Valley Inc.

by Ted S. McGregor, Jr.


"What part of 'No' don't you understand?"


That's a question Dennis Scott says he gets a lot from potential residents of Spokane Valley, Wash., which will become the state's newest city -- and its eighth largest -- if a majority of its future citizens endorse the idea on May 21. To make it happen, Scott, campaign director of Spokane Valley Yes!, has to make converts out of voters puzzled to see the issue again after three defeats dating back to 1990.


But with weekly promotional gatherings of 150-200 people, Scott says when people learn the details and understand the benefits, they see the light.


"Some of them don't even know the questions to ask," says Scott. "Our research shows that if we took the undecideds out of this race, we'd win. But they will decide it, so we have to reach them."


The drive for Spokane Valley is inspired about equally by the American spirit of self-determination, by business interests seeking more local control and by a simple sense of community pride. The effort is still hampered, however, by having no single issue that's grabbing Valley residents by the throat. In fact, when Inlander reporters went to the Valley last week to gather views on incorporation, the most common reaction was a blank stare. This time around, there doesn't seem to be a groundswell of support or opposition.


Still, incorporation backers make a compelling case that now is the time to act. The tax base has grown to the point it can provide a solid financial foundation for a new city, and the specter of annexation looms.


"Some people say we should stay as we are," says state Sen. Bob McCaslin, a Republican who has represented the Valley in Olympia for 22 of the 50 years he's lived there. "But we don't stay the same -- it's an impossibility. Eventually, if we don't [incorporate], we'll be part of the city." (For more on the issue of annexation, see "Yardley Blues," p. 14.)


Scott says the vote will simply confirm what already exists. "They look like a city, they act like a city, they just need to draw a line around it and become a city."


A new government could encourage new and better jobs, as has happened in neighboring Liberty Lake, which incorporated last year. Despite recent hard economic times, the elected officials there have made economic development a priority.


The new city could shed the bureaucracy of Spokane County and be in a position to keep costs down for its citizens through competitive bidding and other innovations, says Scott. (This point is widely debated, however -- for more, see "Checking the Claims," p. 18.)


And decisions that have local impact, from police protection to land use, would be decided by officials representing 81,000 people, not 415,000, as the current Spokane County commissioners do. Take land use, perhaps the itchiest burr under the saddle: Scott says there has been frustration over how the county has handled permitting. "It would be nice not having a moving target," he says. "You can't get a straight answer."


Implicit in any plan to incorporate is a critique of the existing government, and often those critiques are aimed at land-use decisions. Raymond Hanson, who turned an old wheat field into the Spokane Valley Mall complex, has sued the county over such decisions and is a financial contributor to the incorporation effort.


"They call this urban sprawl," says Hanson, "but it's the American Dream, to go out and buy yourself some acreage. They're trying to wipe out the American Dream.


"I've got all the permits I need," Hanson continues. "They can't change what I've already got, but the right thing to do is to make this a friendly city -- friendly to business and friendly to people."


The push to form a new city is coming from business interests like Hanson's -- a curious alliance, as pro-business groups usually oppose the expansion of government. Other big supporters include local benefactors Bernard Daines and Paul Sandifur, according to state Public Disclosure Commission reports. Scott says backers like these don't see a new city as bigger government -- they see it as better government.


"It's another layer of government, but it's a different layer," concurs Sen. McCaslin. "That government that's closest to you is the best, and it's the one you're most involved with."


Backers of the new city hope that message isn't so subtle that it's lost upon voters. After all, running against the county is not much of an option for incorporation backers this time. Over the past 10 years, it was a different story. Today, however, the county is no longer borrowing money to make payroll; instead, it has one of the fattest reserves in the state. Crime is down, streets are smoother and there's no Steve Hasson (the colorful, controversial former county commissioner) to upset residents.


"This is not about the county," says McCaslin. "It's about who's easiest to deal with, a small city or a big county?"


Over in King County, these same questions have been asked over the past dozen years as 10 new cities were born, taking some 250,000 residents out of unincorporated areas. But the dynamic there has almost been the reverse of what's happening here. The push for Spokane Valley is being led by business interests who may not even live there. (While many campaign volunteers live in the new city, Hanson, Daines, Sandifur and even Scott all live outside its boundaries.) In every case on the West Side, it has been everyday citizens reacting to some growth-related issue who ultimately pushed for and won independence from King County.


