Proponents of turning Fairwood into a city got an important decision Thursday night, when a key state board voted 8-3 to recommend the incorporation of what could become a city of about 25,000 residents.

However, the action by the Washington state Boundary Review Board for King County is just a step in the process toward creating a City of Fairwood. The final decision rests with the registered voters within the proposed boundaries of Fairwood.

Next, the proponents, Fairwood Municipal Initiative, will work with the King County Council to set a date for the election, likely this fall.

The decision Thursday was preliminary. The board’s staff now will prepare a formal resolution the board will consider at its June 17 meeting.

The board also opted not to consider a request from J. Paul Blake, who opposes incorporation, that it remove the proposed Red Mill annexation area from the incorporation boundaries.

The Red Mill annexation, which includes much of the Fairwood’s commercial core that generates sales-tax revenue, can’t move forward until the issue of cityhood is resolved. A second proposal to annex a big chunk of Fairwood to Renton is on hold, too.

In making its decision, the board considered several factors and objectives outlined in state law, including the financial health of a new city.

Weighing heavily on the minds of the three board members who voted no was the current state of the economy and whether now is a good time to start a new city. For them, the financial risk is just too great; they questioned whether Fairwood could generate the revenues to operate the city.

The board’s decision came after it was briefed extensively by the consulting team it contracted to prepare a financial feasibility study and public testimony during three evenings.

The hearings were held in the Fairwood Community United Methodist Church in the heart of Fairwood Greens, one of the large residential neighborhoods that characterize this relatively affluent community.

All of the options open to Fairwood residents – cityhood, annexing to Renton or staying unincorporated – carry risks and rewards, said consultant Randy Young of Redmond-based Henderson Young and Co. In essence, what’s happening now is a risk assessment, he said.

As expected, public testimony was split.

The union representing firefighters who would serve the area oppose incorporation, saying a new city is an unnecessary duplication of government services and could result in lower service levels. Proponents countered that service levels wouldn’t suffer with a new city and would increase.

Concerns were raised about whether tax increases would be needed to pay for the services residents want. A potential controversy is the imposition of a utility tax, which would raise millions of dollars for the city.

But a City of Fairwood would get a multimillion-dollar boost because of a new law that gives the sales tax to the jurisdiction where goods purchased online are delivered, rather than to the city from where they are shipped.

That “streamline sales tax” is expected to help suburban cities with little commerce but lots of neighborhoods balance their budgets.

Joe Giberson, president of Fairwood Municipal Initiative, said cityhood means local control over the city’s future and its tax revenue.

And the study finds a City of Fairwood is “financially feasible,” he said. The incorporation study done in the 2005/2006 incorporation effort raised doubts about whether a City of Fairwood would pencil out financially.

The new sales tax laws and sharper pencils are two reasons Fairwood is in a stronger position today, according to Giberson.

Incorporation lost narrowly in a September 2006 election, 48.22 percent yes to 51.78 percent no, a difference of 270 votes. Then, nearly 60 percent of the 13,084 registered voters cast ballots.

The opponents point out they had organized the Go Vote No campaign just three months before the vote.

The issue of who or what would govern the Fairwood area was first studied 10 years ago. The options were outlined in a report in 2000. The public meetings this year on the incorporation study prepared by Henderson Young and Co. drew hundreds of people and generated about 100 written and oral comments.

However, Young, the consultant, said Tuesday night it wasn’t the role of the consultants to make a recommendation about Fairwood’s future. That responsibility lies with the boundary review board and ultimately the public.

“It’s not our job to say it does or does not work,” he said of a City of Fairwood.

Rather than build a budget from scratch as was done in the 2005/2006 incorporation study, the consultants used a stand-in city for Fairwood. They based the study on the financial experiences of nearby Maple Valley, but also used information specific to the unincorporated Fairwood area from a variety of sources.

Concerns were raised about the current recession and whether it’s wise to base financial assumptions when revenues are taking a big hit or whether a new city could survive at all. The counter is that with lower revenues, the city would create a lean government to begin with.

Young, who has responded to that issue many times, said the real question is whether Fairwood would work in “more or less normal times?” The consultants focused on what’s the experience in an average year and suggested that if Maple Valley could tighten its belt to make ends meet in tough times, so could any city, including Fairwood.

Using charts and diagrams, the consultants explained the assumptions about the proposed city’s revenues and finances. The analysis showed that the city’s three key funds would have a surplus, that could build to about $26 million by 2015.

The city could use that surplus to pay for discretionary services, such as parks and human services. Some board members expressed concern that parks and human services would get short-changed in Fairwood’s budget, or likely not funded at all.

The biggest sources of revenue for the city are property taxes, sales taxes and the utility tax, which a new City Council would have to impose. The biggest costs are public safety, public works and administration.

THE FAIRWOOD STUDIES

The Fairwood incorporation studies are available at the end of this earlier story.