CITY OF SPOKANE VALLEY Request for Council Action

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1 CITY OF SPOKANE VALLEY Request for Council Action Meeting Date: November 1, 2016 Department Director Approval: Check all that apply: consent old business new business public hearing information admin. report pending legislation executive session AGENDA ITEM TITLE: Administrative report Legal options for de-annexing from a library district. GOVERNING LEGISLATION: RCW ; and RCW PREVIOUS COUNCIL ACTION TAKEN: Annexation to Spokane County Library District (SCLD) in BACKGROUND: Following incorporation in 2003, the City contracted with SCLD to provide library services while the City considered various long-term options. In 2005, the City Council decided to submit the question of whether to annex to SCLD to the voters of the City, which was approved by a large majority. In early 2012, the City received a request from SCLD for the City to purchase 8.4 acres of vacant land on Sprague Avenue in partnership with SCLD. SCLD would then purchase part of the vacant land to construct a new centrally-located Spokane Valley library, with the City using the rest of the property for a significantly expanded park area. Pursuant to their interlocal agreement, SCLD would have until October 2017 to pass a bond measure. SCLD subsequently formed a capital facilities area through vote, and submitted two separate proposals to voters for approval of bonds to construct the new library, along with construction of a second new library facility near Shelly Lake, and improvements to the Argonne branch. Both efforts failed, with the first receiving 55% in 2014, and the second 57% in In 2016, the SCLD Board of Trustees stated SCLD had attempted twice (unsuccessfully) to obtain the bonds, then passed a motion to request that the City amend the interlocal agreement so that SCLD could receive the funds paid to the City for the 2.82 acres immediately and transfer the property back to the City, rather than wait until October, In light of the recent request by SCLD to amend the interlocal agreement to transfer the property back to the City early, and in light of the goal of the City Council to have a library facility at the Sprague Avenue property across from the new City Hall, staff has been asked to present options on how the City may legally de-annex from SCLD. Those options are contained in a PowerPoint presentation, attached. OPTIONS: Discussion only. RECOMMENDED ACTION OR MOTION: Discussion only. BUDGET/FINANCIAL IMPACTS: Unknown. STAFF CONTACT: Cary Driskell, City Attorney ATTACHMENTS: PowerPoint presentation on legal options.

2 Cary Driskell City Attorney, City of Spokane Valley Kristopher Morton Legal Intern, City of Spokane Valley November 1, 2016 City of Spokane Valley - Office of the City Attorney 1

3 Background. Overview Procedures available for a City to withdraw from a library district. Tax implications. City responsibility for library district outstanding indebtedness. If a City withdraws, what happens to district assets? City of Spokane Valley - Office of the City Attorney 2

4 Background City options for providing library services: 1. Decide to not provide library services; 2. Establish and maintain City library either in-house or by contract with private entity; 3. Join with other governmental units to form a regional library; or 4. Contract for services from an existing library. City of Spokane Valley - Office of the City Attorney 3

5 Background If the City decides not to provide library services: City residents would still be permitted to enter SCLD facilities, browse materials, attend programs, access electronic resources, and otherwise use library services while in library facilities. However, residents would need to pay a Non-Resident Membership fee in order to check out materials. Currently, Non-Resident Membership requires an annual fee of $100 per household. City of Spokane Valley - Office of the City Attorney 4

6 Legal options available to de-annex from a library district City of Spokane Valley - Office of the City Attorney 5

7 Option one - RCW RCW : [T]he legislative body of... a city... which has annexed to... a library district, may, by resolution, present to the voters of such city... a proposition to withdraw from said library district at any general election held at least three years following the annexation to the library district. City of Spokane Valley - Office of the City Attorney 6

8 How: Option one - process Adopt a resolution to present a proposition to voters of the City to withdraw the City from the SCLD. Successful vote by City residents to withdraw from the SCLD. When: The City annexed to SCLD in 2006, so could present a proposition to de-annex at any time. City of Spokane Valley - Office of the City Attorney 7

9 Option two - RCW RCW : A... library district... may withdraw areas from its boundaries.... The withdrawal of an area shall be authorized upon: (a) Adoption of a resolution by the board of trustees requesting the withdrawal and finding that... inclusion of this area within the library district will result in a reduction of the district s tax levy rate... and (b) Adoption of a resolution by the city... council approving the withdrawal.... City of Spokane Valley - Office of the City Attorney 8

10 Option two - process In order to use this provision, it would require that the SCLD Board of Trustees adopt a resolution requesting the withdrawal of the City; AND The Board of Trustees must find that the City s inclusion in the District results in a reduction of the District s tax levy rate; AND The City Council adopts a resolution approving the withdrawal. City of Spokane Valley - Office of the City Attorney 9

11 Tax Implications of de-annexation Any city annexed to a library district and/or a fire district may levy a maximum of $3.60 per thousand dollars of assessed value. Currently, the SCLD imposes a levy of $0.50 per thousand dollars of assessed value; and the fire districts impose a levy of $1.50 per thousand dollars of assessed value. Thus, the City s current maximum levy rate is $1.60. ($ $ $1.50= $1.60) City of Spokane Valley - Office of the City Attorney 10

12 Tax Implications continued If the City withdraws from the SCLD, the City would likely no longer be subject to the District levy, effective on the first day of the year following withdrawal. Option one - State law is silent as to when the withdrawal becomes effective and how taxes will be calculated. Option two - Upon withdrawal, the taxes due for the City and District shall be calculated as if the withdrawn area had not been part of the library district..., and as if the library district... had not been part of the city.... City of Spokane Valley - Office of the City Attorney 11

13 Tax Implications continued If the City withdraws from the SCLD, the local maximum levy rate would increase to $2.10 per thousand dollars of assessed value ($ $1.50 = $2.10). Note, the maximum levy rate for the City will remain at $3.60 because the City is annexed to fire districts. The additional revenue would go into the general fund to pay for general governmental services, including library. City of Spokane Valley - Office of the City Attorney 12

14 City Responsibility for District Indebtedness The withdrawal of an area from the boundaries of a library district shall not exempt any property therein from taxation for the purpose of paying the costs of redeeming any indebtedness of the library district existing at the time of the withdrawal. City of Spokane Valley - Office of the City Attorney 13

15 Responsibility for Indebtedness Continued If the City withdraws from the SCLD, the City would likely be responsible for servicing any library district indebtedness present at the time of the withdrawal. The City would likely be responsible for District outstanding debt regardless of what procedure the City utilizes to withdraw. Note - Option one is silent with respect to a City s responsibility for the District s indebtedness. City of Spokane Valley - Office of the City Attorney 14

16 What Happens to SCLD Assets? State law is silent with respect to what happens to a library district s assets upon withdrawal of an annexed City. However, it is reasonable to assume, since the SCLD already owns the library materials and the Spokane Valley Library building, that the District would retain ownership of the library materials and building if the City withdrew from the SCLD. City of Spokane Valley - Office of the City Attorney 15

17 Conclusion - Option one How: Resolution presenting to the voters of the City a proposition withdrawing the City from the District at any general election; AND Successful vote to withdraw. Tax Implications: A likely increase of the local maximum levy to $2.10 on the first day of the year following a successful vote to withdraw. Indebtedness: The City will likely be responsible for any SCLD outstanding indebtedness present at the time of the City s withdrawal. Assets: It is likely that the SCLD will retain possession of the library materials and building if the City withdraws. City of Spokane Valley - Office of the City Attorney 16

18 Conclusion Option two How: SCLD Board of Trustees adopts resolution requesting withdrawal of the City; AND finding that the City s inclusion in the District will result in a reduction of the District s tax levy rate; AND City Council would then need to adopt a resolution approving the withdrawal. Tax Implications: It is likely that the local maximum levy would increase to $2.10 on the first day of the year following withdrawal. Indebtedness: The City will likely be responsible for any SCLD outstanding indebtedness present at the time of the City s withdrawal. Assets: It is likely that the SCLD will retain possession of the library materials and building if the City withdraws. City of Spokane Valley - Office of the City Attorney 17

19 Questions? City of Spokane Valley - Office of the City Attorney 18