HomeMy WebLinkAboutITEM III
City of Auburn Briefing Paper
25 West Main Street Auburn WA 98001 253-931-3041 www.auburnwa.gov
Contact: Carolyn Robertson, Government Relations, 253-931-3096
crobertsontã!auburnwa.aov
FOR IMMEDIATE RELEASE: August 22, 2005
Streamlined Sales Tax (SST)
Brief Historv
Washington State has participated in the Streamlined Sales Tax Project for the past
several years. This project is a multi-state cooperative effort to simplify statE~ sales and
use tax structures. A streamlined sales tax system is a prerequisite to requiling remote
sellers (Internet) to collect sales or use tax.
State legislation was adopted and signed into law by Govemor Gary Locke in 2003 that
implemented the majority of the Streamlined Sales and Use Tax Agreement provisions
with which Washington State did not already comply. Washington State still does not
conform to one key provision of the model agreement: the ·sourcing" rule, which would
allocate sales tax to the place of delivery. Currently sales tax in Washington is allocated
at the point of sale.
It should be noted that there is no indication from the Bush administration or Congress,
for that matter, that the federal government will lift the current moratorium on taxation of
Internet sales for several years.
That key provision which would allocate sales tax to the place of delivery instead of the
current tax policy that collects sales tax at the point of sale has specific consequences
for industrial, distribution and warehouse cities. It is a major tax policy shift for our state,
and the negatively affected jurisdictions, which include all nine cities in the Valley
Distribution Hub, feel this sourcing change is comparable to changing the rul;~s in the
middle of the game.
Elected officials have planned, zoned, and developed cities under the current sales tax
rules. For example, cities have built roads and other infrastructure (typically by issuing
debt) to attract and support warehousing and manufacturing because, amon~1 other
things, they generate sales tax. With Streamlined Sales Tax legislation in eff,ect much
of that sales tax revenue will be eliminated. Yet, in the case of new streets built by
issuing bonds, not only does the debt service exist for the first 20 years, but the city
must also plan to maintain and replace such infrastructure for many decades.
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This Valley Distribution Hub, including the nine cities of the valley from Tukwila to Fife,
is the second largest distribution hub on the West Coast and the fourth largest in the
United States, generating over $200 million dollars of the State budget dollars each
year. It also contains over 120 million square feet of warehouse and industrial space-
the largest in the state of Washington, attracting more than 200 trucking fimls, 100 of
which are based within a 10-mile radius of Auburn.
Total losses from manufacturing cities in the state of Washington would be over $30
million dollars, and the Valley Cities would bear over $10 million dollars or one third of
that loss. (See attached table of affected cities and their losses ****)
VALLEY CITIES
% of Total Sales
City loss Tax Revenue
Renton $ 901,200 6.38
Tukwila 2,612,300 18.28
Kent 3,298,800 18.67
Auburn 1,181,700 9.94
Aloona Gain (52,400) 27.87
Pacific 5,800 1.23
Sumner 54,200 2.59
PuvalluD 1,020,900 8.61
Fife 966,500 19.71
Total 9,989,000
Local government has spent the last several legislative sessions in Washington State
trying to negotiate some sort of mitigation package to assist those jurisdictions
negatively impacted by the sourcing change. As a result of several factors affecting
those negotiations, no new legislation has occurred.
Current Status of the SST ProDosal
Recently, the positively affected cities asked to meet with representatives of the
negatively affected cities. They proposed accepting most of the recently proposed
legislation (SB 5622) with some changes. The majority of the negatively affe~cted cities
have agreed. Informal negotiations are underway. The cities expect that thE~se
negotiations will result in a bill to be introduced next session on behalf of all dties in
Washington. The mitigation package applies to the current land use but there has been
no acceptance by the positively impacted cities of any provision to protect aglainst tax
losses from future land use.
Land Use/Rail Stud v ImDlications
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Given that the proposed legislation will only address and mitigate existing use and
losses, the cities of the Valley Distribution Hub have taken proactive steps to address
land use changes if indeed a State imposed tax policy change occurs. Some have
enacted an ordinance which states if the streamlined sales tax proposal being
considered was adopted by the State of Washington, the City Council would direct the
Planning Department and its Planning Commission to consider amendments to the
City's Comprehensive Plan and zoning codes to down zone these areas. Every city in
this valley has discussed a similar ordinance.
There is an urban myth that distribution and warehouse land uses bring sufticient jobs
and money to outweigh the cost of those business uses. In fact, they also bring high
infrastructure costs that have been born by cities in order to attract those jobs.
Unfortunately in these difficult times cities cannot afford to bear the infrastructure
impacts caused by these types of businesses without an accompanying income stream.
The loss of sales tax income generated by this type of land use will leave property tax
as the sole income stream, and that alone will not pay the cost of ongoing infrastructure
maintenance. The cities have taken note of the comment by the ports and railroads that
industrial land, once lost to condos and retail malls, is hard to replace. However, the
cities cannot bear the financial burden of these uses without the accompan~'ing income
stream.
The Valley Cities occupy a unique position in the Puget Sound Region as that area
connected to both ports that provides much of the distribution and warehou~ie capacity
for the ports of Seattle and Tacoma, Burlington Northern Santa Fe and Union Pacific
railroads and over 200 trucking firms located in the Valley Cities area. Valley Cities is a
vital part of the state's economy and bring a value of the more than $200 million dollars
in sales tax revenue to the State, accompanied by the more than 85,000 jobs currently
held for the business sector.
Valley Cities recognizes that the ports of Seattle and Tacoma may expand their
business by up to 20% per year for the next decade and that the Puget Sound Region's
trucking fleet as well as the railroads are expecting to expand to meet those increased
needs. While the Valley Cities area has long been a willing partner, the Valley
Distribution Hub they can no longer provide room for expansion or new uses; for
industrial, distribution and warehouse functions under these circumstances.
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RESOLUTION NO. 3 7 8 2
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
AUBURN, WASHINGTON STATING THE CITY'S
POSITION WITH RESPECT TO APPROPRIATE COURSES
OF ACTION IN THE EVENT THAT THE STREAMLINED
SALES TAX PROPOSALS ARE IMPLEMENTED
WHEREAS, for many years, the sales tax revenue has been applied to
sales based upon the sight of origin, rather than the sight of ultimate delivery;
and
WHEREAS, there are currently proposals to change that tax sighting
structure, so that taxes would inure to the jurisdiction to which goods were
delivered, rather than those from which those goods were shipped; and
WHEREAS,because cities such as Auburn have invested in the
infrastructure to promote businesses that ship goods to other locations, a change
of the taxing structure, if implemented by the proponents of the streamlin~~d sales
tax proposals, would serve the disadvantage of Auburn and similarly situated
muniCipalities; and
WHEREAS, in order to accommodate this shifting tax structure, it would
be necessary for the City of Auburn to respond, in turn, by promoting thclse land
uses that would not be disadvantageous to it and its past infras,tructure
investments, and to amend its comprehensive plan and its zoningl codes
accordingly.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF AUBURN,
WASHINGTON, HEREBY RESOLVES AS FOLLOWS:
Section 1. If the streamlined sales tax proposals currentl~' being
considered are adopted and implemented, the City Council would direct the
planning department and its planning commission to consider amendmenlts to the
City's Comprehensive Plan and Zoning Codes along the following lines:
A. LAND USE ELEMENT:
This Land Use Element addresses the land use strategies nece~¡sary to
carry out the long-range land use plans of the City. Implementation of these
strategies is heavily dependent upon the City being able to continue EI strong
public investment program in our support of infrastructure and services>, which
has been ongoing for many years. The ability to continue this necessary public
investment is contingent upon maintaining solvent public revenue streams,
particularly sales tax. Sales tax comprises the largest source of monies to the
--------------- --
Resolution No. 3782
November 8, 2004
Page 1
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City General Fund, comprising 34% of the 2004 City General Fund budget. Any
mandated changes in sales tax sourcing rules, which the Department of Flevenue
forecasts to be in excess of $1.2 million per year for the City of Auburn, will
directly and adversely affect the City's ability to adequately fund the capital
infrastructure and services necessary to support the adopted future land use
plan. This will be especially applicable to industrial areas supporting wamhouses
and distribution centers, should any sales tax program affect the current Irevenue
stream from those uses. In such event, the City Council may need to <:onsider
moratoria and/or land use changes for such industrial areas and uses, as. well as
other actions which could have a significant impact on local and regional
economic development opportunities.
