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Annexation: A thriving municipality offers benefits for the whole community

By S. Ellis Hankins
For the Salisbury Post
You live in a subdivision outside of town. One day, you receive notice that the town is starting the process to annex your home and that town officials can do so without your voting on this issue.
That’s not right, you say. You don’t need or want municipal services. You don’t use municipal services now. You pay sales taxes when you shop inside the city and pay gas taxes that pay for roads. This is just town officials grabbing more revenue. Besides, why doesn’t the town go annex lower income areas that really want and need municipal services? This city-initiated annexation is unfair and undemocratic.
Let’s examine these objections to annexation.
Municipal services
North Carolina’s law is based on the principle that what is urban should be municipal. The vast majority of development in North Carolina has been suburban in nature in recent decades. This density of development creates needs for urban ó or municipal, if you will ó service levels. Such services may include streets and transportation, police and fire protection, garbage collection, land use planning, parks and recreation, water, sewer, stormwater and others.
When areas adjacent to a city or town develop to certain densities, as specified by law, the areas become eligible for annexation. The area has become municipal in character and then becomes part of the city or town.
I already have fire protection, sheriff’s protection and all the necessary services, says the person who doesn’t want to be annexed. You just want my property taxes, and I will get no additional services in return.
People being annexed receive higher levels of police and fire protection services from a municipality. The newly annexed also receive the other services provided by that particular city or town. Are these services “worth” the taxes paid? The answer to that obviously is up to the individual.
As for costs, we can offer some observations on a statewide basis.
According to the Local Government Commission, a division of the office of the State Treasurer, 19 percent of all municipal revenues for fiscal year 2007 came from municipal property taxes, and 19 percent of all expenditures went for public safety.
Another major expense for cities and towns is transportation. In FY 2006, municipalities spent about $1 billion on transportation programs. While municipalities do get a share of the gasoline tax ó about $132 million annually ó that is only a portion of what is spent at the local level on streets, mass transit and related transportation programs.
And, because of growing congestion problems and the state’s limited transportation funding, some cities and towns have spent local funds to upgrade state roads.
Supporting city businesses
People fighting annexation sometimes remark that they support a municipality through paying sales taxes when shopping in the city. Businesses within cities and towns certainly appreciate all customers, but distribution of local option sales taxes in North Carolina is complicated. How much a city or town gets in sales tax revenues does not depend at all on whether a purchase was made inside the city limits.
All of this state’s local option sales taxes are levied at the county level, collected by merchants, sent to the state and then redistributed back to local governments. Once the proceeds go to the county level, the board of county commissioners decides how to divide the money between the county government and the municipal governments in that county. Statewide, counties get about 71 percent of all local option sales tax revenues and municipalities get about 29 percent.
Utility services
Perhaps the most controversial municipal service for the newly annexed is water and sewer services. There are misconceptions about what is required, as well as different extension policies among municipalities. In some cases, municipal water and sewer already is available in the unincorporated areas and so extension is not an issue.
The annexation law requires that a municipality extend the water trunk and sewer outfall lines so that property owners can secure the services “according to the policies in effect in such municipality for extending water and sewer lines to individual lots or subdivisions.” Towns with under 5,000 residents have one year after the annexation to let contracts and start construction. Cities over 5,000 have two years to complete construction.
In addition, for cities over 5,000 there is a requirement that a property owner of an occupied building can request in writing an extension of service to the individual property according to the “financial policies” in effect for such extensions. Property owners receive notice about that important right. For this request to become a part of the annexation service plan, the request must be made no later than five days after the public hearing.
In other words, the municipality must put in the main lines and then offer extension as it would to any other property within the city.
In many municipalities, this means the property owner must pay. In some cases, hookup to the municipal system is required. In other instances, a property owner doesn’t have to hook up to a municipal system until his well or septic tank fails. Some cities, including Salisbury, charge only a portion of the actual cost of extending the lines to individual property. Assessments usually can be paid over several years.
Infrastructure is expensive and having to pay assessments for water and sewer lines rubs some people the wrong way. They believe that the municipality should pay these costs. But municipal residents with these services already have paid these costs, either directly through assessments or as part of the cost of buying their land or houses.
The time requirements can be confusing. If someone waits to request extension, they may still think the lines must be in place within two years after annexation. But that requirement is only for requests made within five days after the public hearing. Cities and towns need to make sure that those being annexed understand the timetable and requirements.
Why not a vote?
Annexation opponents say annexations should be subject to a vote of the people. First of all, which people? The people being annexed? Or the property owners? These may not be the same.
Second, the power to set municipal boundaries rests with the General Assembly. Before legislators delegated this authority to municipal governing boards, the General Assembly passed local bills to set corporate limits. Citizens did not always get a vote on whether a boundary would change.
The General Assembly delegates many powers and responsibilities, both to local governments and to non-elected bodies, such as regulatory commissions. We rely on the General Assembly’s oversight and the court system to address any problems.
The same is true with annexation authority. The General Assembly has jurisdiction here and the courts offer remedies if a city or town fails to follow the law.
Benefits for communitySo far we have looked at the costs and benefits of annexation for the individual being brought into the town, but what about the benefits of annexation for the entire community?
North Carolina’s cities and towns are fiscally sound and economically strong, thanks to a number of factors, including annexation. Cities and towns that are in good financial shape can build the infrastructure and amenities needed to attract new jobs and provide services to residents and businesses. Our cities and towns are job centers. More than 85 percent of all jobs in North Carolina are in the metropolitan areas, and more than half of the jobs in the metro areas are in the cities.
In other states, prohibiting annexation has led to deteriorating city centers, multiple mini-cities with duplicative services and a proliferation of overlapping tax districts that are confusing and financial draining. One study found that fragmented governance at the metropolitan level reduces that area’s ability to compete economically.
North Carolina’s annexation laws have helped keep strong bond ratings for our cities and towns. Changing those laws will adversely affect future bond ratings, costing taxpayers millions of extra dollars on higher bond interest rates.
People locate near cities and towns because of the proximity to jobs, healthcare, leisure and cultural amenities, educational opportunities and other services available in an urban area. As more and more people make this decision, the areas adjacent to a city or town become urban or municipal in character. Annexation is a means to spread the costs of the services and benefit to more of those who benefit from them.
North Carolina citizens need fiscally strong, vibrant cities and towns. Annexation is a positive factor that should not be eliminated. Annexation helps keep North Carolina moving forward.

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