Following is an analysis of the fiscal impacts to the City of annexing Roads End.

Also included is a brief analysis of the net effects of taxes and utility bills on the average Roads End property. This is a preliminary report, and comments and corrections will be considered at least until September 24, 2010. Comments and suggested corrections should be directed to the City Manager at davidh@lincolncity.org with a copy to the City Recorder at cathys@lincolncity.org

Lincoln City, Oregon

PRELIMINARY REPORT:

FI S CAL IM PA CTS OF A NN EXIN G R OA D S END

Prepared by:

ECONOMIC & FINANCIAL ANALYSIS

1409 Franklin Street Suite 201 Vancouver, WA 98660

20 August 2010

TABLE OF CONTENTS

INTRODUCTION ____________________________________________________________________________________1 GOVERNMENTAL ACTIVITIES _____________________________________________________________________5

Additional Revenues ........................................................................................................ 5

Tax Revenues from the Permanent Tax Rate ....................................................................................... 5 Tax Revenues for Open Space Bonds .................................................................................................. 5 Franchise Fee Revenues ....................................................................................................................... 6 Transient Room Tax ............................................................................................................................. 6 State-Shared Revenues ......................................................................................................................... 6

Additional Costs ............................................................................................................... 8

BUSINESS-TYPE ACTIVITIES ____________________________________________________________________ 12 NET FINANCIAL EFFECTS OF ANNEXING ROADS END________________________________________ 13
Public Safety (Police) ........................................................................................................................... 8 Streets ................................................................................................................................................... 9 Library ................................................................................................................................................ 10 General Government Services ............................................................................................................ 10

Sewer ............................................................................................................................. 12 Water ............................................................................................................................. 13 Net Effects on Lincoln City ............................................................................................. 13 Net Effects on Average Roads End Property ................................................................. 14

LIST OF TABLES
Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Table 14 Description of Roads End Area .................................................................................................... 1 Lincoln City Departments or Funds & Sources of Revenues (FY 2009-10) ................................ 4 Impact of Roads End Annexation on Open Space GO Bond ....................................................... 5 Summary of State-Shared Revenues ............................................................................................ 8 Projection of State-Shared Revenues............................................................................................ 8 Miles of Roadways by Type & Condition .................................................................................... 9 Lincoln County Population by City ............................................................................................ 10 General Government Services Cost per Capita .......................................................................... 11 Calculation of Net Development Costs & Revenues .................................................................. 12 Sewer Rate Revenues ................................................................................................................. 13 Sewer Utility Net Result ............................................................................................................. 13 Water Rate Revenues.................................................................................................................. 13 Summary of Net Effects of Annexation on City & Roads End Area Residents ......................... 14 Net Effect on Average Roads End Property Taxes & Utility Bills............................................. 15

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INTRODUCTION
The City is evaluating the fiscal impacts of annexing the Roads End area that borders the Citys northern limits. This unincorporated area is largely developed with single-family houses and a few multiple family houses. Annexing the area will increase demands for City services and affect revenues the City collects from taxes and from providing services. In this analysis, EFA identifies the measurable short-term and long-term fiscal impacts of annexation. The Roads End area shown in Figure 1 encompasses 349.32 acres that are divided into 917 tax lots, with an estimated population of approximately 860. The City already provides sewer service to 619 customers in this area, and water service is provided to 714 customers (1.2 persons per account). Ninety-five residents purchase water from the City but use individual septic systems for sewage disposal. The area also includes one state park.

Table 1 Description of Roads End Area Land Area, acres Number of Tax Lots Number of Buildings Number of Housing Units (developed lots with City water service) Population, estimate (1.2 persons per housing unit) Real Market Value Assessed Value Assessed Value per Tax Lot
Source: City of Lincoln City, GIS Department / Finance Department

349.32 917 761 714 860 $429,094,177 $228,307,936 $249,000

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Source: City of Lincoln City, Planning Department

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Table 2 lists the Citys budget categories, which we divided into Governmental Activities and BusinessType Activities. We highlighted the activities that will be affected by annexation of Roads End. The following sources of revenue are not specifically listed in Table 2, but they are used to pay for various Governmental Activities and will be affected by the annexation: Tax Revenues from Permanent Tax Rate State Shared Tax Revenues Franchise Fee Revenues This report is based primarily on historical data from fiscal year 2009-10, the most recent year for which reliable data exit.

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Table 2 Lincoln City Departments or Funds & Sources of Revenues (FY 2009-10)
Department or Fund General Fund City Council City Administration Finance Information Technology Library Municipal Court City Attorney Planning Building Inspection Recreation Department General Fund Non-Departmental Lincoln Square Operations Facilities Capital Fund Public Safety (Police) Public Safety Dispatch 9-1-1 D.A.R.E. Government Access Agate Beach Lf % For Art Affordable Housing Housing Rehab 96-97 H96035 Community Development Block Grant Transient Room Tax Visitor & Convention Bureau Visitor & Convention Bureau 08 Bm Parks Fund Parks Playground Parks SDCs Parks Open Space 1999 Open Space Bonds Unbonded Assessment Fund Street Fund Street Capital Fund Transportation Development Fund N Hwy 101 Improvement Program Intersection Improvement Bond Redemption Fund Internal Service Fund Storm Drainage Development Fund Water Fund Water Capital Fund Water Construction Fund Sewer Fund Sewer Capital Fund Sewer Construction Fund 2005 Sewer Bonds 2006 Water Refunding 2007 Water Bonds Total Source: City of Lincoln City, 2009-10 Adopted Budget Taxes $3,768,566 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 279,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 744,000 0 0 $4,791,566 Other $6,980,228 0 0 0 0 0 0 0 0 0 0 0 415,994 464,469 3,765,182 756,954 5,895 37,850 803,874 100,593 742,155 2,832 300,000 4,214,000 1,065,174 567,162 1,018,105 11,248 962,971 972,042 37,982 737,484 1,847,541 874,993 194,834 94,552 128,406 777,059 228,482 77,766 3,246,957 1,431,164 0 3,355,192 4,853,214 7,836,304 732,711 308,182 449,808 $50,399,359 Total $10,748,794 0 0 0 0 0 0 0 0 0 0 0 415,994 464,469 3,765,182 756,954 5,895 37,850 803,874 100,593 742,155 2,832 300,000 4,214,000 1,065,174 567,162 1,018,105 11,248 962,971 972,042 316,982 737,484 1,847,541 874,993 194,834 94,552 128,406 777,059 228,482 77,766 3,246,957 1,431,164 0 3,355,192 4,853,214 7,836,304 1,476,711 308,182 449,808 $55,190,925

Business-Type Activities

Governmental Activities

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G O V E R N M E N TA L A C T I V I T I E S
Governmental Activities are those expected to produce benefits to all citizens of the City, rather than services sold at cost. In contrast, the Business-Type Activities are services sold to customers with the intent for the activity to be financially self-supporting. Many of the Governmental Activities have dedicated sources of revenues (e.g., state shared gas tax revenues for the Street Fund) and some of these activities do produce enough revenue to be self-supporting (e.g., development fees that pay for Building Inspections). Following is a description and estimation of the additional revenues to Governmental Activities that can be expected as a result of the proposed annexation of the Roads End area. Following the discussion of revenue impacts, we discuss the likely increases in costs to Governmental Activities affected by the proposed annexation.

Additional Revenues
Tax Revenues from the Permanent Tax Rate
The Citys permanent tax rate is $4.0996 per $1,000 of assessed property value (net of reductions due to urban renewal districts). Lincoln Countys 2009 tax records list Lincoln Citys assessed property value at $959,653,655, and the assessed value (AV) of properties in the Roads End area is $228,307,936. Annexing the Roads End area will increase the Citys assessed value from $959,653,655 to $1,187,961,591. The additional tax revenues from this increase will be approximately $935,971a 23.8% increase over the current years revenues of $3,934,200.

Tax Revenues for Open Space Bonds

The City has an outstanding general obligation bond to acquire and develop land for open spaces. Each year the City levies a tax equal to 100% of the annual debt service. This bond will be fully repaid in FY 2013-14. As shown in Table 3, the Roads End annexation will reduce the future tax rate by an average of about $0.042/$1,000 AV on the remaining 4 years of debt service. It will cost Roads End property owners between $0.075/$1,000AV to $0.227/$1,000 AV per year.
Table 3 Impact of Roads End Annexation on Open Space GO Bond 1 2010 2011 Open Space GO Bond Debt Service Tax Rate w/o Roads End Tax Rate w/ Roads End Difference $275,312 0.279 0.227 ($0.052) 2011 2012 $274,032 0.269 0.219 ($0.050) 2012 2013 $272,150 0.260 0.211 ($0.048) 2013 2014 $99,655 0.092 0.075 ($0.017)

Assumes the current assessed value increases 3% per year

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Franchise Fee Revenues

The City also assesses a franchise fee on the sales of utilities that operate in the CityNorthwest Natural Gas Company, Pacific Power & Light Company, Centurytel (telephone company), Charter (cable TV company), and North Lincoln Sanitary Service (solid waste collection). These companies operate in the Roads End area and their fee payments to the City will increase. The City estimates the annual franchise fees from Roads End will be approximately $30,000.

Transient Room Tax

The City collects a 9.5% Transient Room Tax (TRT) on short-term rentals such as hotels, motels, bed & breakfast inns, and short-term rental (less than 30 days) of single-family and beach vacation houses. Upon annexation, the houses used for this purpose in Roads End area will be taxed at a 0.5% higher rate than the Countys 9.0% TRT rate. The City expects to collect $4,175,813 in 2009-10 from its 9.5% room tax. The County expects to collect $77,500 from its 9.0% room tax in the Roads End area. Assuming no new rooms in this area will be subject to the Citys TRT, the City can expect to collect about $81,375 per year from Roads End propertiesa 2% increase over its current TRT revenues.

State-Shared Revenues
The distribution of state-shared revenues from motor fuel (gas), liquor, tobacco, and 9-1-1 taxes is largely based on the population of a city relative to all other cities in the state. The state uses data published by the Portland State University Population Research Center to determine statewide, county, and city populations. The most current population estimate for Lincoln City is 7,930. This estimate is based on the permanent population and excludes tourists.
M ot o r Fu el T ax

The motor fuel tax is $0.24 per gallon. The State distributes the revenues by formula to itself, and to local governments based primarily on population. The League of Oregon Cities estimates the motor fuel tax allocation will average about $41.00 per capita in FY 2009-10, increase to $50.04 in 2010-11, and to $58.89 in 2011-12. This additional revenue per capita results from the Legislature approving a $0.06 per gallon increase that will begin no later than January 1, 2011, and increases in vehicle title and registration fees and weight-mile fees paid by truckers. Lincoln City expects to receive $313,767 in shared fuel tax in FY 2009-10. Assuming the Citys population will increase by 860 after annexation, the per capita distribution of fuel tax revenues to Lincoln City will increase $43,000 in FY 2009-10 and $50,600 the following year. These revenues can be used only for transportation-related purposes.
To b ac c o T ax

The tobacco tax is $1.18 per 20-cigarette pack, .65% of the sales price of cigars, and $1.78 per ounce of chewing and related tobacco products. The tobacco tax is allocated to the State, and to local governments based largely on population. The League of Oregon Cities estimates the tobacco tax allocation to cities will average $1.43 per capita in FY 2009-10, decrease to $1.34 in 2010-11, and to $1.32 in 2011-12.

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Lincoln City expects to receive $11,183 in shared tobacco tax in FY 2009-10. Assuming a population increase of 860 from the Roads End annexation, the Citys annual average increase in tobacco revenues will be about $1,200. There are no restrictions on the Citys use of these revenues.
L iqu o r T ax

The state liquor tax is based on alcohol content and volume. Distribution of liquor tax revenues to local governments is based on two separate sets of criteria: 20% is allocated on a per capita basis, and 14% on a combination of consolidated property tax rates, per capita income, and population relative to statewide averages for all cities. 20% Allocation The League of Oregon Cities estimates the 20% liquor tax allocation will average $13.60 per capita in FY 2009-10, increase to $14.00 in 2010-11, and to $14.25 in 2011-12. Lincoln City expects to receive $107,848 from the 20% per capita distribution of liquor tax in FY 2009-10. The annexation of Roads End will increase Lincoln Citys share of the 20% allocation of liquor revenues an average of about $12,000 per year. There are no restrictions on the Citys use of these revenues. 14% Allocation (State Revenue Sharing) The 14% allocation of liquor tax revenues shared with cities is also referred to as State Revenue Sharing. The City expects this revenue to be $92,854 in FY 2009-10, and annexing the Roads End area will likely affect future allocations to Lincoln City. In order to forecast that amount, EFA would need to know the consolidated tax rates, personal income, and population for all other cities in Oregon, which is beyond the scope of this analysis. We assume the amount will not decrease below $92,800 per year, and likely will increase due to the increase in Lincoln Citys population from annexation. By how much is difficult to assess, but the population increase will be about 11%. It is unlikely that this population increase will result in an 11% increase in shared revenues because of the other criteria used in the allocation personal income and consolidated tax rate. Personal income in the Roads End area may be higher than the Citys current average income, which would effectively offset the 11% population increase. The consolidated tax rate will not change appreciably, but will decrease because of the addition of the Roads End assessed value. As a rough estimate, we discounted the 11% increase in expected revenues by 50% and came up with an increase of 5.5% in the allocation to Lincoln Cityan increase of $5,035 per year.
Tel ec om mu ni c at i on s T ax (9 -1 - 1)

The State taxes telecommunications companies to fund the 9-1-1 emergency call centers in the State. These tax revenues are shared with local governments based on population. The State is not expecting to make any significant changes in the allocation formula. The League of Oregon Cities forecasts this allocation will decrease from $5.05 per capita in FY 2009-10 to $4.99 in 2010-11, and $4.93 in 2011-12. The City expects to receive $40,047 in shared 9-1-1 tax in FY 2009-10. After annexation of Roads End, these revenues will increase about $4,300 per year. These revenues are restricted to 9-1-1 dispatch services.

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The Citys tax revenues will increase each year for the next 3 years, as shown in Table 4, assuming the current population remains at 7,930 and the Roads End population of 860 is added to the City. Most of the increased revenue is due to the statewide increase in motor fuel taxes and the Legislatures allocation to local governments.

Table 4 Summary of State-Shared Revenues FY 2009-10 2010-11 2011-12 Motor Fuel $/capita % $41.00 $50.04 $58.89 Tobacco $/capita % $1.43 $1.34 $1.32 Liquor $/capita % $13.60 $14.00 $14.25 9-1-1 $/capita $5.05 $4.99 $4.93 %

22.0% 17.7%

-6.3% -1.5%

2.9% 1.8%

-1.2% -1.2%

Source: League of Oregon Cities, 2010 State Shared Revenue Estimates, Salem, Oregon

Table 5 Projection of State-Shared Revenues 20% Allocation Liquor 14% Allocation (State Sharing)

FY/Area 2009-10 Current City 2010-11 Current City Roads End Total Annex 2011-12 Current City Roads End Total Annex

Motor Fuel

Tobacco

9-1-1

Total

$325,130

$11,340

$107,848

$92,854

$40,047

$577,218

396,817 43,034 $439,852

10,626 1,152 $11,779

111,020 12,040 $123,060

92,854 5,035 $97,889

39,571 4,291 $43,862

650,888 65,553 $716,441

466,998 50,645 $517,643

10,468 1,135 $11,603

113,003 12,255 $125,258

92,854 5,035 $97,889

39,095 4,240 $43,335

722,417 73,310 $795,727

Source: Economic & Financial Analysis

Additional Costs
Adding the Roads End population to the City will increase demand and cost for some Governmental Activitiesprimarily police, streets, and general government services.

Public Safety (Police)

Public Safety (police) costs will increase because of the increase in population. Currently the County Sheriffs Department provides patrol to the Roads End area, and although the City police department also responds to incidents in the area, it primarily serves as a backup to the County. After annexation, the roles of the two policing agencies will be reversedthe City police will have primary responsibility and