B. TRANSPORTATION ELEMENT:
This Transportation Element addresses the transportation infras,tructure
strategies necessary to carry out the long-range land use plans of the City.
Implementation of these strategies is heavily dependent upon the City being able
to continue a strong public investment program in our' support infrastructure and
services, which has been ongoing for many years. The ability to continue this
necessary public investment is contingent upon maintaining solvenlt public
.' revenue streams, particularly sales tax. Sales tax comprises the single largest
source of monies to the City General Fund, comprising 34% of the 2004 City
General Fund budget. Any mandated changes in sales tax sourcing rules, which
the Department of Revenue forecasts to be in excess of $1.2 million per year for
the City of Auburn, will directly and adversely affect the City's ability to
adequately fund the capital infrastructure and services necessary to support the
adopted future land use plan. This will be especially applicable to industrial
areas supporting warehouses and distribution centers, should any sélles tax
program affect the current revenue stream from those uses. In such event, the
City Council may need to consider moratoria and/or land use changes for such
industrial areas and uses, as well as other actions which could have a si!lnificant
impact on local and regional economic development opportunities.
C. CAPITAL FACILITIES PLAN ELEMENT:
This Capital Facilities Plan Element addresses the capital Ifacilities
strategies necessary to carry out the long-range land use plans of the City.
Implementation of these strategies is heavily dependent upon the City being able
to continue a strong public investment program in our support infrastructure and
services, which has been ongoing for many years. The ability to continue this
necessary public investment is contingent upon maintaining solvent public
revenue streams, particularly sales tax. Sales tax comprises the single largest
source of monies to the City General Fund, comprising 34% of the 2004 City
General Fund budget. Any mandated changes in sales tax sourcing rules, which
the Department of Revenue forecasts to be in excess of $1.2 million per year for
the City of Auburn, will directly and adversely affect the City's ability to
adequately fund the capital infrastructure and services necessary to support the
--------------- --
Resolution No. 3782
November 8, 2004
Page 2
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adopted future land use plan. This will be especially applicable to industrial
areas supporting warehouses and distribution centers, should any sales· tax
program affect the current revenue stream from those uses. In such event, the
City Council may need to consider moratoria and/or land use changes for such
industrial areas and uses, as well as other actions which could have a si!~nificant
impact on local and regional economic development opportunities.
Section 2. That the City Council directs that in the eVE~nt that
streamlined sales tax programs are in fact implemented, that the Mayor is
directed such action as is necessary to trigger a review thereof, including
amendments to the Comprehensive Plan and the Zoning Code of the Ci~', and to
further take such other action as is appropriate to implement the directives
hereof.
Section 3. This Resolution shall be in full force upon passalge arid
signatures hereon.
PASSED by the City Council this /Si:!J day of S1~ .' 2004.
CITY OF AUBURN
(í?{ ~ -=7
Peter B. Lewis, Mayor
ATTEST:
AJ~¿,O/)d~
'Da . lie E. Daskam, City Clerk
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Resolution No. 3782
November 8, 2004
. Page 3
RESOLUTION NO.
A RESOLUTION of the City Council of the City
of Kent, Washington, declaring an emergency to pursue to
a revision of the Kent Comprehensive Plan to ensun:
continuing compliance with RCW 36.70A by removing th(:
City's designation as a Regional Manufacturing/Industriall
Center under the Growth Management Act in the event thai:
the state Legislature enacts a proposed "Sales Tax
Streamlining" amendment that would reallocate sales tax
sourcing rules in the State of Washington in a manner that
dramatically and adversely affects the City of Kent's ability
to adequately fund and support the capital inrrastructure:
and services necessary for this Growth Management Act
designation.