The lasting impact of that slow-growth motivation has been that land-use decisions, especially for residential development, have become more restrictive, not less. Perhaps the force behind the effort to incorporate has the most influence on the direction of the new government, but it's certainly possible that the new city of Spokane Valley could follow suit and frustrate developers even more than the county.


Since King County has grown so fast in the past decade, it may not seem like the purest comparison to Spokane County. But Liberty Lake is so new, so small (population 3,300) and so economically homogenous that Western Washington is still the best place to learn about what might happen in Spokane Valley.





Everyone agrees that King County's flurry of incorporations over the past decade or so represents a beginning. But some see it as the beginning of the end to efficient society, while others see it as the beginning of a better future. The citizens of Sammamish, north of Issaquah, incorporated after gagging on the growth being green-lighted for them by King County. SeaTac was able to cut down the rampant crime along the strip near the airport. Woodinville incorporated on its fifth try, finally galvanized by a jail King County was allowing to be sited there. (After becoming a city, residents fought off the jail.)


Yet for King County officials, the picture has grown bleak. Now in a $50 million hole, the county is closing parks and has cut back on staff. Not everyone may think that's such a bad thing, but as King County loses its grip on its 39 cities, big-picture decision-making has become more and more difficult.


One example: the long debate over Sound Transit, a county-wide mass transit effort that can't seem to get off the ground. Mike Thomas of the King County Office of Regional Policy and Planning says all the decision-makers in cities on the right-of-way are asking for everything they can think of, pushing the price tag into the stratosphere. Meanwhile, the county's traffic remains among the worst in the nation, leading, in part, to Boeing packing its bags for Chicago. It seems that in the Windy City, executives could actually get to meetings on time.


In 1999, the Washington Research Council studied Pierce County (where Lakewood and University Place had recently incorporated) to test the hypothesis that more new cities were bad for business. In their final report, the council found that more decision-makers could harm the overall business climate. As examples, they discussed a new Boeing plant in unincorporated King County that was "fast-tracked" successfully by county officials. By comparison, they studied a sewer project that the new city of Lakewood had held up for years.


"It doesn't get better the more incorporations you have," Erling Mork, the head of the Economic Development Board for Tacoma-Pierce County told the WRC. "It gets worse."


Individual businesses operating in the new towns, however, were not adversely impacted, according to the study.


The incorporation phenomenon intrigued Dartmouth public administration professor William Fischel, who devoted an entire chapter in his new book The Homevoter Hypothesis (Harvard University Press) to King County's new cities. Fischel's central premise is that people make political decisions that preserve or enhance the value of their homes.


"In a relatively small city, the people who own their homes are going to be an important faction," says Fischel from his office in New Hampshire. "Generally speaking, homeowners are going to get a stronger voice."


Fischel discovered that the prize common to all King County incorporations was to be able to control land-use decisions. The new cities wanted to save themselves from development, he found, so they made getting permits more difficult. "There appear to be no cities as friendly to developers as King County," he writes. Most "became more restrictive and gave developers a harder time -- largely because King County was so accommodating."


In fulfilling the goals of the Growth Management Act by either incorporating or being annexed, these new cities were actually frustrating its goals, Fischel found. Specifically, in-fill development to create higher population density has been fought, as apartments and other multi-family dwellings have found it hard to win approval. In Federal Way, which finally incorporated after three tries dating back to 1971, high-density residential development was the primary reason the area took hold of its own reins. Fischel isn't surprised that it has resisted such development ever since.


Fischel concludes that the new cities are popular with residents. "I could not find a single source (interview or article) in which a resident of a new city lamented the incorporation decision or wished that a neighboring city had annexed its territory," he writes.





Of course, to keep municipal fragmentation to a minimum, King County administrators would have preferred that those areas join existing cities. Sammamish could have joined Issaquah, for example, and Woodinville could have joined Bothell. With every new city, the dream of greater efficiency from interjurisdictional cooperation or even regionalized government becomes more remote. Charged with looking out for the needs of a scattered population and delivering urban services like a city, counties like King, Pierce and Spokane can find themselves painted into a corner as the most self-supporting areas break off and take their tax base with them.


The saving grace has been that these new cities usually contract for services from the very county they just left. In Spokane Valley's case, according to the plan, Spokane Valley police would really be Spokane County sheriff's deputies dressed up in a Spokane Valley cruiser and uniform. In fact, in the Boundary Review Board's report on the feasibility of the incorporation of Spokane Valley, it estimated that $31.3 million of the city's $34.5 million budget for 2003 would be spent on fees and contracting for services. (For details on specific services and contracting, see "Services Rendered," p. 16.)


