LS 7425                             DATE PREPARED: Feb 11, 1999
BILL NUMBER: HB 1491                     BILL AMENDED: Feb 10, 1999

SUBJECT: Annexation procedures.

FISCAL ANALYST: Beverly Holloway
PHONE NUMBER: 232-9851

FUNDS AFFECTED:         GENERAL             IMPACT: Local
                 DEDICATED
                 FEDERAL

Summary of Legislation: (Amended) This bill has the following provisions:

(A) This bill provides for certified mail notification of land owners and certain elected officials of an annexation ordinance.

(B)The bill allows an annexation to be appealed by filing a written remonstrance signed by the owners of more than 50% in assessed valuation of the land in the annexed territory.

(C) It allows a remonstrance to be filed not more than 90 days after publication of the annexation ordinance. If a court finds that a remonstrance is sufficient, the court shall order an annexation not to take place.

(D) An owner of real property in the annexed territory or the municipality that is annexing the territory is permitted to file an action not more than 120 days after publication of the annexation ordinance, requesting a court to enter a judgment voiding the annexation ordinance on the grounds that the ordinance does not comply with legal requirements.

(E) The bill allows a five year municipal abatement of a portion of municipal property tax liability for residential property.

(F) It also prohibits a municipality from making further attempts to annex territory for three years after the later of the circuit or superior court judgment or the date of the final disposition of all appeals, unless the landowners in the annexed territory petition for annexation.

(G) A municipality is required to provide noncapital services in a manner equivalent in standard and scope to those noncapital services provided to areas within the corporate boundaries regardless of similar

topography, patterns of land use, or population density.

(H) A municipality is required to provide capital services to the annexed territory within four years after the effective date of the annexation, in the same manner as those services are provided to areas within the corporate boundaries, regardless of similar topography, patterns of land use, or population density.

(I) This bill repeals a provision that allows landowners to petition a municipality to annex territory and requires the municipality to adopt an annexation ordinance if certain requirements are met.

(J) It provides that if a court, pursuant to a complaint filed by a landowner, finds that the municipality failed to provide the capital and noncapital services under the fiscal plan, the court is required to order all or part of the territory to be disannexed.

(K) The act applies to an annexation ordinance adopted after January 1, 1999.

(L) It requires the filing of a land owners waiver of remonstrance with the county recorder.

(M) This bill provides that an annexation that fulfills all of the following requirements is void:(1) The annexation ordinance was adopted before January 1, 1999. (2) The annexation is effective after January 1, 1999. (3) The annexation ordinance delays the effective date of the annexation for at least one (1) year. (4) A sufficient remonstrance petition was filed against the annexation.

(N) This bill removes the provision that allows a municipality to annex territory if one-fourth of the territory's boundary is contiguous to the municipality and the territory is needed and can be used by the municipality for its development in the reasonably near future.

(O) It makes a technical correction.

Effective Date: (Amended) January 1, 1999 (retroactive); July 1, 1999.

Explanation of State Expenditures:

Explanation of State Revenues:

Explanation of Local Expenditures: (Revised) (A) This bill requires that the notice of a public hearing of specific annexations must be sent by certified mail to persons owning real property within the territory proposed to be annexed and to certain elected officials. The cost of sending an article certified mail through the U.S. Postal Service is $2.78 ($1.35 for certification; $0.33 postage; and $1.10 for a return signed certification card). This bill could increase the number of individuals who would be required to receive notice of a proposed annexation. Implementation of the provisions of this bill would increase the cost to a municipality. The fiscal impact of this bill is indeterminable.

(B), (C) and (D) If an annexation is not successful because of these provisions, the municipality annexing the territory would not be required to extend municipal services to the proposed territory.

(F) Currently, if a municipality attempts unsuccessfully to annex territory, the municipality may not make further attempts to annex the territory for two years. This bill would change from two years to three years

the time in which a municipality may attempt to annex territory that the municipality had previously been unsuccessful in annexing. When territory is annexed, services need to be extended to that territory. The extension of services to this new territory would create additional expenditures for the municipality. The cost of extending services to the annexed territory would occur if the annexation is successful after the three year waiting period.

(G) and (H) A municipality is required to provide capital services to the annexed territory within four years after the effective date of the annexation, in the same manner as those services are provided to areas within the corporate boundaries, regardless of similar topography, patterns of land use, or population density. (Current law requires a municipality to provide capital services to the annexed territory within three years after the effective date of the annexation, in the same manner as those services are provided to areas within the corporate boundaries regardless of similar topography, patterns of land use, or population density.)

(I) and (J) If an annexation is not successful because of these provisions, the municipality annexing the territory would not be required to extend municipal services to the proposed territory.

(L) A municipality is required to record a waiver of remonstrance received from a landowner as a condition of providing a municipal service. The fiscal impact of this provision is minimal and can be done within the existing budget of the municipality.

(M) This bill establishes provisions that could void annexations. If an annexation is voided because of these provisions, the property owners would not have to pay the increased property taxes nor would they receive municipal services. It is unknown how many annexations meet the provisions.

Explanation of Local Revenues: (Revised) (B) and (C) Under current law, when a municipality annexes territory, the annexation may be appealed by a majority of the landowners or the owners of more than 75% in assessed valuation of the land in the annexed territory. This appeal, or remonstrance, must be filed with the Circuit or Superior Court within 60 days after publication of the annexation ordinance.

When territory is annexed, the municipality's assessed value is increased along with its maximum levy. Taxpayers in the annexed territory must start paying property taxes to the municipality in addition to the taxes already paid. The annexed territory then gets the benefit of municipal services. This bill allows an annexation to be appealed by filing a written remonstrance signed by the owners of more than 50% in assessed valuation of the land in the annexed territory. It also gives the remonstrators up to 120 days instead of 60 days to file the remonstrance. The additional 60 days could give remonstrators more time to organize the number of landowners necessary to successfully appeal the annexation. If the appeal is successful the property owners would not have to pay the increased property taxes nor would they receive municipal services. The fiscal impact of this provision is dependent on the outcome of a remonstrance.

(D) This bill allows an owner of real property in the annexed territory or the municipality that is annexing the territory to file an action not more than 120 days after publication of the annexation ordinance, requesting a court to enter a judgment voiding the annexation ordinance on the grounds that the ordinance does not comply with legal requirements. As with a successful remonstrance, this provision could prevent an annexation from occurring. The property owners would not have to pay the increased property taxes nor would they receive municipal services.

(E) This bill allows a municipality to abate a portion of the property tax liability for municipal purposes for

all single family residential property for five years. This bill changes the tax reduction for single family residential property to 90% the first year, 80% the second year, 60% in the third year, 40% in the fourth year, and 20% the fifth year if a municipality abates newly annexed property by ordinance. The property would then be fully taxable in the sixth year.

The increased municipal property tax abatement for newly annexed single family residential property would slow the phase-in of revenue paid by these taxpayers in municipalities offering

(F) The annexation of property broadens the property tax base which tax rates are based on. The existing taxpayers in the municipality usually would experience a rate reduction and the annexed taxpayers usually experience a rate hike. If the municipality is successful in annexing territory after the three year waiting period, the tax shifts would occur.

(L) The recording of a remonstrance will provide a minimal amount of revenue to a county.

State Agencies Affected:

Local Agencies Affected: Annexing municipalities; Clerk of the municipality annexing territory; County Auditor and Circuit Court Clerk of each county in which the annexed territory is located.

Information Sources: