27landlines.pdf

(1)

Land,

Lines

and

Levies:

A

Study

of

Voluntary Annexations

in

High

Point,

NC

The

City of

High

Point usedvoluntary annexationsto

grow

in area

and

population duringthe

1990s. Careful

planning

is

needed

to insure the effectiveprovision

_of

municipal services.

Conducting

modified cost-benefit analyses is

one

way

to

gauge

thefinancial costs

and

revenues

associated with potentialannexations. This report describes the

methodology

underlying a

computer

application that

can

forecast the financial costs

and

benefits associated with

proposed

voluntary annexations.

The

results constitute

a

toolthat

High

Point's council

and

management

can use to

manage

growth.

Suzanne

Dowling,

Jeffery

Maxim,

John

Quintemo, and

Najeema

Davis

Washington

URBAN

GROWTH

IN

THE

TRIAD

North

Carolina's

Piedmont

Triad,

encompassing

thecitiesofGreensboro, Winston-Salem,

and

High

Point,experienced

rapid

growth

duringthe 1990s. Infact,the

populationofthe

Greensboro-Winston-Salem-High

PointMetropolitanStatistical

Area

(MSA)

grew by

19.2percent

between 1990 and

2000.'

With

1,050,304residents,the

MSA

is

the

37

th

largest intheUnitedStates2,while

Greensboro,Winston-Salem,

and

High

Point

respectivelyareNorthCarolina'sthird,fifth,

and

eighthlargestcities.3

Moreover,

theTriadis

growing

ina low-densityratherthan

high-densitymanner.4This

means

that

economic

expansionin

one

partoftheTriadexertsa

ripple effect

on

neighboringareas.

The

interactionof

development

in

High

Point

and

growth

inGreensboro,forinstance,has spurred residentialconstructioninnorthern

High

Point.

High

Pointhasnotbeen

immune

tothe

Triad'sgrowth.

Between

1

990 and

2000

the

city'spopulation rose

by

23.5 percent,bringing

thetotalpopulationto85,839.5

During

the

same

period.

High

Point'sland area increased

by

12percent.6Voluntary annexations

have

servedasa

mechanism

for thisgrowth. Furthermore,duringthe 1

990s

thecity

concludedsixannexation agreementswith

neighboringjurisdictions.7

These

legal

documents

define theterritoriesthat

High

Point

may

or

may

not

annex

withinaspecificperiod.

As

aresultoftheseagreements.

High

Point

couldincreaseitsincorporatedlandarea

from

50

squaremilesto

92

squaremiles.

High

Point's potential forgrowth,coupled withthe

demand

for

growth

created

by

the Triad's

expansion,

may

sparkthe

development

ofland

within

High

Point'sannexationarea.This

would

leadtoarise inthe

number

ofpetitions for

VOLUNTARY

ANNEXATION

IN

HIGH

POINT

Article

4 A

of Section

160A

oftheGeneral

StatutesofNorth Carolina allowsmunicipalities

This projectwasconducted by four

MPA

students

fromtheInstituteofGovernmentatThe Universityof

North CarolinaatChapelHill:SuzanneDowling.

JefferyMaxim,

John

Quintemo,andNajeemaDavis

Washington. Fundingcame fromtheCityof High

Pointanda grantfrom theCenter forPublic Service

(2)

toextendtheirboundariesthroughannexations.

The

General

Assembly

believesthatannexation

isessentialfor

managing growth

andproviding

effectivegovernmentalservices.Moreover,the

General

Assembly

permits

two

typesof

annexations: involuntary

and

voluntary.Although

the statutoryprocesses regulating involuntary

and

voluntaryannexationsaresimilar,the

two

annexationtypesdifferina

key

way. Voluntary annexationsare intitated

by

landowners

who

petition tojoina municipality,whereasthe

government

initiatesinvoluntary annexations.

Though

the

end

resultisthe

same

-

the

annexed

landis

added

tothe taxrolls

and

receives

municipalservices,involuntaryannexations

often

become

spirited politicalissues.