Still, some Spokane County officials want voters to look before they leap. County Commissioner Kate McCaslin represents the Valley on the Board of Commissioners, and she says she'll abide by the will of the voters and make the transition as smooth as possible if they choose to incorporate. McCaslin has lived in the Valley since 1966 and once supported incorporation. Now, however, with what she knows about local government, she says the financial future of the new city is a "roll of the dice. There are so many issues to deal with," she says. "The enormity of it all boggles my mind."


Fellow Commissioner John Roskelley says Valley residents have to look at the commissioners' track record: "I think we're doing a pretty good job out there."


Roskelley points to new sheriff's units as crime reducers, the Sprague couplet as a traffic reducer and the sewering project as a pollution reducer. All, he says, would have uncertain futures with a new city.


"The county is doing everything possible to sewer the Valley," says Roskelley. "Can the new city accomplish this same task? And if they can, what's it going to cost the taxpayers?"


Thomas, the King County planner, says that when people see themselves as part of a city, they expect more services.


"People call police twice as much when they're a city," says Thomas. "People find, over time, that it costs them a lot more money then they initially think."


That claim appears to be backed up by the state Auditor's Office. According to its figures, the growth in expenditures of new cities outpaces the growth in expenditures of counties. When averaging the growth of Federal Way, Woodinville and SeaTac, the growth in their expenditures between 1996 and 2000 has been 34 percent (ranging from a low at Federal Way of 21 percent to a high in Woodinville of 49 percent). Meanwhile, Spokane County's expenditures have grown over that same period by 12 percent. Population growth is a wash, as the three cities range between minus 1 percent (SeaTac) to plus 3 percent (Woodinville); Spokane County's growth between 1996 and 2000 has been about 2 percent.


Thomas knows firsthand that life changes at the county after an incorporation, too. Spokane County would miss out on 85 percent of the sales tax collected in the area, as the new city would keep it. The BRB estimates that sum to be about $14.3 million a year. Overall, the new city would take $18.8 million from the county's existing cash flow -- although some of that could come back in the form of contracted services. Whether losing revenues and responsibilities will even out for Spokane County remains a mystery.


"You really can't predict that until you've been going a few years," says Marshall Farnell, Spokane County's budget director. "It's just too complicated right now."


But after 10 years, King County has wound up losing, especially in the areas of planning and roads. McCaslin and Roskelley could be accused of protecting their turf, but neither believes that money alone will solve problems. It's about leadership, both say: They wonder who would run to serve on the new city council, which would only pay $400 per month (unless, of course, the new council members vote to raise their own salaries). Even county commissioner seats, which pay $81,600 per year plus benefits, often don't attract many candidates. So far, no one has stepped forward to challenge Phil Harris this fall, although Spokane City Councilman Steve Eugster has expressed interest.


"Voters just have to look at, long term, what's best for the Valley," says Commissioner McCaslin. "At the end of the day, it's the people you elect who make the difference. And here, you don't know who'll be elected."


Scott says he has fielded calls about the new council seats, although he's not aware of any potential candidates. Still, he believes such talk is premature and that plenty of leaders will come forward.


"People resist change," says Hanson. "People are afraid of the dark. All you've got to do is shine a little light on it, and that's what we're trying to do."





For more information, you can attend the Spokane Valley Yes! informational meeting Wednesday, May 15, at 7 pm at the


Valley DoubleTree Hotel, 1100 N. Sullivan Rd. Election Day is Tuesday, May 21.





Yardley Blues

The pro-incorporation forces lost one of their best issues when the state Supreme Court declared Spokane's efforts to annex the Yardley neighborhood of the Valley unconstitutional. Unlike anything else, that fight over tax base captured the attention of Valley residents who want no part of the city. Under threat, they might vote to incorporate as a city of their own. Now that the threat has passed, the status quo might be just fine.


But has the threat of annexation really been removed? Not permanently, warns Dennis Scott, campaign director for Spokane Valley Yes!


Scott, clearly hoping to keep the issue alive, says cities will be lobbying the legislature next session to make annexations available again. Other backers have said that if the Valley doesn't act now, someday they will become residents of the city of Spokane. "The threat of annexation is more real now than ever," reads a line from one Spokane Valley Yes! flier.


County Commissioner Kate McCaslin says the issue is a red herring. Even if the city did somehow annex Yardley, the vast majority of the Valley is not remotely threatened by annexation, since the city never provided services to those areas. It could only happen, she says, if Valley residents voted to join the city.


