long -Term Annexation Impacts. This section presents a high -level consideration of how the
annexation may impact the City over the next 20 years.
B FINAL REPORT I May 14, 2014
2.0 STUDY APPROACH
2.1 APPROACH AND METHODOLOGY
This report presents operating cost and revenue estimates of annexing the Gorst UGA into the City of
Bremerton over the next five and twenty years. The report also addresses capital impacts of annexation
including capital facility needs and capital revenue estimates.
High -Level Planning Document
It is important to note that this is a financial planning study and not a budget development exercise.
The analysis is intended to provide a reasonable estimate of potential costs and revenues associated
with annexation and to allow for the development and evaluation of alternative scenarios to test the
implications of development assumptions, policy choices, and alternative service delivery options, to
help the City determine how to proceed with the potential annexation of these areas.
If the City proceeds with annexation, this analysis provides a basis from which the City can begin the
process of planning for the higher service demands of a slightly larger city. However, the actual
implementation will be accomplished through the regular budget process wherein City management will
revisit the balance of costs and revenues in light of updated information and the overall needs of the
City at that time.
In addition, staffing projections used in this analysis are the best estimates given current information.
The City will need to determine exact staffing levels for each department if annexation becomes a
reality. There will likely be a transition phase as new staff are hired and trained, which can include
substantial lead time. The number of personnel needed and the timing of hiring by position will have to
be planned to a greater level of detail was necessary for this planning -level analysis.
While this analysis provides a comprehensive look at the potential incremental impacts on the City's
financial picture, it does not provide a full accounting of the City's projected sources and uses of funds.
Analysis Considers City With and Without Annexation
To be an effective decision support tool, the analysis cannot consider fiscal impacts by looking just at the
annexation areas alone, but instead must consider the potential impacts of annexation by comparing
the fiscal outlook for the City of Bremerton under two alternative futures: (1) the future of the current
City with boundaries unchanged and (2) the future of a larger version of the City that includes
annexation of the Gorst UGA. Analysis of these two alternative futures provides a truly comprehensive
look at the potential implications of annexation on long -term fiscal sustainability.
Land -Based Fiscal Model
BERK developed an annexation fiscal model to estimate revenues and expenses for both the existing City
and a post- annexation City. Taking the analysis into the future shows how the fiscal balance in the City
might change over time and how annexation might affect the long -term fiscal outlook for the new,
larger City.
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
Ongoing Costs and Revenues
The fiscal model estimates changes in the cost of services based on relationships between direct
services, such as maintenance workers or planners, and underlying demographic and community
changes, such as increases in population, housing units, commercial activity, and land area.
Costs are separately estimated for labor and non -labor categories:
• Labor costs are based on current salaries and benefits and an assumed annual escalation rate.
• Non -labor costs in each department are driven by the current relationships between the number of
Full Time Equivalents (FTEs) in that department and the magnitude of non -labor costs in that
department.
• Non -labor costs that are unrelated to the positions in a department (such as facilities maintenance,
which is related to the size of a building, or street lighting costs, which are related to lane miles) are
separated from the department costs and estimated based on relevant cost drivers.
• The analysis of operating impacts focuses solely on the general and street funds, as these are the
primary operating funds for the City. Enterprise funds, whose operations are generally self -
supporting through user fees, are not addressed as part of the operating impact analysis.
Capital Cost and Revenue
The capital impact analysis includes capital costs from all City departments, including the enterprise
funds, to capture all capital needs in the Gorst UGA. The capital revenue analysis focuses on general
capital revenues, primarily Real Estate Excise Tax revenue generated by the Gorst UGA.
2.2 ASSUMPTIONS
General Assumptions
The analysis assumes that the City of Bremerton annexes the Gorst UGA into the City in 2014. The
analysis assumes annexation related costs and revenues accrue on an annual basis beginning in 2014.
All analysis presented in this document is based on annual estimates. Actual impacts from annexation in
any specific year will depend on the effective date of the annexation. Impacts in this document should
be considered planning -level estimates for the City to understand the direction and magnitude of likely
impacts.
Escalation Assumptions. The analysis assumes a general inflation rate of 3.0% annually. Staff salaries are
escalated at 2.0% annually. Benefits are assumed to grow at 6.5% per year in most years, with the
following exceptions: benefits are also assumed to jump by 10% in 2014 due to plan changes and 15% in
2018 due to Affordable Care Act implementation rules regarding health plans.
Development Assumptions
The analysis is built on the premise that key factors in the land base (such as population, employment,
and commercial activity) drive both demand for services and changes in the City's tax base. Demand for
services drives costs in the model, and depends on a jurisdiction's scope of services and choices
regarding level of service. The tax base drives revenues and will vary based on a jurisdiction's choices
regarding fiscal and taxing policy (limited by tax laws).
The BERK fiscal analysis framework is flexible and allows for varying assumptions about anticipated
development in the City and annexation areas over time, and how these changes affect the underlying
local tax base. In particular, the following elements are explicitly specified: (1) development assumptions
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
including type, scale, and timing of new development; (2) type and mix of tenants, associated
employment, and business income levels; (3) housing mix (single - family and multi - family) and density;
and (4) productivity of new retail activity.
Development assumptions within the City of Bremerton's current boundaries assume a level of
development activity similar to that seen historically. Development assumptions for the Gorst UGA are
described below.
Exhibit 2 summarizes the population and employment projections that underlie the cost and revenue
estimates in this study. The first column shows the current estimated housing units, population, and
employment within the Gorst UGA. The subsequent columns show the estimated housing units,
population, and employment in the original UGA boundaries by years.
These development assumptions are based on the adopted Preferred Alternative, which designated
long -term growth targets for 2035. Interim years are interpolated based on conversations with planners
and City staff, and give a conceptual representation of the pace at which the UGA may develop to reach
its long -term targets.
Exhibit 2
Development Metrics for Gorst UGA (2013 -2030)
Current UGA 2015 2020 2025 2030
Residential
Housing Units 106 107 141 268 520
Population 222 234 311 573 1,040
Commercial
Employment 237 237 275 342 428
Source: BERK, 2013.
• Immediately upon annexation, the City of Bremerton will add to its boundaries the 106 housing
units, 222 residents, and approximately 237 jobs that currently exist in the Gorst UGA.
• By 2020, it's estimated that the Gorst area will have grown to include approximately 141 housing
units, 311 residents, and approximately 275 jobs. All of this activity would be located within the new
boundaries of the City of Bremerton.
• Based on the Gorst Subarea Plan, this fiscal analysis assumes that annexation of the Gorst UGA will
add approximately 520 housing units, 1,040 residents, and approximately 428 jobs by 2030 to the
City's boundaries.
2.3 DATA SOURCES
Data used in this report came from the following sources:
• City of Bremerton
0 2013 City of Bremerton Budget
0 2013 staffing detail including position titles, FTEs, salary and benefit costs
o Gorst Creek Watershed Plan, Stormwater Capital Improvement Plan, 2013
o Gorst Planned Action Environmental Impact Statement, 2013
• Kitsap County
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
0 2012 parcel data
0 2012 buildable lands data
0 2012 personal property tax revenue
0 2012 street GIS layer
• Puget Sound Regional Council
o 2013 employment
• Washington State Department of Revenue
o 2012 taxable retail sales
• Washington State Office of Financial Management
0 2013 Population
0 2013 housing units
FINAL REPORT I May 14, 2014
1
SUMMARY OF KEY FINDINGS
This section provides a brief overview of the key findings of our analysis of how annexation of the Gorst
UGA will impact the City of Bremerton, based on the conceptual development assumptions identified
above. This section quantifies the impacts for both operating costs and revenues as the City transitions
through the annexation.
