Ending Forced Annexation in Texas: The Regulatory Takings Inherent in Annexation

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Ending Forced Annexation in Texas: Hon. Jess Fields & James Quintero, TPPF, Center for Local Governance (July, 2015)


The Fiscal Implications of Involuntary Annexation

The takings aspect of annexation does not simply come through taxation, however. There is also a very real regulatory takings inherent in annexation that, unlike the new taxes annexation begets, is rarely discussed. This is the regulatory takings aspect of annexation. It is, perhaps, best illustrated with an example.

Suppose you own 50 acres within the extraterritorial jurisdiction (ETJ) of a city and are within the city’s short-term annexation plan. Because you are not presently zoned, being in the county, you are reasonably free to improve your property as you wish. You may be subject to some restrictions the city has placed upon the ETJ, but these likely will not affect your ability in any significant way to improve your property as you desire. Now, suppose you have plans to build a sizeable 5,000 sq. ft. steel shed on a part of your property, and while it is a fairly large structure, you have no plans to wire it for electricity, water, or wastewater. Your plans have been drawn up but not yet implemented. As long as you are in the county, the materials, labor, and services required to build your shed will cost $30,000.

Now suppose that the city has decided to proceed with annexation of your property. The annexation will place your property in a zoning designation that prohibits the building of a basic steel structure, so you will have to meet the development requirements of the city you now reside in. In addition, you will have to meet the requirements of a masonry ordinance which requires the external use of masonry on any new building. Further, you will be forced to provide utilities to whatever detached structure you build, and adhere to a much stricter and more updated set of building codes.

Once you are annexed, still wanting to build a shed, you modify the plans to meet the codes and requirements of the city and figure up all the costs, and the most basic 5,000 square foot shed you can build will now cost $80,000.

That $50,000 difference is a loss to you—you did not want, desire, nor need the additional cost or features. Nor did you desire or need the additional regulatory process and approval process necessary to build the shed within the city. Your shed might even be located in a stand of trees where no one can see it. Regardless of all these considerations, you will still be subject to these additional regulatory costs.

That $50,000 represents a takings that affects you directly. You now face a choice of either paying an additional $50,000 to build what you previously could build much more cheaply, or you must choose to not build the shed, in which case you have lost the value of the shed entirely, both to you and your property value. The resultant unrealized gain in property value also represents a financial loss, although it is impossible to calculate exactly. Needless to say, you do not come out a winner because of the additional cost you must bear.

The regulatory takings aspect of annexation is rarely discussed, but it is all too real. Every year, in many cities, annexation represents a significant regulatory takings that residents are unlikely to be aware of, because the current annexation process does not require an explanation of all additional regulatory burdens upon newly annexed properties. These property owners, therefore, are often very much unaware of all the regulations that will greet them upon their entry into the city. Even if they want to be annexed, they may not understand the scope of new regulations that will affect them and what it will do to their ability to improve and use their property.

At the very least, however, if property owners and residents were given the chance to consent to annexation, or if they decided to be annexed of their own accord, they would be providing the government with their consent to regulate them. Being annexed entails much more than services and taxes; this regulatory feature must be considered as well, because annexed property owners and residents may lose rights that they take for granted in an unincorporated area. If annexed involuntarily, this is an exceptionally unjust situation.