Yardley, moreover, is kind of an anomaly, as it's mostly railroads and businesses (including taxpaying prizes like Costco and Home Depot). With fewer than 50 registered voters expected to turn out if an annexation election were held (the only remaining method for annexation), city officials could conceivably try simply to convince those few to join them.





Services Rendered

Every incorporation campaign becomes a chance to get acquainted with the services you may or may not receive from your local government. Pass or fail, it provides a good local civics lesson. With input from proponents and opponents (often elected officials "providing information"), here's a look at some of the major services and what people can expect after incorporation.





Parks - If incorporation passes, the 11 parks inside the new city limits would remain the property of Spokane County. In Liberty Lake, the county still owns Pavilion Park, but the new government pays for maintenance. Some arrangement would have to be worked out with the new city either to take over ownership of the parks or follow Liberty Lake's lead and fund maintenance.


Then again, new city council members might wonder why they would pay to maintain the county's property. If they leave it to the county, who's to say the county won't shirk on maintenance or -- as King County has done -- announce the closure of parks to underline its unwillingness or inability to make them a priority. Little dramas like this could spring up any time there is confusion over who's responsible.


Mirabeau Point, the complex that could become a major focal point for the new city, is currently held in trust. The plan is eventually to turn it over to whatever local government emerges.





Roads - The only assets that are transferred immediately after incorporation are the roads -- and Spokane Valley would immediately take possession of 420 miles of right-of-way. (By comparison, Federal Way, with about the same population, has 229 miles of road.) The new city also assumes the cost of maintenance on those roads. While funded through a share of the gas tax, the county also collects a county road fund that the new city will not be able to use. Instead, it will need to make up the difference through its general fund. Major capital projects, like new roads, may have to wait until the new city builds up a reserve fund and a bond rating.


Most new Washington cities start out by contracting with their county for roadwork, but as time goes by they may look to the private sector. Liberty Lake already uses private firms to do its roadwork -- but then, it only has eight miles of paved roads to deal with. Still, there can be significant cost savings in putting roadwork and the engineering it requires out to bid in the private sector.





Sewer lines - The fact that much of the Valley relies on drain fields instead of sewers has always been a major concern to aquifer advocates. In recent years, with some grant money, Spokane County has been aggressively sewering the Valley. Today the project is more than half-done, and the county subsidizes the program with $3 million from the general fund every year. In other words, people throughout the county are paying to sewer the Valley.


County Commissioner John Roskelley wonders if the program will continue under a new city. Pro-incorporation spokesman Dennis Scott says the new city's financials were put together with enough funding to maintain the current level of expenditure on sewers.





Wastewater treatment - Spokane County is currently rushing to find a solution to its lack of wastewater treatment capacity, which has been created primarily by development in the Valley. The county wants to have a new facility up and running by 2007. Since the project is aimed at the Valley, a new city might decide it wants input on the project.


A similar scenario played out in Pierce County, where the new city of Lakewood got involved in a long-planned sewer line and contributed to delays lasting for years. The new wastewater treatment facility is the kind of project that could have a profound impact on the local business climate, because if more capacity is not added, authorities could declare a moratorium on new development.





Schools - While the Boundary Review Board report states that incorporation will not affect existing school districts, schools have nevertheless been an issue in other incorporations. The new city would encompass four school districts -- District 81, Central Valley, East Valley and West Valley.


Back in the early 1960s, a chunk of land north of Seattle voted to join the city of Seattle. Those residents had been promised that they would remain in the Shoreline School District, which they considered superior to Seattle's. Soon, state officials redrew the line and the new Seattleites found themselves in a new school district.


In 1995, the new city of Shoreline, north of the previously incorporated parcel, incorporated primarily to stay in that Shoreline School District rather than be annexed by Seattle and potentially wind up in Seattle's school district as a result.





Law Enforcement - This category goes beyond just police, since the new city would also be responsible for court and jail expenses, too. These days, such costs can add up to 70 percent of a city's budget. In being such a big-ticket item, it's not surprising that a lot of emphasis is put on this area by new city leaders.


The plan in Spokane Valley, as it has been in all new incorporations of the past 15 years, is to contract with the county for police protection, courts and jail space. But storm clouds are already gathering. County commissioners told incorporation backers that they estimated the cost per officer to be $130,000 per year. "It's not cheap to have well-trained and well-equipped officers on the street," says Roskelley.


The pro-incorporation forces' consultant Bob Jean, city manager of University Place, told them he pays $100,000 for Pierce County sheriff's deputies. The county is required by law to justify its expenses in contracting, but with training and insurance to factor in, officials can likely justify $130,000. Scott says the new city leaders might consider asking the Spokane Police Department to bid on providing the service, so as to keep the county's asking price down.


But there's a third option, which may be inevitable with a city the size of Spokane Valley -- the creation of its own police department. Federal Way, which is slightly larger than Spokane Valley, started by contracting with King County. In 1995, Federal Way created its own police force. While the level of service and control certainly must have improved, it also marked a time when Federal Way's expenditures began to expand, growing by 21 percent between 1996 and 2000, according to the State Auditor's office.





Fire protection - Since Fire District 1 already covers much of the new city, new residents may decide to keep it that way. Or they could decide to create their own new fire department. Fire districts are separate entities and have their own funding mechanisms, but the new city would collect and allocate that money if it formed its own department.





Planning and Zoning - Since gaining control over land-use decisions is often the top reason for incorporating in the first place, this is the one area that all new cities take over from day one. In short order, officials would have to consider and adopt a full roster of new zoning rules, along with fee schedules for permits.


Since Spokane County wouldn't get money back from contracting on this front, the county planning department would bear the brunt of the cuts that would result from the vote for incorporation.





Checking the Claims

In any campaign, politicians make promises. In the case of incorporating a new city, you could say campaign promises mean even less than usual -- after all, Spokane Valley proponents can't commit a future city council to a specific decision. But to run a winning campaign, you need to draw a clear picture, so backers of the new Valley city are telling people the way they expect things will turn out. Here's a quick look at a few of the "promises" coming from the Spokane Valley Yes! campaig.





"The growth of the Valley assures we now have adequate


revenue to run a city without raising taxes."





Yes, the Valley has a good mix of residential and commercial real estate, giving it as solid a fiscal foundation as any new city in the state over the past 15 years.


But on not needing to raise taxes, the experience of other new cities has been that, over time, many have raised existing taxes and implemented new ones. In the end, it's the decision of the elected officials, but the deck seems to be stacked against the Valley. Of the state's 13 most populous cities, Spokane Valley, which would cover 38.5 square miles, would be the least dense. This makes everything more expensive, from roads to police protection. It's possible to hold the line on taxes if the new city maintains the existing level of services, but other new cities have found that people in urban areas want more services as time goes by.





"New state laws protect us from tax increases if we incorporate."





Yes, I-747 caps property tax increases at one percent per year. But there's another state law that forces municipalities to balance their budgets. So if there's a shortfall, funding sources other than property tax increases might need to be tapped. A new city can enact a business and occupation tax or a utility tax, along with tweaking its various fees.





"Cities have formed all across the state and in each case, they have found that revenues were more than adequate."





Not exactly. Most cities formed prior to I-695 found themselves in a bind after the $30 car tabs initiative passed. At that time, all had to enact the utility tax, if they hadn't already. Every new city in King County has enacted the utility tax, which adds 6 percent onto electricity, natural gas, telephone service and garbage. Dennis Scott, Spokane Valley Yes! spokesman, says the new city would have an advantage because it didn't start life counting on that pre-695 motor vehicle excise tax money. All budgets, he says, are calculated under current conditions, and he says they show the utility tax will not be necessary.


All new cities, it is true, must pass muster with their local Boundary Review Board, meaning that at the time of incorporation, revenues were deemed at least adequate to cover costs. But the Boundary Review Board report on incorporation estimates that the new city will need to enact the utility tax to cover expenses. If Spokane Valley enacts the tax, it could raise nearly $7 million per year.





"The new city of Spokane Valley would have a reserve


of $6 million in its first year of operation."





Well, that's what the pro-incorporation consultant says. And consultant Bob Jean, the current city manager of University Place (newly incorporated near Tacoma) has 25 years experience. Reserves are important, because the sooner they are built up, the sooner a new city can budget for capital projects like new roads, bridges and sewers. Until those are built up, a new city may be more focused merely on maintaining what it already has.


The only trouble with Jean's figure is that the Spokane County Boundary Review Board saw it quite differently. With an analysis by former City of Spokane Assistant City Manager Pete Fortin, the BRB estimates the new city would have a budgetary shortfall of $5.1 million in 2003.


Incorporation forces felt Fortin's numbers were too conservative and that Jean's expertise allowed for more accurate results. Still, that's a wide margin. At least splitting the difference might be more prudent.