• Short -term impacts, defined as 2014 -2018, are explained in more detail in Section 4.0 beginning on
page 9.
• Longer -term impacts of annexation (after 2018) are described beginning on page 17.
3.1 BASELINE BUDGET ASSUMPTIONS (NO ANNEXATION)
While all cities across the state are different in terms of tax bases, mixes of commercial and residential
land uses, and fiscal policies, almost all cities face structural challenges in local government funding that
have led to the cost of municipal services growing at faster rates than tax and fee revenues. This creates
an ongoing budget challenge for cities to maintain adequate levels of service without changing tax and
fee policies. The most significant contributors to this underlying structural challenge have been the
result of two voter approved initiatives:
1. Initiative 695, which was passed by voters in 1999, reduced Motor Vehicle Excise Tax rates to a flat
$30 fee. A portion of these revenues were used to support sales tax equalization payments that
were a significant funding source for many cities with lower than average sales tax collections.
2. Initiative 747 (and subsequent legislative action to restore the provisions of the Initiative after it was
declared unconstitutional by the Supreme Court in November 2007) limits growth in property taxes
to 1% per year, without voter approval. The effect of this change was to reduce the rate of growth in
property tax revenues, which is one of the three most important sources of local government
funding, to a rate that, in most cases, is lower than general inflation. The 1% limit does not apply to
the value of new construction.
As a result, a projection of revenues and costs that assumes no change in current policies (tax or level -
of- service) suggests the City of Bremerton can expect to face budget deficits in the coming years. This
finding is consistent with the common fiscal challenge in most other cities in Washington State and is
principally related to the impact of rising costs of doing business and additional staffing related to in -city
growth needed to maintain existing levels of service.
Since a city cannot operate with a budget deficit, the Bremerton City Council will make choices each
budget cycle to bring cost and revenue growth into alignment and maintain a balanced budget every
year. When analyzing annexation, it is important to consider that the way in which the City chooses to
address any baseline operating deficits may change the potential impacts of annexation. For example, if
the City were to consider raising business or residential taxes to close the gap, the different tax rates
would change revenues expected from the annexation areas based on the individual land base in those
areas. If the approach were to reduce costs by modifying levels of service, then these revised levels of
service would reduce costs associated with annexation in different proportions, again based on the land
base and the corresponding demand for services.
It is not possible to know what the City of Bremerton's future Councils may choose to do to balance
future budgets, and the City does not need to make those decisions at this time. Since the goal of this
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
annexation study is to evaluate the incremental fiscal impacts of a potential annexation, it analyzes a
scenario which assumes continuing current policies. This results in a long -term outlook that shows
increasing budget deficits. These long -term deficits represent the structural imbalance between
municipal cost and revenue growth rates. In reality, the City will balance its budget in any given year.
3.2 ANNEXATION IS ESTIMATED TO PROVIDE A NET FISCAL BENEFIT
TO THE CITY
Exhibit 3 provides a high -level picture of the key findings of this analysis: the annexation of the Gorst
UGA is estimated to provide a moderate annual benefit to the City of Bremerton.
Exhibit 3
Estimated 20 -year Net Fiscal Impact of Annexation
$4 M
$0 M — -- — - -- - - - - -
-$4 M
� r
-$8 M
O City With Annexation
X12 M o Impact of Annexation
Baseline City (No Annexation)
-$16 M
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031
• 2015 2018 2030
Core Expenditures 412,000 602,000 1,028,000
Core Revenues 350,000 904,000 2,235,000
FTEs from Annexation 1.5 2.3 2.5
Net Resources (000's) 62,000 302,000 1
Deficit/Surplus as % of Expenditures -15% 50% 117%
Source: BERK, 2014.
Note: Exhibit 3 shows the City's future fiscal outlook if no changes were made to policies that impact costs and revenues. In
reality, the City Council will balance its budget each year. This graph represents the impact that the Gorst UGA would
have under the city's current cost and revenue structures.
Exhibit 3 shows that in the near term there may be a slight negative impact, as the City may need to hire
some staff before the full revenue impacts of the UGA are realized. However, in the long run, revenue
growth in the UGA is likely to outpace associated staffing and cost needs.
The short -term and long -term impacts on revenues and costs are described in more detail in the
following sections. Specific decisions around long -term service decisions for police and fire services may
change the long -term impact.
FINAL REPORT May 14, 2014
4.0 SHORT-TERM ANNEXATION
4.1 SHORT -TERM OPERATING IMPACTS
Operating Revenue Estimates
Exhibit 4 shows estimated revenues that would accrue to the City of Bremerton from the Gorst UGA,
assuming annexation in 2014. All analysis presented in this document is based "on annual estimates.
Actual impacts from annexation in any specific year will depend on the effective date of the annexation.
This analysis of operating impacts only includes revenues for the General Fund and Street Fund.
Exhibit 4
Annual Annexation Revenue Impacts, 2014 -2018 (Assuming 2014 Annexation Year)
Operating
Revenu not assu ming any revenue sharing
Sales Tax 384,000 401,000 417,000 434,000 455,000
Criminal Justice Tax 3,000 3,000 3,000 3,000 4,000
Property Tax /Road Levy 0 130,000 135,000 139,000 144,000
Leasehold Excise Tax 0 0 0 0 0
Utility Taxes 16,000 18,000 20,000 22,000 26,000
Commercial Parking Tax 0 0 0 0 0
Gambling Tax 0 0 0 0 0
Solid Waste Franchise Fee 1,000 1,000 1,000 1,000 1,000
Building Permits and Fees 2,000 2,000 2,000 2,000 2,000
Business Licenses and Permits 3,000 4,000 4,000 4,000 4,000
EMS Levy 0 24,000 25,000 25,000 26,000
Liquor Board Profits and Excise Tax 2,000 2,000 2,000 2,000 2,000
Gas Tax 5,000 5,000 5,000 5,000 6,000
Planning and Plan Check Fees 1,000 1,000 1,000 1,000 1,000
Municipal Court Costs 3,000 3,000 3,000 3,000 3,000
Fines and Forfeits 7,000 7,000 8,000 8,000 9,000
Recreation Charges (1,000) (1,000) 0 0 0
Grants and Other Intergovernmental 4,000 4,000 5,000 5,000 5,000
Other Charges 1,000 1,000 1,000 1,000 1,000
B&O Tax 0 0 0 201,000 212,000
Police Services 2,000 3,000 3,000 3,000 3,000
Internal Charges for Service 0 0 0 0 0
Total 433,000 608,000 635,000 859,000 904,000
;Potential Impacts of Revenue Sharing
Loss in Sales Tax Revenue (288,000) (201,000) (104,000) 0 0
Loss in Property Tax Revenue 0 (57,000) (40,000) (20,000) 0
Total After Revenue Sharing 145,000 350,000 491,000 839,000 904,000
Source: City of Bremerton, 2013; and BERK, 2014.
Exhibit 4 provides two different pictures of the level of revenue the City may receive from annexation of
the Gorst UGA. The top portion of the table shows the full level of revenue that would be generated by
the Gorst UGA. The bottom portion of the table provides a picture of how revenues may accrue to the
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
City if the City were to sign a revenue sharing agreement with Kitsap County to mitigate the impacts of
annexation on the County's finances.
Currently, the City is not subject to a revenue sharing agreement with Kitsap County. However, for the
purpose of providing a conservative fiscal analysis, the revenue estimates assume that the City may
choose to participate in revenue sharing.
Entering into a revenue sharing agreement would be dependent on the annexation method used. Under
such an agreement, the City would share sales and property tax revenue generated in the Gorst UGA
with Kitsap County for the first few years after annexation. The net impacts discussed earlier in Exhibit 3
assume that such a revenue sharing agreement will be in place. This provides a conservative approach to
understanding the impacts of annexation.
