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Ending Forced Annexation in Texas: Fiscal Implications of Involuntary Annexation

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


The Fiscal Implications of Involuntary Annexation

Annexation has been noted to have uncertain fiscal implications for the communities involved, both the annexing entity as well as those being annexed. Edwards (1999) noted that “… the fiscal effects of annexation are not obvious, nor are they easily predicted.”36 The fiscal consequences of an annexation depend largely upon the circumstances in which the annexation occurs, as well as variables in the cost of service provision which may or may not be out of the control of the municipality.

One difficulty that arises in estimating the costs to service annexed areas is in the frequent necessity of issuing debt to finance new projects that may become necessary as a result of annexation. Edwards and Xiao (2009) highlighted the fact that debt is often taken out to finance the service costs of annexation.37 Annexation violates tenets of American RepublicThe bond issuances to pay for extending services to annexed areas will expand the debt burden of the municipality whether or not the tax base ever expands through development in the annexed area. If the annexed area fails to develop in such a manner as to expand the tax base to cover the debt service, taxpayers will nonetheless be on the hook for those expanded services.

Edwards and Xiao (2009) also discovered that cities who annex frequently have lower per-capita expenditures on police and fire services.38 Why is this? This is likely not the result of any efficiencies in servicing more spread out areas, but the fact that to properly do so would be much more expensive. As a result, municipalities face a strong disincentive to expand such services, especially in light of the fact that expensive capital projects such as water and wastewater extensions are so often necessary. That means less spending on police and fire per capita as a result. This is supported in much earlier research that focuses on Texas cities with Cho (1969), who found a “…slight correlation with higher taxes and moderate correlations with lower expenditures…”39

The increase in service area is not merely correlated to lower per capita spending, but may also result in other inefficiencies in government service provision. Edwards and Xiao (2009) further concluded that while efficiencies may be more difficult to achieve with lower density resulting from annexation, municipalities that maintain higher density, perhaps through less annexation, are more likely to benefit find such efficiencies.40 “Our research shows that service delivery and administrative efficiencies are certain with higher density development,” they write.41

An interesting dichotomy arises here between the professed planning preferences of many local officials and their actual practice in the policy realm of annexation. Many in the planning community seek denser development in the interest of having more sustainable services, and for other reasons. This does not mean policies are necessary to force such densities upon communities; rather, that these sorts of policies, often referred to as “smart growth,” are in widespread use.

One could imagine that the need for such policies would be diminished if communities were to, as it were, “live within their means” when it came to territorial expansion. It is prudent to ensure that the services of the community, whatever they might be, are well provided to the residents of the population within the existing boundaries before expanding rapidly. It is the wild expansionist tendencies of those cities practicing aggressive annexation that is often irresponsible, from the standpoint of providing services.

Annexation and BRAC Talking Points

Used by James Quintero TPPF, Center for Local Governance at House Hearing Defense and Veterans Affairs Committee.
Click here to download printable pdf copy.

Main Point: This committee is conflating two separate issues, and there is no evidence to suggest both aims cannot be successfully achieved simultaneously.

Issue 1: Protecting citizens from forced annexation:

When cities can forcibly annex citizens miles from city centers against their will, Texas property owners find themselves living under new governments, ordinances, taxes, and debt in which they never had a say. In the most egregious cases of forced annexation, residents gain no new services from the city while their appraised property value and taxes skyrocket. Governor Abbott called this “land piracy” in his press conference for a special session. Others have referred to it as taxation without representation.

Ending forced annexation simply requires a vote or petition process in which the majority of citizens being annexed have the opportunity to give their consent. Legislation that would have preserved this right to vote by the citizens was filibustered and is now a special session item.

Issue 2: Protecting the value of our military installations:

There is no denying the economic contribution of our state’s military installations. Every Texas lawmaker wants to do everything we can to protect our bases as long as we are also protecting the rights of Texas citizens. Fortunately, there are a number of tools in the toolbox that we can and have used to increase the value of our bases and to protect their mission. In fact, the very Governor who put annexation reform on the call for a special session also fought to include $20 million for DEAAG funding in the budget and has a task force dedicated to protecting our military bases.

Our military is important not just because of the economic gains it brings to our state and cities, but more importantly, for its critical and storied role in defending our freedoms. These freedoms undoubtedly include the right to determine who governs us and to have a democratic say at the federal, state, and local level. That’s really what annexation reform is all about – protecting the right of the citizen to vote. 

Existing Tools to Address Military Encroachment

Dark Sky Ordinances:

Dark sky ordinances are in place around Camp Bullis in Bexar and Comal Counties. For those that suggest they are not enforced as well or as often as they should be, that is an enforcement issue. It may be a county funding issue. It’s most certainly not an annexation issue.

Defense Economic Adjustment Assistance Grants (DEAAG):

Working with Bexar County last year, the state approved and utilized $5 million in DEAAG dollars to purchase land adjacent to Randolph Air Force Base. This solution protected the southern runways from encroaching development while respecting the property rights of private land owners. Governor Abbott has put more dollars toward DEAAG funding than any of our previous governors. That includes $30 million in the 2016-17 budget, and $20 million in the 2018-19 budget.

Conservation Easements and Parks:

The best way to insulate our bases is through conservation easements and purchasing private land for parks along existing fence line when appropriate. The implementation of more restrictions and ordinances on property owners around military bases without proper compensation could otherwise be determined to be a regulatory taking, unconstitutional under state law.

Under state law, cities and counties have the ability to partner with military bases to increase awareness of potential developments and construction. House Bill 1640, authored by Rep. Farias and sponsored by Sen. Campbell in the 84th Legislature, provides an example of early disclosure regarding potential land use between defense installations and communities.

Tall Structures Near Air Facilities:

The construction of any tall structure that could impact flight paths must be approved by a Joint Airport Zoning Board under Section 241 of the Local Government Code, set up either through the city or county.

Has Annexation by San Antonio Prevented Development?

There is no evidence that annexation by the City of San Antonio has curbed development around Camp Bullis. In fact, if you compare development inside and outside the city limits within a five mile perimeter around the base, you quickly learn that the tallest structures and densest developments are ALL located within the City Limits of San Antonio. It’s almost impossible to find a structure taller than two stories outside the city limits.

If annexation was the key to preventing development around the base, these results would be reversed, wouldn’t they? In fact, one could make the argument that because the city gains sales tax revenue from all this development, that they are more likely to encourage and fast-track it.

A Few Examples:

  • Six Flags Fiesta Texas is within five miles of Camp Bullis and includes a 55 meter tall (or approximately 20 stories high) roller coaster.
  • The Rim Shopping Mall is within four miles, includes a multiplex cinema and 1.8 million square feet of shops, hotels, and restaurants.
  • Top Golf is a four story driving range with huge outfield stadium lights that the City recently approved to be built within three miles of Camp Bullis.
  • NuStar Energy and Elian Luxury Apartments are multi-story buildings overlooking hilltops located in the city within 5 miles of Camp Bullis.

What about this development and these structures – all approved by the city – makes them less of a threat to Camp Bullis than a homeowner who has been residing in the country minding their own business for the past 30 years? Are we really suggesting the right of the citizen to vote on who governs should be void because 20+ years ago they chose to live outside the city near a military base?