Politics from the Palouse to Puget Sound

Sunday, November 04, 2007

"A 50-50 split; Pullman, Whitman County look at proposed taxsharing plan as means to promote growth in corridor"

In all reality, Moscow is best suited to assist Whitman County with corridor development and split tax revenues. Moscow is closer and the costs therefore would be lower. I have been told that was the plan for many years. But now, the Whites and Reds are fighting a civil war in Moscow following the Bolshevik Revolution there two years ago. So now, luckily for us, Pullman has become a player in the corridor, where the future of retail on the Palouse lies. There are risks, sure, but it's worth it.
Pullman would look much different today if city leaders hadn't taken some risks.

The city extended services up to what would become Bishop Boulevard in the early 1980s, when the Wheatland Shopping Center, ShopKo and Safeway didn't exist. The same idea was used when Northeast Terre View Drive was linked with Airport Road - infrastructure that has opened a new area of town to development as the city made the effort to promote growth.

"You do have to make an investment, and investments usually come with a risk," City Supervisor John Sherman said. "There are areas of Pullman that wouldn't have been able to be developed without the up-front investments."

The city is considering a similar approach as it begins discussing a proposal with Whitman County officials that could extend utilities into the Pullman-Moscow Highway corridor.

Officials from Whitman County and Pullman are in negotiation to potentially split future retail sales tax generated in the corridor 50-50. Sherman said the concept is for the entities, which are both in "financial binds," to pool resources and encourage growth along the seven-mile stretch of highway.

"Partnerships can make things a reality that individual entities wouldn't have been able to do alone," Sherman said.

The city's portion of the tax-share would help pay to extend water and sewer services into the corridor. The county's willingness to share the money, which is "not much," would be a contribution to economic development, County Commissioner Greg Partch said. Cooperation on the part of the city and county would be a long-awaited push to welcome more business - and more tax dollars - into the region.

"The whole (proposal) is built on the premise that we're going to grow," Partch said.

Whitman County officials first pitched the idea to the City Council in 2005, offering to split future commercial sales tax revenue with the city 50-50, if those businesses received water and sewer infrastructure from Pullman. In exchange, the city would forgo future annexation within the area and would save 10 percent of its share of the sales tax for further infrastructure improvements in the corridor.

Whitman County officials offered to possibly pass along a portion of their .09 sales-tax dollar allotment - money provided by the state and awarded by the county to assist rural communities with economic development - to fund utility extensions.

The city didn't go for the offer, but didn't reject it outright, either.

In the last year, the entities each have tweaked the proposal to make it more mutually beneficial, though officials are still deep in the negotiation process and nothing has been finalized.

"We're just in the formative stages of it," Partch said.

Cost projections

Partch said cities and counties are pitted against each other for dollars because of the way the state allocates sales tax revenue. The current breakdown of the 1 percent local share of sales tax grants .85 percent to Pullman and .15 percent to the county on sales made within city limits. Within unincorporated areas - which includes much of the Pullman-Moscow Highway - 100 percent of the 1 percent local share goes to the county.

"It's all about money ... and we only have 1 percent to work with," Partch said.

Partch said the tax-sharing proposal is a way for the county and city to cooperate - rather than compete - for tax dollars. With the recently completed Pullman-Moscow Highway widening project, the time is right to make the corridor inviting for the businesses he believes are eager to locate in the corridor.

"We knew the highway was the biggest piece of the puzzle," he said. "What we're trying to do is work together for the benefit of all our citizens. We're trying to get ahead of our curve and work together on infrastructure and those type of things to benefit both of us."

Tammy Lewis, Whitman County managing director of the Palouse Economic Development Council, said she applauds the county and city's cooperative effort.

Lewis said she periodically hears from businesses looking to locate along the highway, and from an economic development standpoint, any project that would extend water and sewer services into the corridor would be a good start for growth.

"It's just a natural place to grow," she said. "With the cities so close together, that's where businesses will want to locate. It just makes sense."

Partch said the tax-sharing would only pertain to future businesses in the corridor that receive services from the city. Existing businesses, such as Prairie Bloom Nursery, would be exempt, as would the proposed Hawkins Development and James Toyota - which want to locate just west of the Idaho state line.

Pullman Public Works Director Mark Workman said the project would be expensive. Water and sewer hookups in the city currently only extend east to the intersection of Bishop Boulevard and Bleasner Drive. The city could extend services using its existing water right.