The 2018 revenue impacts shown in Exhibit 4 reflect a stable picture of the Gorst UGA going forward,
given that this analysis assumes the City would be past any potential revenue sharing agreements with
Kitsap County by 2018. In 2018, it's estimated that the City would receive approximately $1.0 million in
revenue from the annexation of the Gorst UGA. This amount would grow going forward based on
inflation as well as increased development in the UGA over time as services are built out.
Operating Revenue Detail
This section describes the methodology used to estimate the primary revenue items described above.
Primary Revenue Sources
As with many cities in Washington State, the three largest revenue sources for the City of Bremerton are
Sales Tax, Property Tax, and Utility Taxes, which make up approximately 60% of the City's 2013 general
and street fund operating revenues. Additionally, the City levies a Business & Occupation (B &O) tax that
is a significant revenue contributor.
Sales Tax. Taxable retail sales are assumed to increase by 0.5% per year higher than the general inflation
rate of 3.0% used in this analysis. If the City entered a revenue sharing agreement with Kitsap County to
offset the impact to the County of losing the Gorst UGA, this analysis assumes the City would receive
25% of sales tax revenues generated in Gorst in 2014, 50% in 2015, 75% in 2016, and 100% of revenues
thereafter. Any actual revenue sharing agreement would be negotiated with the County and may vary
from these assumptions.
It's important to note that a significant portion of the sales tax revenue generated within the Gorst UGA
would come from the car dealership. Future revenues would vary depending on the continued success
of this business.
Property Tax. If the City entered a revenue sharing agreement with Kitsap County to mitigate the
impacts of annexation on the County's budget, this analysis assumes that property tax revenues would
be shared with the County using the same ratios as described above for sales tax.
Utility Tax. Utility taxes for telephone, gas, cable, electricity, and garbage are assumed to grow based on
the combination of population and employment in the Gorst UGA. Current rates of these utility
revenues to population and employment in the City of Bremerton were applied to assumed population
and employment totals in the UGA to estimate utility revenues that would be generated within the UGA.
Water and sewer utilities within the Gorst UGA are already provided by the City of Bremerton, and the
City charges a 50% surcharge for these customers outside the current City limits. Therefore, annexation
of Gorst would result in a slight decrease in revenues from these customers. The net impact of all utility
tax gains and losses is shown in Exhibit 4.
0 FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
Business & Occupation Tax. Business in the Gorst UGA would be exempt from the City's B &O tax for the
first three years after annexation. Therefore, B &O tax revenues from Gorst are assumed to begin
accruing to the City in 2017. The model uses two separate B &O tax rates to estimate revenues from the
Gorst UGA:
• For existing Gross Business Income (GBI) in the Gorst UGA, the model assumes that the City's retail
tax rate will apply, since the majority of business activity in Gorst comes from the retail sector. This
tax rate is 0.125 %. It's important to note that a significant portion of the B &O tax revenue generated
within the Gorst UGA would come from the car dealership. Future revenues would vary depending
on the continued success of this business.
• For the increase in GBI from development within the UGA, this analysis uses an effective tax rate of
0.1625% to account for exemptions and varying rates based on types of businesses. This effective
rate reflects the City's current ratio of B &O tax revenues compared to total Gross Business Income
(GBI) in the City.
Other Revenue Sources
The City also receives revenue from many other sources, as described below.
Criminal Justice Tax. Kitsap County levies a dedicated sales tax to support criminal justice expenditures.
This 0.1% sales tax is collected by the state Department of Revenue, and is distributed to counties and
cities on a per capita basis. In 2013, Bremerton estimates per capita criminal justice sales tax revenue at
approximately $11.67 per capita. Future revenues are calculated on a per capita basis, with the annual
per capita revenue assumed to increase at the rate of inflation.
Solid Waste Franchise Fee. The Solid Waste provider in the City pays a franchise fee for providing this
service within the City limits. These revenues are projected on a per capita basis and are estimated to be
$3.66 per resident in 2013. These fees are assumed to extend into Gorst upon annexation.
Building Permits and Fees & Planning and Plan Check Fees. These fees help cover the cost of staff that
review building plans and permit applications for residents. Since the City does not set its fees on a strict
cost recovery basis, these revenues are estimated on a per- capita and per -job basis, and are assumed to
increase both with inflation as well as increases in population and employment.
Business Licenses and Permits. The City of Bremerton charges a fee to obtain a business license within
the city limits. These revenues are projected based on the ratio of total employment in the City and the
annexation areas. Annual employment estimates are generated from land use and development
assumptions within the model.
EMS Levy. The City of Bremerton is currently authorized by voters to levy an Emergency Medical
Services tax. The maximum allowable levy is $0.50. In 2013, the current levy rate is $0.50 since assessed
values in the City have declined in recent years. The City is planning to ask voters to re- authorize the levy
next year.
Because the EMS Levy is a form of property tax, is it subject to the same 1.0% annual increase plus new
construction in years without voter - approved increases. It is therefore assumed that the levy will begin
to decline going forward as assessed values begin to grow at a pace more in line with historical growth
as the region recovers from the economic recession.
The timing of annexation will impact when the City begins to collect the EMS levy from the Gorst UGA.
Collections would only begin in 2015 if the City annexes the UGA early in 2014.
Liquor Board Profits and Excise Tax. According to Washington State law, a share of the state profits
from liquor sales and state collected excise tax on liquor is distributed directly to cities on a per capita
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
basis. Currently, the City's budget estimates the per capita distribution for liquor profits and excise taxes
to be $8.29 in 2013. This per capita estimate is assumed to increase with inflation.
Gas Tax. A portion of the state - collected gas tax is shared directly with municipalities, which bear a
substantial portion of the overall costs of road maintenance and construction. The gasoline and diesel
tax is a flat amount levied per gallon (rather than a percentage of the price at the pump).
Cities are allowed to use this funding for maintenance or capital, and Bremerton uses the full funding
amount for street maintenance. The gas tax revenue estimates from the City's budget project a per
capita gas tax allocation of $21.41 in 2013. Since the tax is a per - gallon tax and not impacted by changes
in prices, this per capita number is assumed to remain constant into the future.
Municipal Court Costs. These revenues are collected through fees that help cover the cost of Municipal
Court services. These revenues are estimated to grow with increases in population and employment
going forward, with the per - capita and per - employment amount growing with inflation into the future.
Fines and Forfeits. Currently, the City's budget projects the per capita revenues for fines and forfeits to
be approximately $29.47 in 2013. This per capita estimate is assumed to increase with inflation going
forward.
Recreation Charges. This analysis assumes that current UGA residents are already using the City's parks
and recreation services, and therefore new revenue will only come from population growth from
development within the UGA. Users who live in the Gorst UGA and currently pay for parks and
recreation services are charged a 25% surcharge for being non - residents. Therefore, there would be
some loss in revenue from these uses being transitioned into the City at first. Over time, the revenue
from new users will offset revenue loss from the 25% non - resident surcharge.
Grants and Other Intergovernmental Revenue. The grants and transfers from other government
agencies considered in this analysis are for operational expenditures only, not those for capital projects.
Future revenues from these sources are estimated on a per capita basis and applied to the annexation
area population. The current per capita revenues, according to the City's 2013 budget, are $17.54 and
are assumed to increase at the rate of inflation. It is important to note that it is difficult to estimate this
source of revenue, as grants tend to fluctuate widely from year to year, and that very little additional
revenue will likely be seen from annexation.