High

Point hasthe legal authority to

annex

land voluntarily

and

involuntarily,butasamatter

ofcustom,the cityonlyconductsvoluntary

annexations.8Inbroadstrokes.

High

Point's

current

system

consistsoffoursteps. First,a

person

who

owns

land outsideofthe city limits

butwithintheannexationareafilesapetition

withtheCity Clerk.9

The

petitioner typicallyisa

developer

who

intendstobuild

on

empty

land.

By

joiningthe city thedeveloperreceivessuch

governmentalservices as police

and

fire

protection

and

accesstothemunicipalutility

system.Second,afterthepetitionisreceived

thecitypreparesserviceplansforthe

proposed

annexation.

To

accomplishthis.

High

Point asks

relevantcitydepartmentstoprepare cost

estimates. Third,theestimatesare sent tothe

Planning

Department

forevaluation

and

a

technicalreview.Finally,afterthecitypublishes

a noticeofintent,theCityCouncil conductsa

publichearing

and

votes

on

theproposed

annexationordinance. Iftheproposal passes,

theland

becomes

partofthecity

on

the effectivedate specifiedinthe ordinance,

LIMITS

TO THE CURRENT

SYSTEM

High

Point'scurrentsystemforevaluating

proposedvoluntaryannexationscontainssix weaknesses:

1) Ignored

Revenues - The

current

system

assumes

thatannexationsonlywillcostthe

city

money. While

annexation requiresthe city toservice

an

area,thisdoes not

imply

thattheannexationautomaticallywill result ina

monetary

loss.

Annexed

areasgenerate

property,sales,franchise,

and

gasrevenues,

and

itisentirelypossiblethatan annexation

willgenerate

more

revenuesthancosts.Yet

theexisting

system

ignoresrevenues

even

thoughtheGeneralStatutesrequirerevenue

estimates.

2)

Short-Term

Focus

- The

currentprocess

emphasizes

the short-termoverthe

long-term.Annexationsthatinitiallyappearcostly

actually

may

be

lucrativea

few

yearslater.

The

benefitssimply

may

notmaterializeuntil

theentire

development

iscompleted. Similarly,

an

annexationthatappears inexpensiveintheshort-term

may

contain

hiddencostsfourorfiveyearshence.

3)

Incomparable

Costs

-

Therecurrently

existslittle

agreement

about

how

departmentsshouldprepare cost estimates.

Consequently,

what one

department

includes as "operatingcosts"

may

differ

from what

anotherdepartmentincludes.

The

inconsistenciespreventcomparisons

acrossdepartments.

4)

Missed

Costs

-

Sincethereappearstobe

confusion regardingwhichdepartments should

provide costestimates, the currentsystem

misses relevantcosts.

Not

allaffected

departmentsaredevelopingcostestimates

and

service plans. Partofthis

problem

is

attributabletotheestimateformsused

by High

Point

The form

isidentical foralldepartments

andfailstoprovideeitherthe specific

informationthat

some

departmentsneedto

compute

accuratecostsor theflexibilityto tailorestimatestothespecificnatureofthe

(3)

5)

Obscured

Costs-

The

current

system

evaluatesannexations

on

anindividualbasis,

therebymissingtheaggregatecostsof

multiple annexations.

One

annexationina

certainarea

may

appearinexpensive, butif

20

distinctparcelsinthe

same

area are

annexed

overtime,the

combined

annexations

may

necessitateacapital expenditure(e.g.a

new

fire station).

6) 'IrrelevantProcess"

-

Afeelingexists

among

some

departmentsthat

management

failsto

usethecurrentsystemfordecisionmaking.

Some

departmentsthereforeprovideonly

rudimentarycostestimatesandservice plans.

Refining

the

System

High

Point's

management

team

has

recognizedthe current system's

weaknesses

and

the

need

for

more

accuratefinancial

estimates.

To

addressthischallenge.

High

Point

recruiteda

team

of

MPA

students

from

the

Instituteof

Government

at

The

Universityof North Carolinaat

Chapel

Hill

(UNC-CH)

to

studythe city'sannexationprocess.

Funded by

theCityof

High

Point

and

a grant

from

UNC-CH's

CenterforPublic Service, the

teamspent thefirsthalfof2001studying

High

Point'sannexationprocess, theproceduresused

bypeercities,

and

alternate

ways

of analyzing

annexations.

The team

alsoconsulted with

academics

who

study annexation, budgeting,

and

financialissuesfacinglocalgovernmentsinNorth Carolina.

As

aresultofthis study, the

team

designed acomputerspreadsheetthat

High

Point

canusetoconduct modifiedcost-benefitanalyses ofproposedannexations.Thisreportboth

documentsthe

methodology

usedtodevelopthe

modifiedcost-benefitanalysis

and

serves asa

user'smanualforthecityemployee(s) responsible

forthecomputerapplication.

METHODOLOGY

AND

PROCESS

The

project

began

when

a

team

of

MPA

students

from

UNC-CH

agreedto

develop

a

methodology

that

High

Point'scouncil

and

management

can usetoassess the costs

and

benefitsassociatedwithvoluntaryannexations

ofland.

The

project'sfirststageinvolvedgathering

information

on High

Point.Staff

members

providedinformationregarding

High

Point's annexationprocess.Additionally, the

team

researched

High

Point'smunicipalservices,

revenuestreams,

and

costs.This information

was

derived

from

such sourcesascity employees,theFiscal

Year 2001

Budget,

and

the

North

Carolina

Performance

Measurement

Project.

Next,information regarding voluntary

annexationsin

North

Carolina

was

gathered.

The

GeneralStatutes

were

reviewed,

and

academicsattheInstituteof

Government

were

consulted.Additionally,the

team

contacted

severalpeercitiesin

North

Carolinatosee

how

theyanalyzeannexations.

Most

ofthecities

were

inpositionsanalogousto

High

Point's,

though

Durham

has

made

aconsciouseffort to

analyze

proposed

annexations.

The

team

thereforeconsideredthestrengths

and

weaknesses

of

Durham's

approach.

Aftergathering information, the

team

consideredvarious

ways

foranalyzingpotential

The

ultimatesuggestion

was

todesigna

computer

spreadsheetthat

High

Point

could usetoconduct modifiedcost-benefit

analyses(seebelow).

The

goal

was

to createan

applicationthat

embodied

3principles:

1) Versatility

- The

applicationshouldpossess

theversatilitytoanalyzethevarious typesof annexationsthatcouldoccurin

High

Point.

2

)

Simplicity

- The

thesimplicity topermitone municipal

employee

touseitquickly

and

efficiently.

3) Flexibility

-

The

theflexibilitytoadapttochanging

economic

(4)

The

team

thenidentifiedtherevenues

and

costs

most

directlyaffected

by

voluntary

annexations.

The

relevantdepartments

were

contacted,

and

theappropriateofficials

were

interviewed.

Based on

theinformationgleaned

from

the interviews,coupled withthe data

containedinthebudget

and

the

North

Carolina

Performance

Measurement

Project,the

equationsforthemodifiedcost-benefitanalysis

were

developed, Preliminary copiesofthe

spreadsheetthen

were

senttothe relevant

departmentsfor

comment.

The

project's finalstageconsistedof

preparingthis

document

detailingthe

methodology

and

spreadsheet

and

submitting

theproductforreview.

The

team

also trained the

municipal employee(s) responsibleforthe

applicationandpresentedrecommendationsto

High

Point's

management

team.

WHAT

IS

MODIFIED

COST-BENEFIT

ANALYSIS?

Cost-benefit analysis

(CB

A)

isa

decision-making

tool thatevaluates a policyaccordingto

some

criterionofefficiency.10

The

analytical

technique involvesidentifying

and

quantifying

(typically in

monetary

terms)allofthecosts

and

benefitsassociatedwithaparticularpolicy

option.

The

totalcosts

and

benefitsthenare discountedtodeterminetheirpresentvalues.

Finally,a decision

maker

compares

theresultto the criterion (thetypicalfinancial criterionisat

leasttobreakeven),

and

ifthe resultsatisfies

the criterion, thepolicyis

deemed

worthy. Initspure

form

CBA

considerseverycost

and

benefitrelated toa policy option including

intangible factors like theenvironment and qualityoflife.

