Annexation Reform: Ignoring the Smoke & Mirrors

1. Annexation Reform: Ignoring the Smoke & Mirrors Daren Bakst Director of Legal and Regulatory Studies John Locke Foundation March 6, 2010 (revised and updated March 10, 2010)

2. Agenda • Context and Terminology • What is Real Reform? • Analysis of HB 524 • Recommendations

3. Context and Terminology Forced annexation: Exists to help local politicians maintain a means of bailing themselves out of their financial mismanagement.

4. Context and Terminology

5. Context and Terminology

6. Context and Terminology

7. Context and Terminology • League: Muddles forced annexation with city-initiated annexations • This is inaccurate—designed to make it sound as if a municipality could never annex an area on its own

8. Context and Terminology • Forced annexation is a process that allows municipalities to unilaterally force individuals to live in municipalities • Forced annexation is a type of city-initiated annexation, but so are annexations where people can vote • In fact, 39 states have city-initiated annexations—they should not be confused with forced annexation

9. Context and Terminology Three Types of Annexation in NC 1) City-Initiated Annexations • Forced annexations • Annexation without force (e.g. Vote) 2) Voluntary Annexations • Satellite Annexations 3) Legislative Annexations

10. What is Real Reform? “Who are you going to believe, me or your own eyes?” - Groucho Marx

11. What is Real Reform? Real reform isn't complicated: Annexed property owners should have a real voice in the annexation process and they should be provided at least one service that offers them a meaningful benefit.

12. What is Real Reform? Real Voice • A municipality has no relationship with the annexation victims (they didn't choose to live in the municipality and didn't vote for the municipal officials) • Have not consented to be governed by the municipality • No different than if Cary annexed Raleigh residents

13. What is Real Reform? Real Voice • But don’t annexation victims have representation with the state legislature? • This is like saying that city and county residents should not be able to vote for city and county officials because the state legislature represents the residents. • Legislature represents people on annexation generally, but not on specific annexations.

14. What is Real Reform? Two Ways to Have a Real Voice • 1) Majority vote (67% of states that have annexation of unincorporated areas have votes) • 2) County Approval (About half of states that have annexation of unincorporated areas have county approval) • At least it is a representative voice

15. What is Real Reform? Municipalities annex people and don’t provide them one single service that an area needs.

16. What is Real Reform? • Nolan. v. Village of Marvin (2006 NC Supreme Court Case) The primary purpose of involuntary annexation, as regulated by these statutes, is to promote “sound urban development” through the organized extension of municipal services to fringe geographical areas. These services must provide a meaningful benefit to newly annexed property owners and residents, who are now municipal taxpayers, and must also be extended in a nondiscriminatory fashion. (Emphasis added.)

17. What is Real Reform? 1) Does an area need services? • If it doesn’t, then the service obviously doesn’t provide a meaningful benefit. 2) What types of services should be covered? • Water and sewer, police, and fire (maybe waste collection)

18. What is Real Reform? If a municipality can prove that an area is in need of just one service, that should be fine. This does not mean: • Contracting out services • Duplicating existing services (not meaningful, for example, if a municipality provides one police officer to an area with excellent police protection)

19. What is Real Reform? • A secondary, but important reform: Municipalities should pay for water and sewer infrastructure costs • Would help some areas—those areas that are being provided water and sewer • Insult to injury

20. Analysis of HB 524 HB 524 Compared to Real Reforms • Majority Vote: No • County Approval: No • Services with Meaningful Benefits: No • Water and Sewer Infrastructure Costs Paid by Municipalities: No • Batting Average: .000

21. Analysis of HB 524 HB 524: A lot of nothing is still nothing. The bill uses a lot of smoke and mirrors to give the impression that something is being done.

22. Analysis of HB 524 The “Vote” Provision • Annexation victims must get the signatures of 15% of the total number of registered voters in the municipality and annexed area. • Time period: A little over a year • Problem: Why would municipal residents want to sign the petition?

23. Analysis of HB 524 The “Vote” Provision Example: Raleigh* Would need 38,057signatures *Based on 15 percent of the registered voters in Raleigh. It does not take into account the votes needed due to the size of the annexed area nor does it include the extra signatures needed due to make-up for rejected signatures.