Police Services. The City estimates it will receive approximately $410,900 in 2013 from law enforcement
services, such as fees for police service, fingerprint fees, and police records searches. Currently, the
City's budget projects the per capita revenues for police services to be approximately $25.93 in 2013.
This per capita estimate is assumed to increase with inflation going forward.
Other Charges. This analysis models approximately $200,000 in other miscellaneous revenues on a per
capita basis. These charges include revenue streams such as investment interest, donations,
miscellaneous permits and fees not related to buildings or businesses, and other minor charges for City
services. Currently the revenue estimated in the City's budget projects the per capita revenues for these
miscellaneous charges to be approximately $5.31 in 2013. This per capita estimate is assumed to
increase with inflation going forward.
Ambulance Transport, Leasehold Excise Tax, Commercial Parking Tax, Gambling Tax, and Internal
Charges for Service. These revenues are not expected to be impacted by the annexation of the Gorst
UGA. Ambulance Transport Fees will accrue to South Kitsap Fire & Rescue, as they will likely continue to
provide fire and EMS services to Gorst. The other taxes are structured in such a way that they will not
see an increase from adding the Gorst UGA to the City's boundaries.
FINAL REPORT I May 14, 2014
I
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
Operating Cost Estimates
Exhibit 5 summarizes the estimated cost impacts of annexation in 2018. The chart shows 2018 because
it presents a snapshot of the short -term impact of annexation once development in the UGA has begun
and the departments have hired up to their full short -term need. Years 2014 -2017 are not shown in the
table, because the exact impact in any one year will depend greatly on how the City chooses to ramp up
its hiring. The City will need to weigh the impacts being seen on the ground as well as the actual revenue
increases from the UGA to determine when hiring decisions need to be made. The methodology behind
these hiring numbers are described after the chart.
Exhibit 5
Annexation Staffing and Cost Impacts, 2018
2018
• • • • FTEs Annual Cost'
City Council - -
Mayor /Auditor - -
Finance /Human Resources 0.15 16,000
Engineering - -
Law Enforcement 0.50 85,000
Fire 0.25 146,000
Municipal Court - 1,000
Community Development 0.15 20,000
Parks 0.25 54,000
Streets /Public Works 1.00 231,000
Legal - -
Non- departmental - 49,000
TOTAL 2.30 602,000
* The annual cost includes staffing costs as well as
non -labor costs such as contracts and equipment.
Source: BERK, 2013.
The annual costs listed to the FTE amounts reflect the total annual cost increase in each of these
departments due to annexation. In some cases, these increases include equipment, supplies, utility
costs, and contract charges.
Operating Cost Detail
City operating cost and staffing impacts were estimated based on our land base fiscal model and
supplemented and refined based on conversations with City staff. Given the moderate size of the Gorst
UGA annexation, not all City departments will be impacted by the annexation. The following
departments are estimated to receive cost impacts from the annexation:
• Finance. The finance department will likely need to add one additional Accounting Assistant II
beginning in 2017 to handle the increase in licensing activity. The combination of commercial
development in the City and the UGA would drive the need for this 1.0 FTE. To estimate the costs
associated with annexation, the fully loaded cost of this additional FTE is apportioned between the
City and the Gorst UGA based on the relative amount of commercial development in each
geographic area each year.
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
• Police. The Gorst UGA will represent a new area for the police department to monitor and to
respond to calls for service. In the short term, given the moderate amount of development currently
in the UGA, the Bremerton Police Department estimates that the City could provide police service to
Gorst with existing staff by incurring additional overtime. The amount of overtime would average
approximately 0.5 FTEs per year beginning in 2014. Serving the Gorst UGA through incurring
overtime would not result in the need for additional benefits payments or capital expenditures.
• Fire. Given the geographic constraints of the UGA, the City plans to contract with South Kitsap Fire
and Rescue (SKFR) to continue providing service to Gorst. The City would pay for this service based
on SKFR's current levy rate of $2.00 per $1,000 AV. This equates to approximately $100,000 annually
beginning in 2014, and would increase over time with development in Gorst.
Based on input from the City's Fire Chief about experience with the SKIA annexation, the City would
likely need to add 0.25 FTE of staff for additional fire inspection services. This position would work
with the fire marshal's office to conduct inspections of existing developments within the Gorst UGA
to ensure they are compliant with the City's fire code as they come into the City's jurisdiction. This
staff person would also support the need for additional inspections as development ramps up in the
UGA. The cost of this staff person is reflected in Exhibit 5.
• Municipal Court. The City currently contracts for public defender services, budgeted at $285,000 per
year in the City's 2013 budget. This analysis assumes that this contract will increase proportionally
with population growth over time. To estimate the impacts of annexation, the current per capita
cost of this contract within the City was applied to the increase in population from annexation. This
approach results in an estimated cost of approximately $750 in 2014, growing with both inflation
and population growth going forward.
• Community Development. The community development department will likely need to add one
additional Building Development Specialist II (building inspector) beginning in 2017 to handle the
increase in commercial development activity citywide. The combination of commercial development
in the City and the UGA would drive the need for this 1.0 FTE. To estimate the costs associated with
annexation, the fully loaded cost of this additional FTE is apportioned between the City and the
Gorst UGA based on the relative amount of commercial development in each geographic area each
year.
This additional staff member will necessitate a one -time capital investment for a vehicle when they
are hired in 2017. The analysis assumes a one -time vehicle cost of $30,000.
• Parks Maintenance and Recreation. The City's parks LOS requires a neighborhood park to be within
mile of all residences. Given existing park facilities and the likely residential development zones in
Gorst, this analysis assumes that the UGA would need to be served by at least two additional
neighborhood parks. Each neighborhood park is assumed to be approximately 1.5 acres, for a total
additional park acreage of 3.0 acres. Assuming a maintenance cost to the City of approximately
$4,000 per developed acre, this would generate about $12,000 per year once the parks are
developed. While the exact development timeline of these parks is unknown, this analysis assumes
maintenance beginning in 2018 to provide the City with a conservative estimate of cost impacts.
Additionally, based on population growth, the City may need to hire approximately 0.25 FTEs in
recreation program staff to support additional recreational users once residential development in
the UGA comes online. This cost will likely be offset in part by additional recreational user fees.
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
• Street Maintenance. The new lane miles that will be added to the City through annexation, to both
existing roads in Gorst as well as new roads that will be built as the UGA develops, will drive the
need for additional maintenance staff. Based on the constraints of hiring for partial positions, the
City would have to add a full 1.0 FTE based on the additional demand. However, the need within the
Gorst UGA would likely not demand 100% of this staff person's time in the short-term. This means
this position would have some time available, in the short -term, to work on street maintenance
efforts within current City boundaries as well.
Additionally, there will be marginal costs related to the additional lane mileage beyond just staff
time, including supplies, materials, and utility costs to support the maintenance work. This results in
annual costs of significantly more than just salaries and benefits for the 1.0 FTE. These additional
non -labor costs are based on the average non -labor costs per FTE that the City currently budgets in
the Street Fund.
• Non - Departmental Impacts. In addition to department- specific impacts, the growth in population
and development will result in marginal cost increases to election services, population -based
contracts with other jurisdictions, and programs like animal control. These costs are based on the
share of population between the baseline City and the City after annexation. This analysis of non -
departmental impacts includes the following major costs:
• Election services
• Care and custody of prisoners
• Animal Control
• Kitsap County emergency management contract
• Public health district contract and alcoholism programs
Additionally, the City may incur additional costs from assuming responsibility for the proportionate
share of South Kitsap Fire and Rescue's (SKFR) debt service that is paid by residents of the Gorst
UGA. This share is calculated based on the percentage of total assessed value included in SKFR's
service area that is located in the Gorst UGA. Since the UGA is a small portion of total SKFR assessed
value, it is estimated this impact will be approximately $1,500 per year through 2018.
