STAFF REPORT FORM

It is the Town of Cary’s goal to establish a comprehensive annexation program that guides future annexation decisions and provides for an orderly and predictable extension of our municipal boundaries. The Town also desires to inform residents and property owners impacted by future annexation of the implications of annexation, the costs and benefits and what to expect in the process.

Specifically, the Town of Cary’s comprehensive annexation program seeks to establish annexation policies and evaluation criteria to objectively identify which properties are appropriate to annex and why. The program addresses both citizen-initiated annexation (heretofore referred to as voluntary annexation) and Town-initiated annexation (heretofore referred to as involuntary annexation), including establishing a process where areas for Town-initiated annexations are considered on a two-year cycle. A comprehensive public information element is included to ensure ample notice of possible annexation and raise awareness and understanding of the important details of annexation.

While not required by State law, this new program has been developed to help potential annexes as well as existing Cary citizens understand the various aspects of annexation. This document contains key information about annexation and establishes policies and criteria that will guide future annexation decisions. Please note that is a policy document and does not grant any procedural rights. In other words, this document is a guide to assist in making annexation decisions; any deviation from this document would not be a basis for challenging annexation ordinances in the future.

The Town of Cary’s comprehensive annexation program will apply to all properties within Cary’s urban services area as designated on our current Land Use Plan. The policies and criteria included in this document were used to identify the annexation study areas and establish a phasing plan with associated timeframes for annexation of the areas. This phasing plan designates areas by the potential for annexation within a certain time period (e.g. 2007-2011, 2012-2016, beyond 2016). Property owners within these areas must note that this is a general estimate and is subject to change.

A map is provided that identifies the annexation study areas and the time-periods for annexation. Annexation study areas that were identified primarily consist of unincorporated areas that qualify for annexation and may be considered for Town-initiated annexation sometime in the future. This map will be used by staff as a guide in selecting areas that will be presented to Council for potential Town-initiated annexation during each even-calendar year (e.g. 2006, 2008). Staff will also present preliminary budget impacts for each recommended qualifying area. Council will decide every even year whether or not to pursue any or all of the areas recommended by staff. Once Council decides which, if any, areas to pursue for annexation, the staff will begin the official process for Town-initiated annexation as required by State law.

This document was produced by Town staff using feedback from the Cary Town Council and participants from two annexation focus groups. One of the two focus groups was created from a randomized list of all 700+ owners of properties annexed into the Town of Cary in 2003, including but not limited to Summerwinds and Kingston Ridge. The other focus group was developed from a randomized list of all 2600+ owners of properties within Town of Cary resolution of consideration and intent areas from the last two years, including but not limited to Medfield Estates and Dutchman Downs.

II. Annexation Defined

Annexation is the legal process by which municipalities add land to their corporate limits. Since 1959, the North Carolina General Statutes give all municipalities the authority to annex areas that meet specified standards provided that required procedures are followed and the municipality commits to extend basic services into the annexed areas. The State’s annexation policy favors the expansion of cities to provide essential urban services to areas that are deemed urban in character, which is defined by the State in General Statutes 160A-48 Character of Area to be Annexed (see Section III for details). Specifically, only municipalities are authorized by law to provide the full range of basic urban services--from water and sewer service to street maintenance and improvements.

III. Methods of Annexation

Cary, like other municipalities in North Carolina, may expand its corporate boundaries through two options: 1) Citizen-initiated annexation (referred to in the North Carolina General Statutes as voluntary annexation) and 2) Town-initiated annexation (referred to in the NC General Statutes as involuntary annexation). Both have specific procedures and qualifying standards that must be followed.

Citizen-Initiated Annexation in Cary

Represents the primary method of annexation in Cary and in North Carolina.
Requires properties to be either contiguous or no point on the proposed satellite annexation Town limits may be closer to the primary corporate limits of another municipality (Exemption is granted from this provision if a utility service/annexation agreement exists with the other nearby municipality).
Allows property owners to receive services that Wake County does not provide, such as public water and sewer.
Majority of these annexations are associated with new developments that desire/require Town water and sewer service.
Allows for new services that must have public utilities (e.g., shopping centers, offices, large churches, public schools, and most residential developments with an overall density of less than one unit per acre).
Makes available nationally accredited Parks, Recreation and Cultural Resources, Police, Fire and EMS.
Provides for the annexation of individual residential properties that need public water and/or sewer because of failures of private well or septic systems.
Requires the following actions:

Property owner submits a petition to the Town requesting annexation;
Town Council adopts a resolution calling for a public hearing on the annexation;
Town Council holds a public hearing; and,
Town Council adopts an ordinance annexing the property.

