Despite pressure and incentives from county and state officials, Kirkland’s Potential Annexation Area (PAA), which includes Kingsgate, Juanita and Finn Hill, will stay part of King County for now.

An April 15 City Council study session on annexation ended with an informal straw-poll split 4-3 against moving forward. Council members Jim Lauinger, Jessica Greenway, Tom Hodgson and Dave Asher lined up against the proposal.

Breaking the tie, Mayor Lauinger said the city is facing a worsening financial outlook that it must consider first.

“This is a risky financial endeavor,” Lauinger said. “I can’t turn my back on real prudence.”

He also said it would be impossible to both annex the PAA and then raise taxes if poor revenues continue.

Council members voting against moving forward cited new budget projections showing the city will face a $4.5 million deficit in 2010, which would grow in every scenario involving annexation despite a state subsidy estimated to be worth $40 million over 10 years.

“This is an opportunity that is never going to get better, but it’s still bad,” Hodgson said. “It’s the right thing to do. I want to do it … But I just don’t see it working.”

Greenway had supported the annexation effort as recently as a few months ago.

“I was cautious but optimistic,” Greenway said. “I cannot responsibly support a decision that will lead to financial disaster.”

She also said she believes the majority of residents don’t support the annexation plans.

The decision almost certainly means the city will not place a measure on a 2009 ballot for PAA voters to decide on. It also means a state tax subsidy incentive set to expire in 2010 — meant to encourage either incorporation or annexation of developments in the county to prevent sprawl — will go unused. City officials said the renewal of such money is unlikely, given the state’s own projected deficit.

The informal study session vote came after a number of delays on a decision, with the Council requesting more information on annexation options, such as phased expansion or shifting around city services.

In a change from previous plans, Kirkland Police Chief Eric Olsen said three police districts could cover an area that had previously planned for four, showing optimism the force could provide the same level of service presently enjoyed in Kirkland.

“We may have to assess each call so we can respond in a timely manner,” he said. “But based on the numbers of officers that we’ll have (if annexation occurred), and looking at the full call load that we anticipate in the full growth model, I’m confident that we can do what we need to do, given the chance.”

Council members Joan McBride, Mary-Alyce Burleigh and Bob Sternoff supported the annexation plan, which City Manager David Ramsay recommended and called “manageable.”

A forecast of declining tax revenues associated with a nation-wide economic downturn, reduced services for the planned PAA areas and worries of rising budget commitments weren’t enough to deter Burleigh, who remembered the gerrymandered annexation of the Totem Lake commercial area, which left some Totem Lake neighborhood residents out in the cold. Since then, she said, the city has successfully added other communities with few drawbacks.

“In 1989, we annexed North and South Rose Hill and Juanita and we managed to get through that in good grace. The city has handled this before,” she said.

After the meeting, Johanna Palmer, a member of the pro-annexation group “Citizens for One Kirkland,” addressed the council bitterly.

“I’m disappointed with the lack of confidence of the Council in its staff,” she said. “We don’t want to be divided up.”