In total, non - departmental impacts are estimated at about $50,000 per year immediately after
annexation, and the majority of these costs will grow with inflation and population over time.
The analysis assumes that the other departments not mentioned explicitly above — such as City Council,
Legal, the Mayor's and Auditor's Offices, and Engineering — will not be impacted.
4.2 SHORT -TERM CAPITAL IMPACTS
Capital Needs
In the short-term (2014- 2018), the City of Bremerton would not have any specific capital needs to
address if it annexed the Gorst UGA. There is just one capital project planned for the Gorst UGA, which
is scour control for the Sam Christopherson Bridge. This project is in Kitsap County's TIP and scheduled
to have been completed in 2013. The Gorst Creek Watershed Capital Improvement Plan lists the need
for a Flood Cause Study to evaluate flooding within the UGA. The Gorst Creek Watershed CIP estimated
the cost of the study at $600,000 and was designated the responsibility of the City of Bremerton. Listed
revenue sources for this Flood Cause Study include the stormwater fund and grants.
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
Capital Revenues
The City of Bremerton's capital projects are primarily funded by the Capital Improvement Funds, except
for capital projects undertaken by the City's enterprise funds. Those capital projects are generally
funded by the enterprise funds themselves.
The City manages five capital improvement funds — general capital improvements, park facilities
construction, Pacific Avenue construction, Conference Center expansion, and Lower Wheaton Way. The
largest funding sources for Pacific Avenue, Lower Wheaton Way, and the Conference Center expansion
are grants, which are not expected to be impacted by annexation. The remaining capital funds are
primarily supported by the Real Estate Excise Tax (REET). This section describes how the annexation
would generate additional REET revenues.
Real Estate Excise Tax. REET is levied on all sales of real estate, both commercial and residential, that
occur within City boundaries. The City collects REET at a 0.5% tax rate based on the transaction price of
the sale.
To estimate REET revenues, this analysis makes assumptions about the turnover rate of properties
within the Gorst UGA. The current rate of real estate sales is still slightly lower than historical averages
due to the recovery from the recession. To be conservative, this analysis assumes a turnover rate of
4.0% for residential properties and 2.5% for commercial properties through 2015, and then a return to a
more typical rate of 5.0% for residential properties and 3.5% for commercial properties for 2016 and
beyond.
These assumptions result in the following REET revenue impacts from the Gorst UGA:
• In the near term, 2014 -2018, the City is estimated to receive a total of approximately $100,000 in
REET revenues from the Gorst UGA, or an average of about $20,000 per year. This is based on
turnover of existing property as well as sales of new development.
• This compares to current City revenues of approximately $400,000 in REET revenue per year, which
are expected to increase as the economy recovers and development returns to a more typical pace.
The City has additional revenue sources, besides REET, that can be used for capital funding. These
include the Motor Vehicle Fuel Tax and the Commercial Parking Tax. However, given current pressures
on operations through the general and street funds, it may be difficult for the City to reallocate
significant portions of these funds to capital expenditures in the short-term.
FINAL REPORT I May 14, 2014
5.0 LONG-TERM ANNEXATION ' '
5.1 OPERATING IMPACTS
Over the long run, it is estimated that revenues generated by activity in the Gorst UGA will be higher
than costs and staffing needs generated by the area. These general long -term fiscal impacts of
annexation mirror the short-term findings, as shown in Exhibit 3. This will result in a positive annual
impact to the City of Bremerton's operations budget resulting from annexation.
However, as with any long -term financial analysis, there are risks inherent in some of the revenue and
cost analysis that could arise. A few issues that could substantially change the long -term outlook
include:
Development Assumptions. The development assumptions included in the model drive nearly all of the
cost and revenue findings presented above. Very few impacts are generated simply by the geography of
the annexation, rather they are generated by the people and businesses that choose to live and operate
there. Therefore, there would be risk if the UGA did not develop as quickly as planned.
The risk is primarily that the UGA would not have as large of a fiscal benefit to the City. Given the
moderate current population and the low level of service need, a lower development rate would result
in both lower costs and revenues, resulting in a minor and possible negligible fiscal benefit if
development did not occur.
Police Service Needs. Through conversations with the Bremerton Police Department, the short-term
impacts of annexation could be addressed by existing staff through incurring overtime. However, in the
long -term, it may become necessary to develop a new patrol area to serve the increasing number of
residents and businesses in Gorst with the same response times that other City residents receive.
If a new patrol area were added, it would require 6.0 FTEs to provide full -day patrol service to Gorst.
This cost would need to be balanced with the revenue generated by development in Gorst, and its net
fiscal impact would depend heavily on how Gorst ends up developing. Since the South Kitsap Industrial
Area (SKIA), will also be developing over the same time period, the City could coordinate an increase in
police staffing and new patrol areas to serve the two regions as efficiently and effectively as possible.
Given the uncertainty around the need for this level of service, the potential fiscal impact of a new
patrol area (salaries, benefits, and equipment for 6.0 new FTEs) is not included in the net fiscal impacts
shown in Exhibit 3.
Fire Service Needs. The short term impacts of annexations are to be addressed through a contract with
South Kitsap Fire & Rescue. However in the long term, as the City continues to annex more area in the
Gorst area and as SKIA continues developing, at some point the City would need to look at providing
these services directly. In that case, the City would need a fire station (of which there is one currently in
Gorst), an engine /paramedic unit, and 6 -12 FTE's to provide fire service.
5.2 CAPITAL IMPACTS
Over the remainder of the study period, there are additional capital facility needs, particularly for
transportation, parks, and stormwater facilities. Responsibility for these projects is divided between the
City of Bremerton, Kitsap County, Washington Department of Transportation (WSDOT), and private
property owners.
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
All Capital Facility Needs
It was not within the purview of this analysis to conduct a new examination of the Gorst UGA's capital
facility needs. Instead, this section focuses on compiling and describing the capital needs identified in
recent capital facility needs analyses, including:
• City of Bremerton Gorst Planned Action Environmental Impact Statement.
• City of Bremerton Gorst Creek Watershed Stormwater Capital Improvement Plan.
Overall, there are 21 separate capital facility project needs identified in the Gorst UGA between 2018
and 2035, totaling $18.4 million. It's worth noting that the widening of Belfair Road accounts for more
than half of the projects' total costs and would be the responsibility of Kitsap County. Exhibit 6 lists the
individual projects by type and estimated costs.
Exhibit 6
Total Long -term Capital Facility Needs for Gorst UGA
Projects Total Costs
1 Belfair Widening to 4lanes - Mason County Line
to Bremerton City Limits $9,982,000
2 Belfair Widening to 4lanes - Bremerton City
1 Limits to Sam Christopherson Ave. $2,822,000
Transportation 3 Possible Pedestrian Overpass NA
4 Possible Bike improvements? NA
5 Possible Intersection improvements - Sherman
Heights Road NA
Fire 6 None $0
Police 7 None $0
- --
- - --- -- ._.. -... _....... . - - - - - — - - ----------- -- - ......_ .........._.__.._.......... - - - -
Parks 8 2 additional local parks (3 Acres) NA
-• -- - - -- ...- - -- - - - - -- ----------------- ....- -- - -- --- - - - - -- --- ...__...----- .........-- - - - - --
Water 9 None $0
--
-- -... - _._.._.._.__.._.. - =- -- -- - - -- -._. _..._._._._.. --- ._.._._.... - - - - -- - - - - - —
Sewer 10 Pump Station SB 3 Upgrade $100,000
11 WSDOT Hwy 3 flooding $174,000
12 Hillside seepage & stream overbank flooding $99,000
13 Storm drain piping & sink hole $216,000
14 Highway flooding from two creeks $3,224,000
15 Stream overtopping $1,049,000
16 Gorst Creek floodplain flooding $15,000
Stormwater 17 Roadway undermining and culvert clogging $13,000
Private storm sewer piping creating sink hole &
18 fish passage barrier $456,000
19 Upstream Culvert 12 inlet flooding and fish
passage, Map ID #111010 $292,000
20 Water quality concerns with yard flooding $0
21 Water quality with private pond $0
Total 21 $18,442,000
Source: Kitsap County /City of Bremerton Gorst Planned Action Environmental Impact Statement, 2013.
