Lynnwood faces a tight deadline for annexation sales tax incentive

There is a July 1st, 2028 deadline for the City of Lynnwood to claim a 0.2% sales tax incentive from the state government if it annexes portions of unincorporated Snohomish County. Annexation would mean an increase funding for city services that already support the residents who live in unincorporated areas that already have a Lynnwood address.

Back in 2021, the Washington State Legislature passed a 0.2% sales tax incentive to encourage municipalities to annex neighboring areas that are part of their urban growth area (UGA); the tax incentive expires on July 1st, 2028. This sales tax incentive allows for cities to impose a temporary local sales and use tax in the annexed area that is then credited against the state’s portion of the sales tax; what this means is that for the first ten years of the annexation the city will be collecting a higher share of the sales tax revenue to cover the increased cost of services and infrastructure, and shoppers don’t pay an additional sales tax.

Lynnwood is facing a tight deadline because there are 23 months until that deadline and it takes 21 months to complete the study into the annexation, fill out the paperwork required, and get the county council’s approval. Since the current deadline came into effect back in 2021 (post pandemic) there does not appear to be an appetite among state legislatures to further extend it.

Editors note: The 0.2% sales tax incentive only kicks in if the population of the annexed area is 10,000+.

The two subareas that the city would be able to annex, or start the process for annexation, by the deadline are North Lynnwood and Northeast Lynnwood. It was noted, by council member David Parshall, that Northeast Lynnwood is the subarea that would have the most return on investment for the city; but it would cross I-5 which means that the Lynnwood Police Department would want a substation to help them better police the annexed area.

If the city council were to move forward with examining annexation, the contract for the study into the annexation will be piggy backed off of Everett’s study. This decision to work with the same contractor Everett will utilize will cut the cost of the study from its typical $250,000 to somewhere between $100,000 to $150,000. Development & Business Services director Ben Wolters stated that they’ve been setting aside money in preparation for the study, and they can use funds from other studies that were either canceled or postponed; the council and city staff will have to find the rest of the money themselves.

Council member Bryce Owings was among the first members of the council to express support for moving forward with the study. He pointed out that the cost of study is a small fraction of the additional tax revenue annexation would bring into help fund city services that residents of unincorporated Lynnwood already utilize without paying into – the parks were an example he brought up. Assistant city administrator Monisha Harrell, who lives in unincorporated Lynnwood, also pointed out that residents from unincorporated Lynnwood also utilize the Library and Rec Center without paying the taxes that support them.

The concern about the additional cost to the city’s budget because of expanded services was brought up, particularly policing. But, as it turns out, LPD is already doing a chunk of the policing in the unincorporated Lynnwood because the Snohomish County Sheriff only has one officer on duty in the unincorporated areas near Lynnwood; as a result, the city has an interlocal agreement with the county to help with the policing in the area, the other neighboring cities also assist the county sheriff as needed.

There was a general consensus that council members were interested in pursuing the study to see if the annexation would be financially beneficial to the city, especially with the significant discount that would come from piggy backing off of Everett’s contract.

Spokane fires

The City of Spokane has made the decision to utilize its H.O.M.E Starts Here Fund to assist victims of the wildfires that have torched the city. This fund will assist with short- & long-term rent, diapers, baby formula, back to school supplies, basic house ware needs, furniture and other household needs as families try to rebuild their lives. As the city and its residents are working through the recovery process, the city will forgo it’s typical administrative fee so that 100% of each donation will go to those in need.

If you want to donate to this fun, click here.