Impact of annexation: Roads End

Roads End tops list for annexation

The News Guard

Lincoln City’s recent adoption of an ordinance that allows the City to force areas within the urban growth boundary to agree to annexation in exchange for continued water supply has laid the foundations for bringing Roads End within the city limits.

Consisting of some 715 homes to the north of town, Roads End is at the top of the City’s annexation list.

Officials say the area benefits from City services without contributing to the general fund – a claim rejected by some residents and examined in last week’s edition of The News Guard.

This week, The News Guard looks at what annexation would mean for Roads End property owners in terms of additional tax and increased access to City services.

Roger Middleton of N.W. Neptune Avenue said he sees limited benefits from joining the city.

“We feel that in return for being taxed that additional amount, we would receive improved police service and nothing else,” he said. “The City would say at last we are paying our share.”

City Manager David Hawker said that in addition to 24/7 police protection, Roads End would benefit from improved street maintenance, regulation of the area’s many vacation rental dwellings and better access to local government.

Financially, the biggest change for homeowners would be the addition of City property taxes, which include a general fund levy as well as levies earmarked to pay off open space and wastewater plant construction bonds.

The taxes are levied on a home’s assessed value – a figure that is limited by state law and normally about 60 percent of its market value.

Data from the Lincoln County Assessor’s Office show assessed values in Roads End vary dramatically between oceanfront and non-oceanfront properties.

The median assessed value for Roads End’s 110 oceanfront homes is $450,000, making for an estimated City tax bill of $2,278, of which, $1,844 would go to the general fund.

Meanwhile, the area’s roughly 600 non-oceanfront homes have a median assessed value of $275,000, making for estimated City taxes of $1,392, with the general fund getting $1,127.

Residents would also see some costs decrease, most notably water and sewer rates, which would be cut in half immediately upon annexation.

Savings from that cut depend on each property’s water use, but according to the City’s economic consultant, Raymond Bartlett, Roads End property owners would save an average of $467 per year.

Inclusion within the city limits would also relieve Roads Enders of their current tax obligation toward the Lincoln County Library District because they would be paying for library access through their City property tax.

Inclusion within the City’s streets program would likely reduce the amount that homeowners currently pay from their own pockets to maintain streets that do not feature on the County’s maintenance list, although this savings would vary greatly from owner to owner.

Once all the costs and savings are totaled, a median oceanfront property is looking at an additional annual burden of about $1,651, while a non-oceanfront home would see an increase of about $824.

One silver lining for homeowners is although the increase in property taxes will likely outweigh the water and sewer savings, property tax can be listed as a deduction on state and federal tax returns while utility bills cannot.

Many of the property owners in Roads End are retirees and would be eligible for a state program that allows homeowners to defer their property taxes until the property sells, whereupon the owner repays the state from the sale proceeds.

The program, run through the Department of Revenue, is open to people aged 62 or older as well as people of any age who are receiving Social Security disability payments.

It allows homeowners to defer 100 percent of their property taxes as long as their income stays below a federal limit – set at $38,500 in 2009.

If an enrollee’s income exceeds the federal limit, the tax deferral is gradually phased out.

Deferring taxes is not without its costs. The state charges a simple (not compound) interest rate of 6 percent on all deferred taxes – meaning that an owner deferring $1,000 in taxes each year for five years would accumulate $600 in interest fees on top of the $5,000 deferred tax bill.

The program does not prevent homeowners listing their property taxes as a deduction when filing state and federal income tax returns.

For more details, go to the Department of Revenue’s property tax Web page at www.

shtml and click on the “Property Tax Deferral” link.

Hawker said Roads End property owners who defer their taxes could come out ahead when the property is eventually sold, saying a guaranteed water supply could boost house prices in the area.

“Right now,” he said, “if we run short of water, our plan calls for shutting off water outside the city.”

However, Carl Felts, who has sold numerous homes in Roads End in his position as real estate agent with Coldwell Banker Gesik Realty, said that in his experience, the lack of certainty over the area’s water supply has not had a negative effect on sale prices.

“It truly hasn’t,” he said, adding: “I think they [buyers] truly don’t believe that the City would leave people without water.”

Felts said he could not predict whether annexation would affect the area’s property values.

Judy Pluard, a real estate agent with Windermere Real Estate and also a Roads End resident, agreed that buyers do not seem to believe that the City would ever shut off their water.

Pluard said the prospect of City regulation of vacation rentals could affect property prices, discouraging purchases by investors who are currently able to operate without government restriction.

She said buyers could also be put off by the higher tax rate if the area is brought within the city limits without a clear indication of what services residents will receive in exchange for their higher tax bills.

“They [the City] need to sell it,” she said. “They don’t need to try and push it.”

Costs and concerns

The Monday, Aug. 23, meeting of Lincoln City Council brought two developments in the Roads End annexation issue.

First, City Manager David Hawker announced the findings of reports on the estimated financial impact of annexation of Roads End and Neotsu.

He said the City commissioned its longstanding economic consultant Raymond Bartlett to compile the reports.

Hawker stressed the City has no plans to annex Neotsu, saying the area was included for comparison purposes.

Bartlett concluded that the annexation of Roads End would net the City $606,849 per year in additional revenue – taking into consideration additional property taxes, franchise fees and state revenue sharing as well as the increased costs of extending services such as police protection and road maintenance to the area.

Meanwhile, he said, annexation of Neotsu would result in a net gain of just $117,000 per year.

Bartlett also calculated that the average Roads End property would see an increased financial burden of $691 per year after increased taxes and lowered utility bills were take into consideration.

That figure differs from those calculated by The News Guard for one very simple reason. When calculating the average assessed value of properties in Roads End, Bartlett included roughly 200 bare lots, which dragged the average figure down to just $249,000.

Meanwhile, the News Guard confined its calculations to developed lots, basing estimated property tax bills on the median assessed values of oceanfront homes ($450,000) and non-oceanfront homes ($275,000) as provided by the Lincoln County Assessor’s Office.

The City is accepting comment on the studies for 30 days. To order an electronic copy, contact City Hall at 541-996-2151.

The second development at Monday’s meeting was a condemnation of the City’s Roads End annexation policy from Ron Usher, a Roads End resident who is on record as supporting the area’s inclusion within the city limits.

Usher said that as a former assistant city manager he was involved in several annexations and never threatened to cut off people’s water to force their consent.

“We would take the time to encourage people to join the city and make it a better place for all concerned,” he said.

Usher said the City should reject the forced consent policy and instead set a date by which it expects annexation to occur.

In the meantime, he said, the City should engage with the Roads End Improvement Association to work out residents’ concerns about City taxes, ordinances and zoning.

Usher said the City should also offer incentives for people who sign consents prior to the annexation deadline, such as reduced utility bills or phased-in taxes.

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Filed under Annexation, Lakeside

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