' This table does not include costs of upgrading the LIGA's current transportation infrastructure to an urban standard.
z These parks were identified as part of the long -term annexation analysis, and are not identified in any existing City or County
capital planning documents.
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
City of Bremerton Responsibilities
The City of Bremerton would not be responsible for all or most of these projects. Known capital facility
needs that the City of Bremerton is responsible for are listed below. Specific projects and total long -term
costs for the City of Bremerton are not fully established as of yet, particular for stormwater projects.
Transportation: Future transportation infrastructure capital investments will be necessary to achieve a
modern urban standard. The City should consider long -term planning around upgrading the UGA's
current transportation infrastructure to an urban standard, which may include adding sidewalks, curbs,
gutters, and storm drain systems. These improvements could be phased over time as the City identifies
specific needs and revenue sources.
Fire: None
Police: None
Parks and Recreation: Two additional local parks totaling 3 acres in size (Cost: unknown). Based on the
City's new park level -of- service standards, Gorst will need at least two neighborhood parks. The
standard size for a neighborhood park is at least 1.5 acres. Property acquisition costs and development
costs for the park are not available since there are no development plans or sites selected for the parks.
The development of the mine site may also require the developer to provide open- space, which could
include a neighborhood park.
The City should plan on coordinating with developers in the UGA as residential developments come
online to understand options for partnerships and potential developer responsibilities for park and
recreation infrastructure.
Water: None
Sewer: New pump station (Cost: $100,000). This cost estimate was identified in Kitsap County's Capital
Facilities Plan Update published in August 2012. Conversations with City staff during this annexation
process have identified that $100,000 may be too low of an estimate for this project. The City should
consider that this cost may warrant further study to ensure the City understands its responsibilities in
this area. Funds for a new sewer pump station upgrade are programmed from the utility enterprise
funds and will not come from the City' general fund.
Stormwater: Between one to seven projects (Cost: up to $1.86 million). The Gorst Creek Watershed Plan
adopted in 2013 by the City of Bremerton lists programmatic stormwater capital facility needs for the
entire Gorst Creek Watershed. The Plan identifies 35 different sites within the watershed that need
stormwater improvements. Of these identified projects, 11 are within the Gorst UGA. These projects are
shown in Exhibit 7 below.
The plan provides initial cost estimates for these projects and lists the entity designated responsible for
each project. Of the 11 projects in the Gorst UGA, 7 are designated the responsibility of the City of
Bremerton. These seven projects total $1.86 million. Responsibility for stormwater projects is based on
the Gorst Creek Watershed Stormwater Capital Improvement Plan Technical Memorandum completed in
September, 2013.
FINAL REPORT I May 14, 2014
CITY OF BREMERTON
FISCAL ANALYSIS OF GORST UGA ANNEXATION
Exhibit 7
Long -term Stormwater Capital Facility Needs for the Gorst UGA (2018 - 2035)
M Projects Costs Designated Responsibility
1 WSDOT Hwy 3 flooding $174,000 City of Bremerton
2 Hillside seepage & stream overbank flooding $99,000 City of Bremerton
3 Storm drain piping & sink hole $216,000 City of Bremerton
4 Highway flooding from two creeks $3,224,000 WSDOT
6 Stream overtopping $1,049,000 City of Bremerton
7 Gorst Creek floodplain flooding $15,000 City of Bremerton
10 Roadway undermining and culvert clogging $13,000 City of Bremerton
11 Private storm sewer piping creating sink hole & fish passage barrier $456,000 Non city, county, state
12 Upstream Culvert 12 inlet flooding and fish passage, Map ID #111010 $292,000 City of Bremerton
13 Water quality concerns with yard flooding $0 NA
16 Water quality with private pond $0 NA
Total $5,538,000
Source: Kitsap County /City of Bremerton Gorst Creek Watershed Stormwater Capital Improvement Plan, 2013.
Discussions with the City of Bremerton Public Works Department indicate that they believe the City is
only responsible for projects in the public right -of -way, which is just one project (Site 10) totaling
$13,000. There are also three sites where the responsibility is uncertain. These uncertain projects' costs
total $771,000. As a result, potential long -term stormwater capital costs vary widely based on how
responsibility is ultimately assigned.
To be conservative, the City may want to assume the maximum of $1.86 million when considering the
full impacts of annexation. Once Gorst residents begin paying into the City's stormwater fund, the City
may be expected to partner on drainage issues on both public and private party. Overall, there is risk
that the City may need an additional stormwater staff member in the long- term handle these
challenges.
FINAL REPORT I May 14, 2014
Fiscal Analysis of
Gorst UGA Annexation
City of Bremerton
City Council Study Session I May 14, 2014
Presentation OOverview
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Bremerton City Council May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 2
Study Purpose & Background
This analysis assesses the fiscal implications of the City of
Bremerton annexing the Gorst Urban Growth Area
(UGA)*
The purpose of the analysis is to give the City an
understanding of specific incremental fiscal impacts —
costs and revenues — of annexation during the first five
years after annexation.
The study also considers high -level potential impacts over
the next 20 years to identify long -term risks,
opportunities, and uncertainties the City should consider.
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 3
Study Pu & Background
.......... ... . .... . ....
Goys� Z
Population =of '2 22 ' �.......____..
;,jUGA Boundary f ....
c fir�rnierton Wt ;z 1GA �.•
residents f
=Estimate 237 jobs . _�..
d
- Planned to evolve: into a:' '� ��,r'•.
City of Bremerton ' r °•r
complete:.tommunity'witn' :
places to: live, play,; shop,:
and work, ` h a waterfront. t = . -. -..
�'.... ,..... Gb• rO U GA [ r `
setting,
Under- the Preferred
Alternati.v the.' .Gorst :.
. .. .... ...... .
Subarea Plan developed . :in
2013, - _U.GA.js : assum. ed to : 1; r
r F
_ r e
• 'a dd ._ . _ - - •. , >W.._._.:__.:.... � � - -
1,06.0 people: - by 20:35` _�
- F ( City of Bremerton �—
!"
�.. • -i ff
: _ •.�. a .mce Eae icu6aa ASDA JSGS AE% (.oEye Geunavo rp Acmaea iG\ iGIR -0 �e GiS 0- 298: addlt�onal obs. by
2035 =
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 4
Approach Overview
High -Level Planning Analysis. A financial planning study
intended to provide a reasonable estimate of potential costs
and revenues associated with annexation.
Incremental Impacts of Annexation. Estimates potential
impacts by comparing the City's fiscal outlook as:
o (1) The current City with boundaries unchanged.
o (2) A larger version of the City that includes annexation of Gorst.
Operating and Capital Impacts. Estimates operating impacts
and capital impacts separately.
o Estimated operating impacts are based on modeled changes in the
underlying land base (such as changes in population or assessed value),
supplemented with City staff interviews.
o Estimated capital impacts are based on adopted capital plans and
interviews with City and County staff.
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 5
Ap Overview
........ . ..
o'n_.