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the Sheriff will provide backup. The City will patrol an additional 8 miles of residential roadways, answer police calls, and investigate crimes. Currently, the City of Lincoln City has more police officers per capita than most other cities in the state of Oregon. A 2009 survey by the Oregon State Police, Law Enforcement Data System (LEDS), shows 3.28 officers per 1,000 population compared with a state average of 1.71 officers per 1,000 for cities with populations between 5,000 and 10,000. 2 Lincoln Citys summer population is almost double its permanent population, and it is home to the largest gaming facility in the state.3 Taking this transient population into account, the average number of officers per capita likely drops to about 1.50 per 1,000 population and tourists. Assuming that public safety costs increase with population, the 860 people in Roads End would justify about 1.33 full-time equivalents (FTE) police officers (1.5 officers/1,000 pop x 860/1,000). The salary of a sworn police officer plus 40% overhead is $70,500. Assuming the salary for a 1.33 FTE officer is split between part-time officers and overtime pay, the total annual cost to the City for additional police personnel will be $93,860 (1.33 FTE x $70,500). A new fully equipped patrol car amortized over 4 years plus fuel, servicing, and maintenance averages $21,440 per year. 4 At 1.33 FTE, the cost to serve the Roads End area will be about $115,300 per year ($93,860 for personnel and $21,440 for patrol cars).

Streets
The Roads End area contains about 8 miles of roadways that require annual maintenance. The roadways are below the Citys standard and a majority are in poor condition. Over time they will need to be upgraded. The City Public Works staff estimate the annual cost of repair and maintenance will be about $110,300.

Table 6 Miles of Roadways by Type & Condition Roadway Type Gravel Miles % Paved Miles % Total Roads Miles % 1.68 21% 0.54 7% 5.73 71% 0.15 2% 8.10 100% 1.68 31% 0.54 10% 3.01 56% 0.15 3% 5.38 66.4% 0.00 0% 0.00 0% 2.72 100% 0.00 0% 2.72 33.6% Good Condition (Miles) Fair Poor Unfinished Totals

Source: City of Lincoln City, Public Works Department

2

Lincoln City (3.28), Seaside (3.09), which also has a large seasonal tourist trade, and the City of Hood River (2.02) have the highest ratio of officers to population. The National Bureau of Economic Research shows that Indian Casinos (and all other casinos) increase the crime rate of an area. The social and economic impact of native American casinos, William N. Evans and Julie H. Topoleski, 2002, working paper 9198. The purchase price plus equipment is about $23,320 amortized over 4 years at 4.25% is $6,440 plus 30,000 miles per year at $0.50 per mile is $15,000.

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Library
The City owns the library in Lincoln City and pays all of its ownership and operating costs. Lincoln County has a library district with a tax base of $0.2485/$1,000 AV, plus a local-option tax rate of $0.09/$1,000 AV. The District is composed of all of the unincorporated areas of Lincoln County plus the incorporated cities of Waldport, Siletz, and Depoe Bay. Those in the District are taxed at the combined rate of $0.3385/$1,000 AV and the tax produces about $1,142,300 (FY 2009-10). The District allocates about 70% of these tax revenues to the five libraries in the County, including Driftwood Library in Lincoln City. Allocation of the tax revenues to libraries is based 35% on the relative operating expenditures of each library and 65% on the relative circulation of library materials to District residents. The District codes each library card to determine who lives in the District. Lincoln City expects to receive $226,910 from the District in FY 2009-10. Annexing Roads End will reduce both the tax revenues it receives and the transfer payments to the libraries. The Districts population is 21,710, according to the PSU Population Research Center, and the Roads End annexation will reduce the Districts population by 860, or about 4%. If this percentage also represents the relative drop in assessed value, then the District will experience a 4% reduction in total tax revenues. Since the allocation of revenues is 65% dependent on the circulation of library materials to District residents, the annexation of Roads End will likely result in a larger than 4% reduction in revenues from the District. EFA cannot estimate with any confidence how much the revenue from the District will decrease. We use an estimate of 10% in this analysisa loss in revenue of approximately $22,700.

Table 7 Lincoln County Population by City City/Unincorporated Area

(shaded areas are in Library District)

2009 Population 815 1,190 1,420 2,145 3,645 7,930 10,600 16,955 44,700 21,710 860 22,570

% 2% 3% 3% 5% 8% 18% 24% 38% 100%

Yachats Siletz Depoe Bay Waldport Toledo Lincoln City Newport Unincorporated Total Lincoln County Population* Current Library District Population^ Less Roads End Population Net Library District Pop. After Roads End Annex
Source: Portland State University, Population Research Center, July 1, 2009

4%

General Government Services

General government services are composed of City planning, building inspection, administration, City attorney, finance, non-departmental, and information technology. Annexation increases demands for these governmental services, but since the services are largely provided without fees, the cost per unit of service is not readily available. We use estimating techniques to arrive at a reasonable cost per service.