RECITALS
A. Under the state Growth Management Act, the City of Kent's land use,
transportation, and capital facilities element establishes the City of Kent and the Green
River Valley as one of the few designated Regional Manufacturing/Industrial Growth
Centers in Western Washington.
B. The City's Comprehensive Plan Policies state that this Regional
Manufacturing/Industrial Center is a key component of the regional economy. Our
policies, which are consistent with the policies and goals of the state Growth
Management Act (GMA), define these centers as areas with a significant amount of
manufacturing, industrial, or other related employment (at least 10,000 employees).
Sales Tax St¡reamlining-
Comprehensive Plan Amendment
The City's North Valley Industrial Area is an extremely important part of both the
City's and the region's economic and employment base, and 3.1 square miles of this
industrial area has been designated as a Manufacturing/Industrial Center.
C. The Puget Sound Regional Council (PSRC), in its 2020 Vision
statement, which again is consistent with GMA requirements, states that
"Manufacturing/Industrial Centers are major, existing regional employment areas of
intensive, concentrated manufacturing and industrial land uses which cannot be easily
mixed at higher densities with other uses." PSRC's Vision statement requires that, "to
preserve land at these centers for manufacturing, industry and related uses, large retail
uses or non-related offices are discouraged." Plus, the PRSC requires that cities with
these centers provide the necessary infrastructure to support them: "Provision of
adequate public facilities and services, including good access to the region's
transportation system, is very important to the success of manufacturing/industrial
centers."
D. King County, in its Countywide Planning Polic:ies, states:
"Manufacturing/Industrial Employment Centers are key components of the regional
economy. These areas are characterized by a significant amount of m¡mufacturing,
industrial, and advanced technology employment." The county makes spe:cial notation
that these centers "differ from other employment areas, such as business/office parks,
in that a land base and the segregation of major non-manufacturing uses are essential
elements of their operation."
E. Kent must provide the complex infrastructure to support these centers.
The county's Land Use Planning Policy LU-54 directs cities with these centers to
"design access to the Regional Manufacturing/Industrial Centers to facilitate the
mobility of employees by transit, and the mobility of goods by truck, rail or waterway
2 Sales Tax Streamlining-
Comprehensive Plan Amendment
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as appropriate." Regional comprehensive plans shall include strategit:s to provide
capital improvement projects which support access for movement of goods."
F. Prior to the enactment of the GMA and in the nearly fifken (15) year
time period that the Act has been in effect, the City has developed transportation,
utility, land use, and other capital facilities, at a cost in excess of one hundred million
dollars.
G. These capital infrastructure improvements have successfullly supported
the growth and success of these warehouse, manufacturing, and distribution businesses
which serve the Ports of Seattle and Tacoma, the greater Seattle region, :and the State
of Washington in general. These businesses, which are particular to the City of Kent
and which the City has encouraged at the expense of encouraging other types of retail
and office businesses, generate sales tax revenue that the City has, in turn, applied to
support the infrastructure necessary to keep this manufacturing, warehouse, and
distribution economy vibrant and healthy. Moreover, Kent will have to spend millions
more to improve, operate, and maintain this infrastructure.
H. Currently, the City projects that its sales tax revenue will represent
nearly one-fourth of the City's General Fund revenues for the 2005 fiscal year. The
City relies upon a portion of this revenue, together with its other revenUi~ sources, to
maintain, repair, operate, and improve the entire infrastructure that supports this vital
economic engine in south Puget Sound.
1. Current proposals that may be placed before the state LI~gislature in
2005 may radically alter sales tax sourcing rules in the State of Washington. Should
the state Legislature enact destination based sales tax sourcing, commonly referred to
as "Streamlined Sales Tax," impacts to the City's revenue stream, and its concurrent
ability to support the manufacturing, warehousing, and distribution businesses in the
City, would be dramatically reduced. Current sales tax reallocation proposals under
3 Sales Tax Streamlining-
Comprehensive Plan Amendment
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discussion, according to state Department of Revenue forecasts, would reduce the
City's sales tax revenue by $3.3 million per year. Without this revenue, the City will
no longer be able to adequately fund its infrastructure needs or to appropriately provide
the land use and transportation services needed to continue to support this business
sector, which the City has endeavored to support for nearly three decades. As an
example, the City has constructed a number of much needed cross-valley road
corridors:
· 277th Street Phase I Corridor Project at an approximate cost of
$32 million.
