Jesseca Lightbourne | January 18, 2017
With the Texas state budget facing fiscal constraints, its municipalities must find innovative strategies to secure revenue to adequately and efficiently provide goods and services to its residents.
It’s a challenge that affects many communities, but in particular, small cities and towns. The size of their population, the tax base, often determines their ability to repay debt. That makes large products requiring the issuance of municipal bonds especially challenging.
But one option on the table is annexation, or the incorporation of new territory.
Cities must have authority to annex, and it can occur based on a slew of factors — charter provisions, local government code provisions, or a petition of votes from area voters or area landowners.
Annexation — a type of government consolidation — is often pursued for several reasons. First, annexation can provide unincorporated areas with municipal services such as waste collection and water services. Second, annexation allows municipalities to increase their revenue via an increase in population. Revenue can come from property taxes, but it can also come from sales tax, and user fee charges paid by new residents. Third, residents will have the ability to participate in elections and decisions of the city. Lastly, annexation can help cities control and manage development.
Although annexation provides some benefits to cities, there are potential pitfalls. Cities that annex land may increase their population and alter their demographics. Those changes may be associated with greater expenses necessary to serve the new population, given the needs to provide the area with things like police, fire, water, wastewater management, roads and social services.
After the well-known annexation case that occurred in 1996, when the City of Houston annexed the northern suburb of Kingwood, some residents of Kingwood reported to the Houston Chronicle in 2006 that they wound up paying more for inadequate services such as police, water and fire because the city was unable to staff vacant positions within those departments needed to serve the new population.
Additionally, annexation creates larger governments. The benefit of smaller governments is the ability to create competition to help control costs and meet unique service demands from its residents. To attract potential residents, local governments often seek to offer exemplary services at low costs. Having one large government monopolizing the market could lead to higher costs.
Annexation can be a very helpful tool to increase revenue, provide public funded services efficiently and effectively, and control land use. In November 2016, the Houston Business Journal reported that Sugar Land approved annexation with New Territory and Greatwood. The City of Sugar Land will benefit through a population growth by approximately 34 percent (87,367 to 117,000). The city plans to grow its tax base and add add funding to a category outside of its operating and capital budget that would support borrowing for future projects.
The question is, can a similar strategy — or elements of this strategy — be implemented in Houston and areas of unincorporated Harris County?
Jesseca Lightbourne is a Urban and Metropolitan Governance Research Fellow at the Kinder Institute. She earned her doctorate in public administration from the University of North Texas.
In the coming weeks Dr. Lightbourne will produce a series of reports to discuss the alternatives to consolidation. These reports will identify options for departments in the City of Houston and Harris County to save costs while delivering public goods and services effectively and efficiently to its residents. The objective of these reports is to contribute to the ongoing work that both the city and the county have initiated to help provide public funded services in a more efficient, equitable and effective manner.