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Growth Cost Benefit Analysis for Annexation

michaelskis

Cyburbian
Messages
20,051
Points
50
Many places will include a cost/benefit analysis for developments before they are annexed into a community, but it seems that every model is different to determine the anticipated revenue as part of the development vs the cost to provide services.

What do you include in your model and how were those factors determined?
 

Planit

Cyburbian
Messages
12,968
Points
52
Mskis - I did that years ago & I wish I still had the file from the old place. We assumed an average house value ($200k maybe). Taxes paid, water rate, sewer rate, cost of private trash collection, cost of fire insurance, and a few other things - private vs. public - I can't remember off the top of my head.


As far as the cost/benefit for the city, we looked at the cost of improvements, number of customers for water & sewer, potential developments (assuming the vacant lots in a subdivision would be build within 5 years or so), potential tax revenue, potential service cost for sanitation, police & fire, etc.


Call me if you want to sometime to discuss.
 

DVD

Cyburbian
Messages
14,792
Points
51
I think that pretty much covers the one I did years ago. We also included impact fees which were a big part of taxes for us. Basically, any annexation for commercial or industrial development would pass. Annexation of residential projects failed. Then someone from the city manager's office would tell us to recommend approval because the development is building all the water, sewer, and streets (normal process here). There was no arguing that long term residential was a dollar something per tax dollar where commercial was more like $0.80 per tax dollar. All those people demand services.
 

MD Planner

Cyburbian
Messages
2,378
Points
34
You know it's funny. You always hear about how single-family residential development doesn't pay for itself. But at my last job we had a consultant (I'm sure most of you know the one I mean, they've been around this kind of stuff for years) that did a study for both us and the county and their analysis was that type of development DOES pay for itself and the next best thing was office development. That was the preliminary finding and the report never got released because of the pre-conceived outcome of certain elected officials who wanted the study done in the first place.
 

bureaucrat#3

Member
Messages
43
Points
3
Our property taxes are insanely low in the state, but we do have a city occupational tax (income tax). Commercial and industrial only annex in if they need sewer or water. When I ran the numbers in my last city, the home value had to exceed $450K, be college housing or it had be age restricted to break even when schools were added to the equation. The state prohibits most impact fees, so almost all residential except infill is a loser for cities in Alabama. Current city has been trying to attract more families so, we sometimes share costs on utility improvements for residential.
 

DVD

Cyburbian
Messages
14,792
Points
51
In Arizona it's more about higher density. I think the number was 5du/ac or something like that. We get impact fees for some things, but we have no income tax for cities.
 

Gedunker

Moderating
Staff member
Moderator
Messages
11,436
Points
39
Indiana annexation ordinances require a detailed fiscal analysis for capital and non-capital services and improvements that needs to clearly show the annexation area will be served at least at the same level as "comparable" city neighborhoods.

Indiana, however, is outright hostile to annexation by cities and the general assembly tries to decapitate annexation Every. Single. Legislative. Session.

If housing is beneficial to your tax base, then your tax base is much higher than here (or at least before we went to a tiered system). Studies showed that housing consumed something like $1.63 of municipal services for every $1.00 paid. Business and industry consumed something like $0.24 services for every $1.00 paid. (No doubt the tiered system brought that a little more into alignment since owners pay no more than 1% of assessed value, while rental pays no more than 2%. Would like a new study to verify.) Still, Indiana property taxes are ridiculously low. German, Scotch-Irish frugality on display.
 

Planit

Cyburbian
Messages
12,968
Points
52
NC Legislature has gutted the annexation laws since I started in this profession. The annexation studies I did for another city in the 1990s were very good, detailed & areas were annexed. The city I work for now had a hand in rapid decline of annexations in this state (how's that for prominence) due to the administration at the time.

Back then my analysis showed that a SF property had to be worth $250k to come close to break even, with at least 1 tap connection every 150' average. A good, healthy mix of 60% residential/40% nonresidential balanced things out. Gosh that's been a long time ago.
 

DVD

Cyburbian
Messages
14,792
Points
51
Something I think Arizona actually did right is their annexation laws. You have to get signatures from 50%+1 of property owners and that must represent more than 50% of the property value. So you can't use the high value property to annex others and you can't use others to annex the high value property. Plus a bunch of rules on size, shape, providing services, etc. So you can't annex existing county residences easily, but you can annex developer owner property around them and leave them alone.
 
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