The analysis: wa con. ducte y d , .using: =a - lexi'ble,. a.ssum;pti'
.driven fiscal- model.
In the annexa factorsI _ the land base :(such. as
population, : employment, and commercial activity) drive both,
deman&for .ser -vices and the't.ax base to support services.
Model- findings ,were su:ppl.ement.ed with interviews.. with all
City department. heads.
b While.this was not a �fUnd 'ased study; the analy::sis
focuses on the City's;:Ge' r'al.�and' , tr.eet'Funds: -
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation b
Summary of K Findi
Annexation .is estimate611_ 1
.: Estimated 20-year Net Fiscal Imp act of Annexation
.. Y
to provide al- moderate $4M
annual benefit to - the '._
City $0 M
'In the short -term there : $ 4M - - - -- '
may -be a slight negative
-$8 M
impact, as the City -:ma -y WithAnnexation `
O Ci t
need to hire some staff - $ 12 M O Impact ofAnnexation — _........._ — -._ ....... --
before f r u I I revenue T — — Baseline City (No Annexation)
• -$16 M
impacts are. realized. 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031
- 2015 2018 2030
a In the long -term,..revenue Core Expenditures 412,000 602,000 1,028,000
growth in the UGA..i Core Revenues 350,000 904,000 2,235,000
{. FTEs from Annexation 1.5 2.3 2.5
likely to outpace Net Resources (000's) (62,000)1 302,000 1,207,000
• • ng: and.
' Deficit/Surplus as %of Expenditures -15% 50% 11T%
.....',associate staffi
=_cost •needs..
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 7
Summary of K Fin
The table below shows- two different. pictures'.bf the level of . --
revenue the City may receive .from an f� nexation o the .Gorst- UGA:
The top portion of the table shows the full level of revenue that would be
generated by the Gorst UGA.
The bottom portion shows how revenues may accrue if- the City were to sign.
a revenue sharing agreement with Kitsap County - to mitigate -the impacts of-
-annexation on the County's finances.
Estimated 5 -Year Operating Revenues from Annexation
Operatin Revenues 2014 1 1 16 2017 20
Revenues not assuming any revenue sharing
Sales Tax 384,000 401,000 417,000 434,000 455,000
Property Tax/Road Levy 0 130,000 135,000 139,000 144,000
Utility Taxes 16,000 18,000 20,000 22,000 26,000
B&O Tax 0 0 0 201,000 212,000
All Other Revenues 33,000 59,000 63,000 63,000 67,000
Total 433,000 688,000 635,000 859,000 904,000
Potential Impacts of Revenue Sharing
Loss in Sales Tax Revenue (288,000) (201,000) (104,000) 0 0
Loss in Property Tax Revenue 0 (57,000) (40,000) (20,000) 0
Total After Revenue Sharing 145,000 350,ODD 499,000 839,000 904,00D
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 8
Primary Operating Revenue Impacts
Sales Tax
City would receive 25% of sales tax revenues generated in Gorst in 2014, 50% in 2015,
75% in 2016, and 100% of revenues thereafter.
Property Tax
,, City would receive 25% of sales tax revenues generated in Gorst in 2014, 50% in 2015,
75% in 2016, and 100% of revenues thereafter.
Utility Tax
Slight decrease in water and sewer utility revenues from customers in the UGA, who currently
pay a 50% surcharge.
Business & Occupation Tax
Exemption for business in the Gorst. UGA for first three years after annexation;
B &O tax revenues from Gorst are assumed to begin accruing to the City in 2017.
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 9
Summary of Key Fin
o Annexation Staffing and Cost Impacts, 2018
20 'presents a:.:sna pshot o:f
the : short -term .impact of 20�$ ,
• • - • • FTEs Annual Cost*
• City Council - -
annexat once. - Mayor /Auditor - -
• Finance /Human Resources 0.15 16,000
development In. the "UGA . has,:, Engineering - -
begun -'an e
d :the: dpart ments ":: Law Enforcement 0.50 85,000
r - F Fire 0.25 146,000
ha ve h ire d - u to the °` f.UI +I Municipal Court - 1,000
p' Community Development 0.15 20,000
.. _ •- ...:.. •:;.. -., ::,. �. - °���..:
sho rt= te,rm� - nee Parks 0.25 54,000
d.. ,:
- /P bl Works 1 23
- ��• •� - Streets /Public is o s .00 1,00 0
n i :_:. -... -• , -. - ::::.- ::' : , :; <::, ..: ;� � Legal - -
:Prior to 2018., the exact _
Non- departmental 49,000
• ... _ TOTAL 2.30 602,000
impact.In any one`. ea•r- :. will: .:
t;• =•: -':` *
The n ► s taffing costs as well as
e an ual cost in clude s es s
= depend._; :greatly •on = h ow the:
no costs such as contracts and equipment.
City- chooses '46. r:amp.up: =its f :Ff
h*Ir - in =g
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 10
Primary Operating Cost Impacts
Police
0.5 HE in annual overtime
Fire
Contract with South Kitsap Fire and Rescue (SKFR); service based on SKFR's levy rate
0.25 HE for fire inspection services
Streets Maintenance
1.0 HE to support street maintenance in Gorst (Costs will include labor costs for FTE and non -labor
maintenance costs)
Parks Maintenance and Recreation
° 0.25 FTE of recreational staff to support new residential construction
Annual parks maintenance costs for new neighborhood parks in Gorst
Community Development
1.0 FTE Building Development Specialist II (building inspector) beginning in 2017
Cost of position is apportioned between the City and the UGA
Finance
1.0 FTE Accounting Assistant II beginning in 2017
Cost of position is apportioned between the City and- the UGA
Bremerton City Council I May 14, 201 4 Fiscal Analysis of Gorst UGA Annexation 1 1
Short -term Ca ptal i Imp acts
• In the short -term (2014- 2018), the City of Bremerton would not have any specific new
capital needs to address if it annexed the Gorst UGA.
• There is one capital project planned for the Gorst UGA (scour control for the Sam
Christopherson Bridge), which is in Kitsap County's TIP.
• The City manages five capital improvement funds — general capital improvements, park
facilities construction, Pacific Avenue construction, Conference Center expansion, and Lower
Wheaton Way.
• The largest funding sources for Pacific Avenue, Lower Wheaton Way, and the Conference
Center expansion are grants, which are not expected to be impacted by annexation. The
remaining capital funds are primarily supported by the Real Estate Excise Tax (REET).
• In the short -term, 2014 -2018, the City is estimated to receive approximately $100,000 in
REET revenues from the Gorst UGA, or an average of about $20,000 per year.
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 12
Considerations Longmterm for
O erafi Im acts
Development Assumptions
Fiscal benefit is dependent on estimated development rate.
A lower development rate would result in both lower costs and revenues, resulting in a minor
and possibly negligible fiscal benefit.
Police Service Needs
A new patrol area to serve Gorst may become necessary.
Would require 6.0 FTEs to provide full -day service. Funding for this would depend on
development rate.
South Kitsap Industrial Area (SKIA) will also be developing over the same time period; the City
could coordinate an increase in police staffing to serve the two regions as efficiently and
effectively as possible.
Fire Service Needs
As the area continues to develop, there may be a future need for direct fire services.
City would need a fire station (of there is one currently in Gorst), an engine /paramedic
unit, and 6 -12 FTEs to provide fire service.
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 13
Long-term C onsiderations for
Ca ital Impa
Additional Capital Facility Needs:
Transportation, parks, stormwater facilities.
Responsibility is divided between the City of Bremerton, Kitsap County, Washington
Department of Transportation (WSDOT), and private property owners.