Workman said estimates in 2004 to extend sewer services to the Rolling Hills area - located near the Avista Utilities shop about two miles east of town - were about $2.1 million. The cost to run water services, including a reservoir and a pump station, to the same point was estimated at $3.7 million. Workman said inflation has added 25 percent to the 2004 estimate.

City Finance Director Troy Woo used Pullman's $3.2 million 2007 year-end projected sales tax revenue as a way to put the expense of the proposed project into perspective. The figure reflects sales tax revenue citywide during a year of "record level construction," due to projects such as the Compton Union Building and Martin Stadium expansions.

Sherman estimates it likely would take years for the city to break even, should the city and county reach an agreement.

"This is not a project where there's a quick payout," he said.

Woo agreed.

"That's kind of the scary part. We're not going to have a direct financial analysis," he said. "Typically, utilities follow development."

Woo said with most of the corridor undeveloped and no idea how many businesses would move in or when, there's no way to know how much tax revenue would be needed for the city to recoup its losses.

"These are businesses that we don't really know will be here in the near future," Woo said. "There's a lot of uncertainty with how this is going to pan out financially. We're going to have to make a decision based on really general figures. Our crystal ball isn't developed yet. We're obviously not going to enter into this if it's going to put the financial standing of the city in jeopardy. We're not going into this blindly."

The uncertainty is "kind of like the chicken or the egg concept," Woo said.

Sherman likened it to the "build it and they will come" mentality.

"It's not what is today, but what, potentially, will be there tomorrow," Sherman said.

In the original proposal, the county asked the city to set aside 10 percent of its sales tax share for future utility extension. Partch said the county also will save money.

"The way I see it, it needs to be an equal proposition for both of us," Partch said.

Other options for funding include raising water and sewer rates or instituting a reimbursement district - in which future businesses in the corridor would help to slowly pay back the cost of extensions. Woo said state or federal grants are not a likely option for funding.

If .09 money is granted to Pullman for the utility extension process, Woo said the city likely would use it to pay off a revenue bond - an action the city can take without taxpayer approval.

About $367,000 was allotted to Whitman County in .09 funds in 2006.

"Bottom line, someone will have to issue bonds and someone will have to pay them off," he said.


The county has agreed to drop its proposal that the city never annex within the Pullman-Moscow corridor. In fact, the county is receptive to expanding the area the city could annex without opposition from the county. The tentative area is roughly bounded by Albion Road to the north, U.S. Highway 195 to the west and a proposed south bypass, that may someday link up with the Pullman-Moscow Highway at Sunshine Road.

Sherman said an expanded area and the right to future annexations makes the proposal more appealing to Pullman officials.

"That very definitely gives us a hand in the planning," he said.

Workman and Pullman Planning Director Pete Dickinson, along with their Whitman County counterparts - Planner Mark Bordsen and Public Works Director Mark Storey - are discussing boundaries for the tax-sharing proposal and extension of services 50 years into the future.

The corridor has been identified as the major area, though pockets to the south, west and north of Pullman also may be negotiated, Sherman said.

"Obviously, we can't just look at the short-term about where our service are going to go," he said.

Also on the table are the county's requests that a buffer east of U.S. Highway 195 between Wawawai Road and South Grand Avenue be retained as a commercial development area and that the city pay for the construction of roads and other infrastructure within any annexed areas. The county also asked that the city allow developers to connect to the utility system at the developer's expense, without the risk of future annexation - a request that makes Sherman a bit nervous.

He pointed to Spokane, where city officials agreed to extend utilities to businesses in Spokane Valley. There was no agreement in place, and Sherman said Spokane was taken advantage of when Spokane Valley incorporated as a city with those businesses still utilizing Spokane's utilities.

How a tax-sharing proposal would pertain to future residential development also is negotiable. Sherman said future residential use may be as important in discussions as potential businesses locating in the corridor.

"If we can designate and preserve those areas for future growth unencumbered, that's good planning," he said.

Partch said he would like to see an agreement in place by December but recognizes the negotiation process may be slow because there is no precedent for this kind of agreement.

"This has never been done before," he said. "We're still trying to work out how it would be most beneficial for both of us."

Sherman said having an agreement in place by year's end is "ambitious," but negotiations are under way and the council plans to discuss the issue in upcoming meetings.

"At this time, we're not saying 'absolutely not' on any level," Sherman said. "At this point, everything is subject to negotiation."

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