As Municipalities Consider Annexation, the Laws Could be Changing

By Deen C. Rogers, CPA, Principal, February 21, 2013
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We saw a number of annexation efforts in 2012, and that trend will probably continue in 2013.

Why are so many municipalities considering expanding their boundaries?  The reasons are probably as numerous as the communities considering an annexation, but several reasons stand out:

1. Equity and fairness.  Residents living on the fringes of the municipality are getting many services, but often not paying for them.  Providing utility services to areas outside the city has also come under attack.
2. Economic development.  If your municipality has run out of land for additional economic growth, annexation is one way to bring new businesses and residential development to your community.  Local governments are the primary facilitator of economic growth. 
3. Budget management.  This can work both ways.  From the city or town’s perspective, reduced revenues due to economic conditions or property tax caps may create a financial need to expand their tax base.  There’s no doubt some municipalities’ growth plans accelerated as revenue challenges became more acute over the past few years. From the taxpayers’ perspective, the economics of paying for services may cause them to request a voluntary annexation, so they can be served under a wider umbrella. 
4. Obtaining critical mass.  Some areas propose joining together because it gives them additional clout in determining their area’s future in terms of zoning, planning and development.

Annexation can be an emotional community issue, so it is essential to build a strong case and communicate it well.  Every annexation must have a fiscal plan that includes estimated costs for providing services, financing methods, and a plan for organizing and extending services.  Although not a statuatory requirement, it is also highly recommended that an analysis of circuit breaker impact be prepared to avoid unintended consequences.

If your municipality is considering annexation now or in the future, please be aware the rules and procedures could be changing.  We are watching nine bills in the Indiana General Assembly that may impact the annexation process.  Some bills contain only minor changes, such as one that would add municipally owned water or wastewater treatment facilities to the list of allowable non-contiguous land that can be annexed. Other bills may have a greater impact.  One proposed bill requiring signatures from a majority of landowners would essentially eliminate involuntary annexations.

We’re still a long way from the end of the legislative session; these bills could be amended before passage or go away altogether.  Either way, we’ll keep you informed if legislative changes will affect future annexations.

Umbaugh has advised numerous communities regarding their annexation plans.  If you have questions about whether an annexation would be advantageous or the procedures to accomplish one, please contact us at footnotes@umbaugh.com.

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Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at footnotes@umbaugh.com.