24. Analysis of HB 524 The “Vote” Provision Example: Goldsboro* Would need 3,304signatures *Based on 15 percent of the registered voters in Goldsboro. It does not take into account the votes needed due to the size of the annexed area nor does it include the extra signatures needed due to make-up for rejected signatures.

25. Analysis of HB 524 The “Vote” Provision “Reward” for Getting Signatures • City residents instead of city council would determine if annexation victims are annexed. • Voters in the municipality would dominate the number of voters in annexed areas. • The vote would generally take place in general elections which would help to ensure higher municipal turnout. “If the municipality's next general election is to be held more than two years from the determination and the municipality does not abandon the proposed involuntary annexation, the resolution setting the date for the referendum shall make that date coincide with the next countywide general election.”

26. Analysis of HB 524 The “Vote” Provision But maybe the annexed property owners can convince the city residents? • Property owners still would have no voice, but would just be left to “begging” city residents. • Furthermore, municipalities would bring in the big guns.

27. Analysis of HB 524 The “Vote” Provision League Action Alert: "Third, this divisive referendum requirement would force municipal officials to beg the chamber of commerce or other groups to contribute private funds and run educational campaigns urging voters to approve proposed annexations."

28. Analysis of HB 524 What about services that provide meaningful benefits? • HB 524 now makes it official: Municipalities can clearly annex areas without providing one meaningful service to an area.

29. Analysis of HB 524 • Current Law: Real possibility that NC Supreme Court would clarify that games being played by municipalities aren't allowed (such as duplicating services). • HB 524 would expressly allow duplication of services!

30. Analysis of HB 524 • Completely ignores whether an area needs a service • How “meaningful services” works under HB 524: 1) Municipality must be able to provide two of the following services to its own residents: Police, fire, solid waste, street maintenance, water, or sewer. Again, it doesn’t matter if the area already has the service so long as a municipality is providing, for example, solid waste and street maintenance services to its citizens.

31. Analysis of HB 524 2) The service doesn’t even have to be provided to municipal residents by the municipality—it can be contracted out. 3) For a municipality that is providing police protection to an annexed area, the municipality only needs to provide a “higher level of service.” This means one extra police officer.

32. Analysis of HB 524 • HB 524 takes the concerns about meaningful services and does the exact opposite of what was needed. • To make it look like something is being done, the House used the term “meaningful services.” • The legislation is a benefit to the League because it preempts the NC Supreme Court from clarifying that these games with services are prohibited.

33. Analysis of HB 524 But under HB 524 municipalities are required to provide water and sewer to property owners within 3 years. Isn’t this a real reform? • Before getting into the details of this, this has nothing to do with real reform and at best could limit the size of annexations—but it won’t even do that.

34. Analysis of HB 524 • Existing law: When municipalities are required to provide water and sewer to property owners, they may only get out of the sewer requirement if the installation of sewer is not economically feasible due to the unique topography of the area. (Emphasis added) • HB 524: When municipalities are required to provide water and sewer to property owners, they may get out of the sewer requirement for any fiscal reason (it is not connected to the topography anymore). Note: Municipalities must “provide septic system maintenance and repair service until such time as sewer service is provided to properties similarly situated.”

35. Analysis of HB 524 More on the 3 year requirement: • Under existing law, at least people have some ability to push off paying for water and sewer—under HB 524 they would have to pay no matter what (choice has been removed). • Municipalities that have actually discounted infrastructure costs will not be as “generous.” Even without the huge fiscal exception, municipalities would still find ways to cover costs.

36. Analysis of HB 524 Recommendations • The core reforms need to be the focus. Tangents on unrelated issues do nothing but confuse the matter. • Compromise position: County approval • Problem: County commissioners didn’t support county approval

37. Analysis of HB 524 Recommendations Enemy #1 for Reform Advocates: County Commissions • Municipalities and the League are like drug addicts: they can’t help but need forced annexation to cover up for their mismanagement—not to mention, why should they care about people living in unincorporated areas? • For 50 years, counties have sat back and watched their constituents get abused by municipalities (They do represent you!).

38. Analysis of HB 524 Recommendations • Legislature should pass a bill with the core reforms, like SB 494 • Legislature should even consider blowingup all the bills and just adding a vote, county approval, or real services protection to existing law.

39. Analysis of HB 524 Recommendations • Get past the smoke and mirrors • Believe our own eyes • Conclusion

40. Analysis of HB 524 Questions?