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Table 8 shows the budget for each of the services and an estimate of the percent and amount of the budget attributable to general government services. The Planning and Building departments collect revenues from applicants, though the fees only cover a portion of the total annual cost of these departments. The average net Planning and Building subsidies are included in Table 8 for these departments. Table 9 shows a 4-year history of expenses and revenues and the net paid from the General Fund. For Administration, Finance, Non-Departmental, and Information Technology, about 25% of the total budget is paid from the General Funds of the City rather than from funds such as sewer, water, SDC funds, and transportation funds. About 35% of the City attorneys costs are paid from general revenues of the City. All of these departments respond to the general demands of citizens that are not specifically accounted for through fees. The main sources of revenue to pay the net costs are the Citys revenues from its permanent tax rate and from some state-shared revenues. City staff estimate they spend about 10% of their time responding to issues in unincorporated areas. Since the unincorporated areas are in part serviced by the City already, we deduct this estimated amount from the total costs that are not allocated to other funds. The net amount not allocated and net of unincorporated areas is $823,369. The current population imposes these costs on the City at the rate of $104 per capita per year. This average, however, probably does not apply to the next increment of population that enters the City. In essence the Citys costs do not increase proportionate to population growth. The City benefits from some economies of scale as it grows. We estimate this to be 50%. The next population increment will increase the Citys costs per capita only 50% of the current cost per capita, or $52 per capita. Roads End has a population of 860, which will impose a cost of general governmental services of $44,720 per year.

Table 8 General Government Services Cost per Capita General Government Department Costs Planning Building Administration Finance Attorney Non-Departmental Information Technology Total Costs Adjustments Cost of Services to Unincorporated Areas Net Cost Net Cost Per Capita Current Population Cost per Capita/year Economy of Scale Net Average Cost Per Capita/year City Budget Not Allocated to Other Funds % $

$484,652 617,677 146,758 286,461 333,566 $1,869,114

25% 25% 35% 25% 25%

$298,405 134,495 121,163 154,419 51,365 71,615 83,392 $914,854 (91,485) $823,369

10%

50%

7,930 $104 (52) $52

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Table 9 Calculation of Net Development Costs & Revenues General Government Department Costs Planning Building Administration Finance Attorney Non-Departmental Information Technology Total Costs Adjustments Cost of Services to Unincorporated Areas Net Cost Net Cost Per Capita Current Population Cost per Capita/year Less Economy of Scale Net Average Cost Per Capita/year City Budget Not Allocated to Other Funds % $

$484,652 617,677 146,758 286,461 333,566 $1,869,114

25% 25% 35% 25% 25%

$298,405 134,495 121,163 154,419 51,365 71,615 83,392 $914,854 (91,485) $823,369

10%

50%

7,930 $104 (52) $52

BUSINESS-TYPE ACTIVITIES
The Citys sewer and water utilities are its Business-Type Activities. These utilities, each represented by multiple funds, are expected to produce enough revenue from sales of sewer and water services to cover their total annual costs.

Sewer
The City provides sewer service to 691 Roads End area customers. The City collected $2,589,506 in sewer rate revenues in 2008-09, of which 14% ($363,967) came from Roads End customers, who currently pay an outside-city sewer rate that is double the in-city rate. On annexation Roads End sewer rates will decrease by 50%, resulting in a revenue loss of approximately $181,983 from these customers (Table 10). This loss of revenue is largely off-set, however, by the additional property taxes Roads End customers will begin paying on an outstanding sewer general obligation bond. In fiscal year 2008-09 the City paid 62% of the debt service on this bond by assessing a property tax of $0.70/$1,000 AV, and 38% from sewer rate revenues. After annexation Roads End property owners will also pay the sewer bond tax, which will increase the Citys property tax revenues $159,816. The increase in property tax revenues and the decrease in sewer rate revenues results in a net loss to the sewer utility of $22,167 (Table 11).