. Partnered with City of Auburn to construct 277th Phase II
Corridor Project at an approximate cost of $32 million.
. 196th Street Corridor Project at an approximate cost of $52
million.
· 22Sth Street Corridor Project at an approximate cost of $30
million.
Each of these projects, together with many other City infrastructure improvements,
directly support and serve the City's Manufacturin¡¥lndustrial Center.
J. If the state Legislature enacts sales tax sourcing legislation that has the
dramatic and detrimental effect projected by the Department of Revenue to the City of
Kent, the City Council will need to reconsider whether it can afford to continue to
support this business sector. Land use changes may be required, and the City may be
forced to eliminate its designation as a Regional Manufacturin¡¥Industrial Center under
the GMA.
K. As a result, it is both necessary and appropriate that this Council, as the
steward of taxpayer funds for the City of Kent, declare that, pursuant to Kent City
Code section 12.02.010, an emergency of community-wide significance exists.
Accordingly, and in order to continue to promote the public health, safety, and general
welfare of the citizens of Kent, this Council directs staff to prepare and consider a
Comprehensive Plan amendment, pursuant to the GMA, to remove the City's
4 Sales Tax Streamlining-
Comprehensive Plan Amendment
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designation as a Regional Manufacturing/Industrial Growth Center under the GMA
and to begin necessary review to redesignate land uses in the Green River Valley
consistent with an adjusted land use vision that appropriately responds to the revenues
generated from the amended sales tax sourcing legislation, should the state Legislature
enact legislation similar to the proposed "Streamlined Sales Tax" measure.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT,
WASHINGTON, DOES HEREBY RESOLVE AS FOLLOWS:
RESOLUTION
SECTION 1. - Recitals Incorvorated. The foregoing recitals are incorporated
into this resolution.
SECTION 2. - Comprehensive Plan Amendment. Because of the dramatic and
imminent threat to the City's sales tax revenue and its concurrent impact on the City's
ability to support its Regional ManufacturinglIndustrial Growth Center's I;:c<)llomy, the
City Council finds that an emergency exists. Further, in order to preserve and promote
the public health, safety, and welfare, the City Council directs staff to begin the process
to amend the City's Comprehensive Plan to provide that, if the Legislature redistributes
sales tax sourcing in a manner that negatively impacts the City's sales tax revenue
stream, the City may in that event withdraw its designation as a Regional
Manufacturing/Industrial Center under the GMA and, concurrent with thalt withdrawal,
commence a process to revisit and redesignate land uses and the long tenn land use and
capital needs plan in the Green River Valley in the City of Kent.
SECTION 3. - Severabilitv. If any section, subsection, paragraph, sentence,
clause or phrase of this resolution is declared unconstitutional or invalid for any
reason, such decision shall not affect the validity of the remaining portions of this
resolution.
5 Sales Tax StJ'eamlining-
Comprehensive Plan Amendment
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SECTION 4. - Ratification. Any act consistent with the authority and prior to
the effective date of this resolution is hereby ratified and affirmed.
SECTION 5. - Effective Date. This resolution shall take effect and be in force
immediately upon its passage.
PASSED at a regular open public meeting by the City Council of the City of
Kent, Washington, this day of November, 2004.
CONCURRED in by the Mayor of the City of Kent this __ day of
November, 2004.
JIM WHITE, MAYOR
ATIEST:
BRENDA JACOBER, CITY CLERK
APPROVED AS TO FORM:
TOM BRUBAKER, CITY A TIORNEY
6 Sales Tax St.·eam/ining-
Comprehensive Plan Amendment
I hereby certify that this is a true and correct copy of R,esolution No.
passed by the City Council of the City of Kent, Washington, the day of
November, 2004.
BRENDA JACOBER, CITY CLERK
P,'CMNtE50~_T_
7 Sales Tax Streamlining-
Comprehensive Plan Amendment
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