Ø Typically includes an immediate effective date following annexation ordinance’s adoption.

Town-Initiated Annexation in Cary

Historically, represents 2% of the total land area annexed in Cary within the last 20 years.
Allows the Town to annex properties that meet certain development standards provided certain procedures are followed.
Does not require property owner consent.
Requires that the area to be annexed:

Be adjacent to or contiguous with the current corporate limits
Have at least one-eighth of the total boundary contiguous to the current corporate limits
Not be located within another incorporated municipality
Developed for urban purposes according to the State definition (must meet only one of the State’s following tests):

Population density of 2.3 persons per acre; or
Population density of 1 person per acre plus: or

60% of acreage is in parcels of 3 acres or less
65% of parcels are 1 acre or less

60% of parcels are used and 60% of the vacant and residential used acreage are in parcels 3 acres or less: or
All tracts are used for non-residential uses (i.e., commercial, industrial, governmental, or institutional purposes).

Requires the Town take the following actions:

Adopt resolution of intent to annex specific areas;
Mail notices of required public meetings/hearings to all property owners subject to the resolution;
Adopt an annexation report and plan of services that shows how the areas meet required standards, how the Town plans to extend services, and lists revenue projections and a summary of costs and benefits to property owners within the proposed annexation areas;
Hold a public information meeting to explain the annexation report and plan of services;
Hold a public hearing;
Adopt the annexation ordinance with a specific effective date;
Provide government services to newly annexed areas according to the Town’s policies and procedures, all of which must be in accordance with State law; and
Allow for appeals by residents and/or property owner based upon failure of the Town to follow required process/procedures.

Citizen-initiated annexations typically take three months to process, while Town-initiated annexations take approximately one and a half years from start to effective date.

IV. History of Annexation in Cary

Historically, the expansion of Cary’s Town limits has primarily been the result of citizen-initiated annexation. Over the last 20 years, the Town has developed long range plans and made investments in essential facilities that provided a foundation for orderly growth and development that promotes a high quality of life and environment. This planning, in combination with Cary’s desirable location, resulted in significant expansion of Cary’s corporate limits as property owners needed Town services to support new developments consistent with our adopted land use plans and ordinances. Cary’s ordinances and comprehensive plans are effective tools at managing growth in a way that protects property values and results in high quality development.

Citizen-initiated annexation continues to be Cary’s primary method of annexation. The Town’s citizen-initiated annexation policy provides for annexation by property owners if they are requesting Town services. Thus far, a minority of these types of annexations have been the result of existing single family property owner’s requesting public utilities because their well and/or septic systems have failed. However, as homes around Cary continue to age, this type of situation will likely grow.

Town-initiated annexations represent a minor part of the total property annexed into the Town (about 2% of the total area annexed in the 20 years immediately preceding development of this policy. Historically, the Town has not pursued this type of annexation, in part, due to the successful growth of the corporate limits through citizen-initiated annexation. However, over the years, new developments within the corporate limits have expanded to surround unincorporated properties. Due to their location, these “doughnut holes” are considered for Town-initiated annexation because they could be more effectively served by the Town than the County. A significant portion of these areas included older subdivisions developed with private well and septic systems through Wake County within the boundary that is presently in Cary’s urban service area (within the Town’s planning jurisdiction, with services of water, sewer and emergency services). Four of these subdivisions and many non-subdivision single family lots have experienced private system failures that resulted in the Town providing public utility service without immediate annexation provided that annexation agreements were signed by all the property owners. (An annexation agreement is a legal document that states that the property owners agree to submit a citizen-initiated annexation petition upon the request by the Town anytime in the future.)

Town-initiated annexations have occurred in 1974, 1982, 1991, and 2002. In 1982 approximately 270 acres were annexed. In the 1991 Town-initiated annexation, properties that were already connected to Town water and/or sewer were annexed (approximately 90 acres). In 2002, a comprehensive annexation resulted in incorporating approximately 755 properties containing a total of 1,039 acres (including 629 residential dwelling units).

A majority of these properties were included in County subdivisions that were nearly completely surrounded by Cary Town limits. Annexation of these “doughnut holes” provided for more efficient service delivery and the availability for public water and sewer for these new residents. Soon after the 2002 annexation, approximately 362 property owners, primarily from five subdivisions, requested that water and/or sewer be extended into portions of their subdivision. These property owners chose to sign a petition to request the Town fund a utility extension project within their subdivision. Some residents participated while others within the same subdivision chose not to connect to utilities at that time. The percentage of voluntary participation by residents ranged from 100% to 50%.

Table 1: Water and Sewer Petitions and Participation by Area

Subdivision/Area	Properties Petitioning	Properties in Petition Area	Percent Participation
Hillsdale Forest Area	139	147	93%
Triangle Forest	39	46	84%
Logan Road/Bud El Acres	3	3	100%
Piney Plains Road	6	10	60%
Summerwinds Phase 3	35	43	81%
Windsor Oaks	89	90	98%
Bud El Acres/Woodland Dr.	11	22	50%
Summerwinds Ph. 1 & 2	40	55	70%
Totals	362	416	87%

This level of participation (approximately 58% of the residential property owners whose property was annexed and 87% within existing subdivisions) demonstrates the desire from a majority of these residents to replace their private well and septic systems with a more permanent public system at a reasonable cost.

V. Current Annexation Issues

The main focus of the Town of Cary’s comprehensive annexation program is to acknowledge and wherever possible successfully address the following issues:

· Unincorporated Subdivisions Adjacent to Corporate Limits – Today, many unincorporated subdivisions and individual residentially used properties exist within the Town’s designated service areas. In Cary and other Wake County jurisdictions, the County has designated those areas within its 1988 General Development Plan should be included within municipalities due to existing and future plans for municipal services. These unincorporated subdivisions are served by private well, septic and/or private utility providers (i.e., Heater Utilities). Due to failures or inability to support the homes with private well and/or septic systems, four unincorporated County subdivisions are already receiving Town utilities (i.e., Hollybrook, Cary Oaks, Oak Chase and Jamison Park).

Most of the unincorporated subdivisions were developed under one of two conditions. First, they were not within the Town of Cary’s Extraterritorial Planning and Zoning Jurisdiction (ETJ) or second, they developed at a time when the Town of Cary did not have the utilities extended to these areas. Since the property rights laws of the State of North Carolina give property owners the right to use their property, the Town of Cary did not have the authority to deny the owners use of their property, even if utilities were not available to serve it and whether or not it was in Cary’s ETJ. The zoning of areas outside of Cary’s ETJ is regulated by Wake County. The County’s past and current zoning regulations allow residential development at urban density with private wells and septic systems.

Cary, exercising authority given to it and other municipalities by the General Assembly, has and can vote to annex qualifying properties in order to provide services, manage urban growth and protect the area’s health, safety, welfare, and environment. Most property owners facing a Town-initiated annexation oppose this action and the increase in taxes.

· Individual Property Rights Versus Long-term Communal Interests
Individual property owners opposed to annexation are concerned that the process designated under State Law is contrary to democratic principles and individual property rights. They are concerned that their individual interests are being subjected to the interests of a larger community that they feel they do not belong to (such as Cary) rather than seeing themselves as part of a State that defines annexation as important.

· Timing, Completeness, and Clarity of Information About Annexation – For a number of reasons, many property owners do not completely understand the complex issues of annexation. Inaccuracies are primarily related to the costs of public utilities and if and when properties are required to connect. In addition, property owners are confused about how zoning regulations apply to their existing properties. Specifically, owners are concerned about any additional regulations that may apply to them upon annexation.

· Timing of Annexation – Property owners in qualifying annexation areas are concerned about if and when annexation will occur. Many residents may be less opposed to annexation if they are provided enough notice to prepare for its implications.

