Transitions to New Municipal Boundaries

Posted by & filed under CGR Staff.

Over many years, CGR has assessed the full range of local government reorganization—pairings of village/town, town/city, town/county, city/county, or two or more school districts.  Structure change is often contentious, in part because reorganization frequently results in tax increases for some taxpayers and decreases for others.  For instance, when a village dissolves, village residents may see their tax rate fall while town residents see an increase, even if total taxes decline. Unfortunately, this means that a change that improves efficiency and effectiveness can get blocked solely for distributional reasons.

Are there ways to mitigate these tax shifts? As a relative newcomer to New York State, I’m wondering whether or not the approach to structure change through annexation in my former home of British Columbia might resonate in this part of the world.

In B.C., a municipal annexation is approved by the Province if the municipality has requested the annexation, property owners and residents of the annexation area have been informed of the proposal, and the majority of the owners do not object.  Annexations can enable a municipality to more effectively manage growth, provide necessary services, or address fairness issues.  Over the past 30 years, dozens of annexations have occurred across the Province.

Stakeholders may object to an annexation proposal because it results in a loss of land-use planning control, a loss of tax revenues, or promises a change in community identity (e.g. I want to live in the country, not in the city).  In collaboration with communities, the Province has developed a number of strategies to alleviate some of these concerns.  Here are a few examples:

  • If the parcels in the annexation area will see a property tax increase as a result of moving from one jurisdiction to another, the Province can require that the taxes are phased-in over a five-year period in increasing 20% increments.
  • If the parcels in the annexation area include a significant industrial property that is a regional asset, then the Province can require the annexing municipality to share the tax-base revenue with one or more neighboring local government.  For example, in the Elk Valley, the municipalities of Sparwood, Elkford, and Fernie and the Regional District of East Kootenay share the tax base revenues from the industrial coal mining properties in the region (see here for more detail).
  • If a municipality is annexing an industrial property and the business is concerned about higher taxes as a result of annexation, the Province can tie the industrial and residential tax rates together by imposing a tax rate ratio on the municipality (e.g. 3:1 for industrial to residential.  Note that there are eight property classes in B.C.).

Municipal annexations are each unique and have their own circumstances and challenges.  In some cases, annexation may not be feasible and alternatives need to be explored.  Recent ideas developed by B.C.’s Regional District Task Force for the proactive management of municipal jurisdictional boundaries include the creation of a fringe area planning committee, the development of a fringe area planning policy and the use of cross-acceptance of land-use plans.  While a small number of B.C. local governments have developed fringe area planning policies (for example, see the Thompson Nicola Regional District policy here), the other ideas are yet to be explored in practice.

The purpose of highlighting these ideas from B.C. is not to suggest that they should be applied wholesale to NYS. B.C. covers a large geographic area that is roughly 6 times the size of NYS. Most of this area is sparsely populated and unincorporated. Of the 4.4 million people living in the Province, more than half are located in the two dozen municipalities that make up greater Vancouver. Moreover, the Province retains significant power over local governments—they lack the Home Rule provisions enjoyed by their NYS counterparts (see an article discussing Home Rule by Squire Sanders & Dempsey attorney Kenneth Bond[1]).

I raise these examples to ask whether we might think about structure change differently. How can we move away from seeing restructuring as a zero-sum game and work to find common ground instead?  The answer to this question lies with the stakeholders and the communities themselves.

[1] Kenneth W. Bond, “Some Observations on Annexation, and a Hearty Welcome to the Asian Century”, NYSBA, Government, Law and Policy Journal, Winter 2007, Vol. 9, No. 2