This analysis focused on compiling and describing the capital needs identified in
recent capital facility needs analyses, including:
O City of Bremerton Gorst Planned Action Environmental Impact Statement.
a City of Bremerton Gor'st Creek Watershed Stormwater Capital Improvement Plan.
There are 21 capital facility project needs identified In Gorst'between 2018 and
2035.
a They total $18.4 million.
o The widening of Belfair Road accounts for more than half of the projects' total costs and
would be the responsibility of Kitsap County.
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 14
Lon g-term Considerations for
Capital Impacts
Transportation: The City should consider long -term planning around upgrading the
UGA's current transportation infrastructure to an urban standard, which may include
adding sidewalks, curbs, gutters, and storm drain systems.
Parks and Recreation: Two additional local parks totaling 3 acres in size (Cost:
unknown). Property acquisition costs and development costs for the park are not
available since there are no development plans or sites selected for the parks.
Sewer: New pump station (Cost: $100,000). Funds for a new sewer pump station
upgrade are programmed from the utility enterprise funds and will not come from the
City's general fund.
Stormwater: Between one to seven projects (Cost: $13,000 up to $1.86 million). The
Gorst Creek Watershed Plan adopted in 2013 identifies 35 different sites within the
watershed that need stormwater improvements. Of these identified projects, 1 1 are
within the Gorst UGA and 7 are designated the responsibility of the City of
Bremerton. These seven projects total $1.86 million. The City believes its responsibility
may be as low as $13,000, which includes only projects in public right of way.
Bremerton City Council I May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 15
Thank ou!
y
Question.
•: t
Bremerton City Council May 14, 2014 Fiscal Analysis of Gorst UGA Annexation 16
CLO
From: Chal Martin
Sent: Wednesday, May 14, 2014 11:00 AM
To: 'RaeJean Barone'; robinh @oz.net; nirada.t @hotmail.com; mike @bremertonchamber.org;
missy @derblokken.com; holly @hollyjames.com; aaron @bicycle - works.com;
andrew jordy @gmail.com; eroberts @newlifebrem.org; enetai_beach @msn.com;
manettesidebar @aol.com; john @jthayerguitars.com; revron4u @msn.com; kathydh3286
@ gmail.com; joe @jwevanslaw.com; n.belanger @wavecable.com;
rejuvthespa @gmail.com; bunnypcs @gmail.com; manettetradingcompany @gmail.com;
mplman @aol.com; t2a @aubinahrensphoto.com; adam.brockus @gmail.com;
daveburnettl @gmail.com; Patty Lent; Kelsie Donleycott; Elaine Valencia; City Council;
PW Managers; PW Supervisors; Joan Brookman; Linda Fulton; Angela Woods; Kathryn
Kelleigh; Eduardo Aban
Subject: Washington Avenue Bike /Pedestrian Project List Serve and Also Lower Wheaton Way
Ladies and Gentlemen,
Here is the latest information on the Washington Avenue project — the Bremerton City Council will be considering the
consultant design contract for this project tonight and at next week's Council meeting. Also, I am hoping you will attend
a public meeting scheduled for Thursday, June 12 we have set up to get your input into the various proposals to
configure this critical link. Finally, please sign up to receive project information emails through our list serve service, for
both Lower Wheaton Way and Washington Avenue. You will probably get 2 -3 emails per month (or fewer), and it is a
good way to stay informed. And, you can unsubscribe at any time.
The Washington Avenue list serve link is here:
http: / /visitor.r20. constantcontact. com / manage/ optin ?v= 00lNyz69cbig- r24kkSdik9-
HQWvt8N6nESkOtlolcHnBcS hOzOEfZOXN17KIQRINCROVMG168BAOVee9elr8bHNLiD D92zV11DWdE6r32h4 %3D
The Lower Wheaton Way list serve link is here:
http: / /visitor.r20. constantcontact. com / manage / optin? v= OOlNyz69cbig- r24kkShck9- Ehrfop-
gulpvMBUGyDiVIWggPNgACVuaJk4Xd1Y5bh9icaMHal-
3Mgmf28BzAugyagDZtanMrBGKvOU4uB59U55F9v9M IHeis8KRJmwul36hYIBN9Hx6xVRfxito7PUDQrVi9kf62BXYm1TfrX5
x6NUXrLlSoX65zkeH -7xvXz
The latest Washington Avenue update is below:
UPW
Public Meeting - June 12, 5:30 -8pm, Norm Dicks Government Center
The City would cordially like to invite members of the community to a public meeting for the
project. This meeting will be an update for work completed to date, schedule for what remains
prior to bidding, and discussion of design alternatives for the roadway. We look forward to seeing
you on Thursday, June 12 from 5:30- 8:OOpm in the Council Chambers on the first floor of the
Norm Dicks Government Center.
Project Status
i
(as of May 5, 2014; provided by Chal Martin, PW &U Director)
Thank you for your patience as the Public Works & Utilities Department conducted a test of the
single -lane concept for Washington Avenue between 6th and the Manette Bridge. The test ran
from Monday, April 21 st to Thursday, April 24th, and included three afternoon rush intervals.
Bremerton Kitsap Access Television (BKAT) was kind enough to film the rush interval for us. The
links to that video are here for Monday, Tuesday, and Wednesday afternoons. The following
Monday, BKAT also filmed a "normal' commute, shown here. I was also out watching each
afternoon. The first day was the most difficult - the commute ended that day at 4:33. We made a
couple of changes to the channelization setup, and the 2nd and 3rd days were better, with the
commute ending at 4:30 and 4:29, respectively. Typically, the commute ends at 4:23, although it
can end a bit earlier - on Monday, April 28th, the commute ended at 4:21. This test informed us
that the worst case for delay in this configuration was 12 minutes. However, the traffic setup was
very crude; the signals at 6th and the bridge were not coordinated and at times worked against
each other; therefore, we would expect a significant improvement once a properly- constructed
project was in place.
There are options for configuring Washington Avenue, and we will need your input. No
configuration has been chosen. Under discussion are:
1. A configuration that reduces Washington Avenue to a single lane northbound and
southbound between the Manette Bridge and 6th street, and uses the current curb lanes
to add sidewalk width and bike lanes, both northbound and southbound (this was what
was tested the week of April 21 st)
2. A configuration that converts the current southbound inside lane to a northbound lane;
converts the current northbound curb lane to a wider sidewalk and bike lane, retains the
current curb lane southbound (which would become a shared bike /traffic lane), and
retains the current southbound lane sidewalk width
3. A couplet configuration in which Washington Avenue would be converted to two
northbound one -way lanes, and southbound traffic would be handled by Pacific Avenue
The next step in the process for Washington Avenue will be Council consideration of a consultant
design contract, followed by a public meeting to gain insight on where our citizens might be
landing on this issue. The Council will consider the design contract at its study session May 14th
for possible approval on May 21st.
A public meeting is planned for June 12th, 5:30 p.m. at the Norm Dicks Government Center. This
meeting will be crucial for informing the Council on which project configuration approach to take.
This decision must be made early in the design process, so that the bid package can be prepared
by the end of 2014.
Below are links to the BKAT films from the single -lane concept testing.
First Day of Test Run
2nd Day of Test Run
3rd Day of Test Run
Monday following Test Run
Sign up for a -News
The City has started a project e-mail list to provide updates for interested citizens. If you would like
to be included on the list, please click here and enter provide your e-mail address.
More information:
For more information please visit the Washington Ave /11th St Sidewalk Connector rp oiect
webpage
2
Thanks everyone. Chal
Chal A. Martin, P.E.
Director, Public Works and Utilities Department
City of Bremerton
(360) 473 -5758 / (360) 473 -5018 Fax
chal.martin @ci.bremerton.wa.us
3
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