· Impact of Citizen-Initiated Annexations on Town-initiated Annexations – Historically, the Town has routinely approved citizen-initiated annexations. However, approval of these annexations may lead to creating more “doughnut holes” and may jeopardize the potential for Town-initiated annexations of properties. In the 2002 annexation, several potentially eligible properties were not annexed due to a previous citizen-initiated annexation.

VI. The Importance of and Reasons for Annexation

As outlined earlier in this document, annexation is an important tool for North Carolina, which has provided its localities to expand their boundaries, protections, and services in accordance with adopted plans and policies. Only municipalities are authorized by State law to provide the full range of services required to support developed/developing areas (i.e., water and sewer services, solid waste collection and disposal, street maintenance and improvements). Counties are not authorized under State law to provide street maintenance and improvement and do not typically provide public water and sewer, which is the case in Wake County. This is one of the reasons why nearly all places used for the general public’s day-to-day activities are located within the corporate limits of or are served by municipalities. Municipalities can provide the services and facilities to support more urban and concentrated development. Places such as schools, restaurants, hospitals, apartments, shopping centers and other retail areas require the complete array of services that counties are not directly nor typically authorized under State law to provide.

State annexation policy allows for municipalities to expand, which maintains the financial strength needed to deliver essential services at a reasonable cost. According to a staff memorandum prepared by George Esser for the Municipal Government Study Commission, annexation is important to a municipality’s fiscal health. The State’s annexation statute permits a city to “extend its tax base and ….secure payment from services from those who receive the services.” Cities with such an annexation power would benefit from “a more stable and equitable property tax base,” enabling the city to have “a more stable income and (be better) able to meet its capital needs.”

In addition, State annexation laws encourage the growth of existing municipalities to: reduce redundant services and redundant costs; provide for economy of scale, more uniform level of service; and ultimately improve the vitality and quality of our communities and, therefore, our State.

One of the most important issues of many of the owners of property being considered for Town-initiated annexation is their perception that the process is undemocratic since the State-mandated process does not include an election for them to vote on the proposal. Further, they state that they have no representation regarding annexation. However, the process for annexation was adopted into law by members of the State General Assembly, a group of men and women that all registered voters in North Carolina elect regardless of jurisdiction or incorporation.

In a representative democratic society there are areas of public policy where a determination must be made about what is in the best interest of the public as a whole if individuals and their property are to be protected and provided for now and for the long-term. For example, the Town of Cary has and continues to provide emergency water and/or sewer connections to subdivisions and individual lots within Wake County where private utility failures that are not repairable or contaminated wells have left residents seeking help to protect the use of their property. If the Town had made no future plans to serve these areas for the greater public good then these owner’s property values would diminish significantly.

The authority to make Town-initiated annexation decisions has the same basis in democratic theory that gives elected officials the authority to make decisions that are in the best interest of protecting the public health and welfare as their representatives. Specifically, the authority to make these decisions is the same that allows elected officials to regulate land use, define individual behaviors and the use of property that are nuisances to the public as whole.

According to David M. Lawrence with the Institute of Government at The University of North Carolina at Chapel Hill, the enabling statutes for annexation are based on what is in the best interest of municipalities and the State as a whole:

“The involuntary annexation statutes are based on the idea that an incorporated city is at the center of, but is not the whole of, an urban community – a community defined less by governmental boundaries than by economic and social realities. Although the city is not the whole of its urban community, it has much to do with the community’s existence, health, and growth. If the city did not exist, the larger community would probably not exist either. It is the attractive power of the jobs and quality of life generated by or within the city that creates the larger urban community. That being the case, the statutes are based on the conclusion that it is good public policy – for the city and its citizens, for those living in the urban fringe, and for the people of North Carolina – that the city be able unilaterally to annex developed and developing property within its surrounding urban community. “

In addition, the State annexation statutes for Town-initiated annexation support municipalities’ annexing developed areas adjacent to their boundaries to ensure that those that receive benefits also participate at an appropriate and meaningful level in paying for these services/benefits. As stated above, unincorporated residents do benefit from the Town’s investment in the community. This is also supported by the North Carolina Supreme Court decision upholding an annexation undertaking by the City of Winston-Salem:

“It is common knowledge and experience that residents of areas adjacent to our cities and towns which are subject to annexation under the laws of our State enjoy a great many city services financed by city taxpayers without paying city property taxes themselves. Most of those outside residents work in the city, shop in the city, use all manner of office facilities in the city, use in-city health care facilities, park and recreational facilities and programs and while doing so use city streets, city law enforcement and fire protection services, city garbage and refuse collection services, city parking facilities and city water and sewer services. They also receive planning, zoning and inspection services from the city. With the possible exception of parking fees, inspection fees, and in some instances fees for the use of recreational facilities and perhaps some other isolated costs, these outside residents pay nothing for these services financed by taxes paid by residents of our cities. Fairness dictates that there comes a time when these residents must join in bearing the costs of those services.” (In re Annexation Ordinance (Winston-Salem), 303 N.C. 220, 233-34, 278 S.E.2d 224, 233 (1981))

One of the reasons for the State’s annexation policy is that municipalities are the appropriate authority to decide on the extension of their boundaries. Municipalities are established by the State to make decisions to support the objectives of the larger urban community. Allowing extension of municipal boundaries to be the responsibility of individual residents living outside a municipal boundary would not fulfill the municipalities’ responsibility given to them by the State to protect and promote the health, safety and welfare of existing and future residents in consideration for the long-term viability of North Carolina. .

Benefits to Existing Town Property Owners

Annexation accomplishes several goals that are beneficial to existing Town property owners. These goals include to 1) improve service efficiency and effectiveness, 2) plan for future service delivery and development of utility capacity to benefit the property owners in qualifying annexation areas, 3) protect the environment and public health, 4) accomplish these goals in a manner that does not place a financial burden on the residents of the annexation areas or the existing citizens of Cary, and 5) allocate the cost of providing urban services and infrastructure to serve those benefiting on an equitable basis.

Unincorporated property owners/residents do benefit the Town through their valued patronage of commercial establishments; however, none of the sales taxes come directly to Cary since sales tax is apportioned to municipalities based on population, and, by definition, unincorporated patrons do not count towards Cary’s population total. In addition, these valued patrons do not participate fully and appropriately in financially supporting the Town’s obligation to provide essential urban services to these commercial areas such as street construction and maintenance as well as fire and police inspection and protection to name a few.

Unincorporated property owners/residents also benefit the community with their involvement in schools, religious institutions, charities, volunteerism, and civic organizations. However and again, unincorporated citizens do not participate fully and appropriately in financially supporting the Town obligation to provide the essential urban services necessary to support these community benefits.

Lack of full and appropriate participation in financial support creates inequity among unincorporated property owners and Cary taxpayers. Annexation of developed properties as allowed by the State ensures that everyone that benefits contributes to funding the government services and facilities needed. Without the ability to annex, Cary residents would be carrying more than their fair share of the financial responsibility for the areas high quality of life.

In addition, developed properties that exist within our designated service area and outside of our Town limits can produce inefficiency, duplication and unnecessary costs for the County and Town tax payers. The existence of unincorporated residential areas on the outskirts of or as doughnut holes within existing municipalities can increase the County taxes municipal residents have to pay to support duplications in urban services such as police patrol, parks and recreation, solid waste disposal and others.

Elimination of qualifying annexation areas over time reduces duplication of urban services and will help keep taxes lower for everyone, both inside municipalities and in the county. As it is now, municipal residents are subsidizing the duplicative urban services that are provided by the county because municipal residents also pay county taxes.

VII. Impact on Unincorporated Property Owners

One of the main questions that residents with property proposed for annexation ask is, “How much will this cost?” While the answer will vary from property owner to property owner, the most significant financial impact for most potential annexes is the payment of municipal property taxes--both real and personal (including homes, cars, boats, etc.), the monthly solid waste fee, and an annual per vehicle license fee of $15. The vehicle license fee is dedicated toward Town transportation improvements and to support capital and operational funding for our Town’s transit system, C-Tran. One of the major misconceptions about cost is associated with public utilities.

No Requirement to Connect to Town Utilities - Property owners may continue to use their private well or septic system; there is no requirement to tie onto Town water and/or sewer once a property is annexed. It is the sole decision of each individual property owner to determine when or if to connect to Town utilities.

Cost of Town Utilities is Voluntary - With the exception of a small, monthly availability fee that may be charged if utilities voluntarily requeste