Over the last 100 years, the proportion of Americans living in cities has increased from 46 percent (1910) to 81 percent (2010, U.S. Census Bureau). As the trend of urbanization continued, states put into place enabling legislation to allow existing municipalities to accommodate growth.
Annexation is a process in which a city or town may expand its boundaries into surrounding unincorporated areas, typically to accommodate new development by extending municipal services or to balance the costs of services already provided. Today, 72.4 percent of Indiana’s population lives in urban areas with a combined footprint that accounts for only 7.05 percent of its total land mass.
How does annexation affect property tax caps?
In Indiana, circuit-breaker caps placed on property taxes limit taxes to 1 percent of the gross assessed value of owner-occupied residences, 2 percent of other residential and agricultural properties, and 3 percent of commercial and industrial properties, and personal property such as farm equipment.
How this tax revenue is divvied up is dependent on the property’s location, the boundaries of local taxing units and the tax rate (per $100 of gross assessed value) levied by each of these units. Taxing units can include cities, counties, townships, school districts, fire service districts, library districts, water and sewer districts, and others.
When an unincorporated area is annexed into municipal boundaries, taxes levied may change. Taxes may rise on properties currently assessed below the circuit-breaker cap. For property owners already paying taxes at the capped limit, the total amount paid will not change but how those tax dollars are distributed will.
What does annexation really do?
Properties may become part of different special districts after annexation, commonly a fire service district or a water and sewer district. However, in Indiana school district boundaries are not affected by annexation. In other words, municipal annexation does not change where children within an annexed district attend school.
Annexed properties become subject to the municipality’s planning and zoning ordinances. However, zoning classifications are determined in a process technically separate from annexation (although sometimes these processes overlap). A common zoning change is converting agricultural land to industrial, commercial or residential classifications to accommodate for future growth.
In states with urban growth boundary restrictions, like Oregon and Tennessee, open space and agricultural land is more closely protected from development. However, Indiana does provide some protections, such as requiring owner consent for zoning changes to annexed agricultural land.
Annexation is not a “taking” as defined by the Fifth Amendment (e.g.: eminent domain or development rights). Because it does not change the value of property or seize property, but rather redefines service agreements and tax levies attached to those properties, annexation is not something for which property owners can seek compensation.
How does Indiana compare in policy?
Annexation statutes are extremely complex, making state-by-state policy comparisons difficult. In 1997, the Indiana General Assembly authorized the Indiana Advisory Commission on Intergovernmental Relations to study issues and options associated with annexation practices. The resulting study, “Annexation in Indiana: Issues and Options,” completed by the Indiana University Center for Urban Policy and the Environment, provides a good (if now somewhat outdated) overview of the policies and considerations related to the expansion of municipal boundaries via annexation.
In 1999, several changes to the state statues were made that improved due process, broadened the basis on which residents may remonstrate against annexation and required municipalities to provide a fiscal plan for providing services. Additional changes have been made in subsequent years as well.
The Indiana University Public Policy Institute’s forthcoming survey of state annexation activity (to be released next month) will serve as a good reference point for what type of annexation is being pursued by Indiana municipalities (e.g.: voluntary, involuntary or super-voluntary) and will identify other important process points to understand how cities, towns and affected residents are navigating current enabling legislation.
How does Indiana compare in practice?
The U.S. Census Bureau’s Consolidated Boundary and Annexation Survey collect data on legal boundary changes for localities nationwide including annexations, detachments, incorporations and mergers. The Census Bureau records these changes to ensure accurate reporting of local level data.
In 2013, annexations were recorded in 1,406 cities and towns nationwide affecting 245,265 acres. Indiana ranked 10th among states in net acreage affected by annexations with South Carolina, Texas, North Dakota, Tennessee, and Utah rounding out the top five.
There are 566 cities and towns in Indiana, 278 of which have self-reported some sort of annexation activity to the Census Bureau since 2001. Of the 20 places that have annexed the largest areas over this time, half are in metro Indianapolis: Carmel (19,707 acres), Whitestown (9,838) Noblesville (8,773), Fishers (8,481), Avon (7,356), Brownsburg (4,375), Westfield (4,182), Zionsville (3,289), Greenwood (2,982), and Greenfield (2,739).
Others in the top 20 include Fort Wayne (11,888), Kokomo (9,092), Jeffersonville (8,112), Lafayette (5,922), Charlestown (4,871), Valparaiso (4,474), Evansville (4,415), Greensburg (3,041), Terre Haute (2,859) and Centerville (2,620).
ELLEN CUTTER, AICP, is the director of the Community Research Institute at Indiana University-Purdue University Fort Wayne and a certified urban planner by the American Planning Association.