City objects to imposition of utility fees, mulls annexation

The King County Council passed an ordinance on Nov. 8, 2016 that imposes an annual fee on utilities like water, sewer and storm that pass through unincorporated areas.

Said ordinance affects only three small water, storm and sewer utilities that pass through Auburn’s Growth Management Act-mandated potential annexation areas, or PAAs, and the fees are fairly small. Two of the areas are south of Highway 18, and one is an island on the city’s north end.

Two 25-year franchise agreements the City has with King County for water and sewer give the county the right to impose such fees, which the City would collect and pass on to the county.

As City Engineer Ingrid Gaub told the Auburn City Council on Monday, the question is, what to do about payment of the bill the City will get from King County?

That is: should the City pass the costs along to property owners in those areas who are getting services from the City; or should the City pay those fees out of utility funds and reflect those costs in rates the City imposes on all its utility customers?

In plainer prose, who should pay the fees: all 80,000 plus city residents, or only the people in those areas?

Deputy Mayor Largo Wales was flabbergasted.

“A fee is not a tax, because with a fee you’ve got a service, and I don’t see where King County is providing a service, so this is a tax,” Wales said. “This is crazy.”

Councilman John Holman said the state’s Growth Management Act allows cities to annex islands and peninsulas with a council-manic decision, referring to rules that allow cities to annex without a public vote of the people in those areas.

“So, might I suggest to my esteemed colleagues that we incorporate these areas, and then the problem becomes moot,” Holman said.

Councilman Rich Wagner agreed that the City should annex, and the fees should go to the City.

“Over the years, we’ve had lots of people use our right of way for their properties and businesses without paying the City, and I’ve asked if we could put a fee in, and I was told we couldn’t. So I am in favor of lobbying Olympia to say this isn’t a fair tax and shouldn’t be allowed” Wagner said.

Adding a wrinkle to the annexation question, however,. is that two of the areas in question are in Auburn’s PAA, but one of them is in Federal Way’s PAA.

Also, said City Attorney Dan Heid, the law gives people who live in the areas the right to put the question to a referendum, so the ultimate decision may not rest with the City Council.

King County’ methodology limits the fee to a maximum amount of $5 per month per parcel. City staff estimates that the initial annual fee to be paid to King County would total approximately $2,000. that is, $600 for 30 parcels adjacent to the water lines, $600 for 20 parcels adjacent to the sewer line, and $800 for 20 parcels adjacent to the storm lines.

King County has developed a proposed methodology for determining the annual fee that each franchisee would owe, and is accepting comments about the methodology up to Dec. 7.

The methodology is based on 10 percent of the assessed land value – excluding the value of improvements of the properties adjacent to the right of way – with a 6.6 percent rate of return on that value. There are provisions in the methodology for periodically updating the fee. The methodology assumes that the annual fee will be divided among the number of customers/parcels adjacent to the utilities.

Failure to pay the fee means the City’s franchise agreements would not be renewed, and the City could be subject to legal action for failing to comply with existing franchise terms.

Lisa Tobin, the City’s stormwater engineer, said there are about 20 properties on average across each area, and the monthly fee ranges from $1.50 to $3, so one good question is whether it would cost more to bill them than what the City could collect.

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