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Table 10 Sewer Rate Revenues 2008-09 Sewer Base Sewer Volume Totals
Source: City of Lincoln City, Finance Department

After Annex 145,046 36,938 $181,984

Loss to City (145,045) (36,938) ($181,983)

290,091 73,876 $363,967

Table 11 Sewer Utility Net Result 2008-09 Sewer Bond Tax Sewer Revenue Totals After Annex 159,816 181,983 $341,799 Net Gain (Loss) 159,816 (181,983) ($22,167)

363,967 $363,967

Water
The City provides water service to 714 Roads End customers. The City charges these non-resident properties 212% of the in-city water rate. Data available on water rates and charges shows the City collected about $346,347 in rate revenues from outside-city customers over a 12-month period. Annexation will result in Roads End water revenues decreasing to about $163,371a loss to the Citys water utility of about $182,976, or approximately 6.5% of the $2,824,968 revenues the City collected in FY 2008-09. No tax effects will offset this loss. To make up the difference, the City would have to increase water rates about 6.5%.
Table 12 Water Rate Revenues 2008-09 Water Base Water Consumption Total
Source: City of Lincoln City, Finance Department

After Annex 132,801 30,570 $163,371

Loss to City (148,737) (34,238) ($182,976)

281,538 64,808 $346,347

NET FINANCIAL EFFECTS OF ANNEXING ROADS END

Net Effects on Lincoln City
Table 13 is a summary of the fiscal effects of annexing the Roads End area. After annexation, the City will net approximately $606,849 after paying all direct expenses for the newly annexed area. Notice that the loss of sewer rate revenues is offset by the additional property taxes collected to pay debt service on the sewer GO bonds.

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Table 13 Summary of Net Effects of Annexation on City & Roads End Area Residents Revenues/Costs Revenues Property Taxes Permanent Tax Rate Sewer GO Bond Open Space GO Bond Transient Room Tax State-Shared Revenues Franchise Fees Water Rate Revenues Sewer Rate Revenues Net Effect on Revenues Costs Police Streets Library General Government Net Effect on Costs Total Net Effect Increase (Decrease)

$936,000 159,816 81,375 57,564 30,000 (182,976) (181,983) $899,796 (115,300) (110,300) (22,700) (44,647) ($292,947) $606,849

Net Effects on Average Roads End Property

Table 14 shows the net financial effects after annexation on the average valued property in Roads End that is currently connected to the Citys sewer and water systems. These net effects consider only property taxes and utility bills. However, other economic benefits that were not considered in this reportsuch as more frequent police patrols and a more responsive government to urban land use and development issuesshould be given consideration in the annexation decision.

Taxes
The property taxes are shown in the top half of Table 14, and are based on a property assessed value of $249,000. The Citys permanent tax, sewer GO bond tax, and open space tax rates will apply to the annexed properties. The Library District taxes will cease to be assessed. The net of new and discontinued taxes is $4.686/$1,000 AV on the annexed properties. The net additional annual taxes will add $1,167 to the average Roads End property tax. The County charges a 9% transient room tax for vacation rentals and the City charges 9.5%. Those property owners who have vacation rentals will pay an additional 0.5% tax on their rent receipts. The TRT tax is not included in Table 14 since most properties in Roads End do not pay this tax.

Utility Bills
The second half of Table 14 shows the annual effect of lower sewer and water rates. Outside-city sewer and water rates are approximately double the in-city rates. Assuming the average property uses 500 cubic feet of water per month, the average combined sewer and water bills will be reduced by $476 per year.

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Preliminary Report: Fiscal Impacts of Annexing Roads End

20 August 2010

Six hundred ninety-one Roads End customers purchase both water and sewer services from the City. Only 23 customers purchase water only and use septic tanks for sewage disposal.

Table 14 Net Effect on Average Roads End Property Taxes & Utility Bills Taxes Tax Rate Taxes Lincoln City Permanent Tax Sewer GO Bond Tax Open Space GO Bond Tax Library District Permanent Tax Library District Local Option Tax Total Property Taxes/year Utility Bills Sewer Charges (see below)^ Water Charges Total Utility Bills/year
(per $1,000
AV)

Before Annexation 62 22 $84 485 452 $937

$4.100 $0.700 $0.225 $0.249 $0.090

After Annexation $1,021 174 56 $1,251 Utility Bills 248 213 $461

Net Annual Change $1,021 174 56 (62) (22) $1,167 (237) (239) ($476) $691

Net Annual Change in Taxes & Utility Bills (Transient Room Tax not included)
Average Assessed Value Average Monthly Usage (in cubic feet) $249,000 500

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