However,

itoftenisextremely

difficulttoidentify

and

quantifyevery

conceivablecost

and

benefit.Isitpossible,for

instance, toassignafinancialvaluetoaclean

environment?

How

much

isa cleanenvironment

worth, orfor thatmatter,

how

much

isalivable

community

worth?

Inresponseto thisproblem,the

team

from

UNC-CH

developed

a

modified

cost-benefit

analysisthatfocusessolely

on

the financialcosts

associatedwithannexations.11

Insteadof

consideringeverypossible cost

and

benefit,the

CBA

addressesonlyfinancialones.

The

methodology

estimatesboth

how much

itwill

cost

High

Pointtoprovidecertainservicesto

proposed

annexations

and

how much

the city can expecttoreceiveinrevenues.

The

analysis

isfurtherlimited

by

a

problem

uniqueto

CBA

in

the

governmental

sector:thelackofnatural marketsforgovernmentalservices.

The

publicpurposesservices(e.g.police,fire,

and

sanitation)provided

by

a government have

no

naturalmarkets.Sincethegovernmentisthesole

provideroftheseservices,itisdifficulttoascertain

truecosts.

For

example,itisimpossibletosay

how much

fireprotectionshouldcost since the

government

istheonly provideroffireprotection.

The

onlyguidancegovernments haveforassessing

costs

comes

from benchmarking

projectslikethe NorthCarolinaPerformance

Measurement

Project thatallowcitiesto

view

theircost relative

toothercities.

LIMITATIONS

AND

ASSUMPTIONS

Like

any

analytical

method,

CBA

contains

certain

weaknesses

thatpreventperfect

predictions.

CBA

also necessitates theuse of

certainassumptionsthat

may

limitfurtherthe

technique's predictivepower. Consequently,

decision

makers

using the spreadsheetdesigned

for

High

Pointneedanunderstandingofthe

limitationsandassumptionsinherentinthemodel.

Limitations

The

followingfive factorslimit thisanalysis

of

High

Point'svoluntary annexations:

1) Exclusion ofIntangibleCosts

-As

mentioned

earlier,this

CBA

only captures thefinancialcosts

and

benefitsassociated

withannexation.Non-financialfactorsare

(5)

exist.For example,astraightfinancial area.

As

aresultspecificityissacrificed.

More

analysismight

show

thatitisfinancially accurateresultscouldbeobtained

by

profitable to

open

anuclearwastefacilityin developing ananalysisforaspecific

High

Point,butthe financial benefits

may

be annexation, butthe

model

then

would

notbe

dwarfed by

the

non-monetary

applicabletootherannexations.

environmentaland

community

costs.

When

making

decisions,city

management

and

5) DataLimitatioas-

The

qualityandavailability

electedofficialsneedtoconsider

more

than ofdata alsolimitsthestudy.

When

exact

justthecosts

documented

in thisstudy.This figures

were unknown,

imprecise,or

CBA

capturesjust

one

setoffactors that unavailable, estimateswereused.

The

use of

decision

makers

shouldconsider. estimates

may

affectthemodel'saccuracy.

2)

LackofDecision-MakinaCriteria-CBA

Assumptions

>

2

evaluatespolicyoptionsaccordingto

some

Fiveassumptionsguidethis

CBA:

r

criterionofefficiency,butdeterminingwhat

Z

m

to

thatcriterionshouldbe. at least ina 1) OptimalService Levels

-

This

model

>

2

governmentalcontextisapoliticalact.

What

assumes

thattheservice levelsprovided

by

r-m

determinesifanannexationisdesirableor citydepartmentsduringFiscalYear

2000

<

m

not?

Aproposed

development ofaffordable

housing,for instance,

may

befinancially

are theoptimal ones.

The

model

assumes, forinstance,thatthe

number

ofpolice

W

o

unprofitable,butifaneighborhoodneeds officers

working

for

High

Pointduring r;

affordablehousing,thenon-monetarybenefits

FY'OO was

ideal,butthat

may

or

may

not

2

CD

mightfarexceedthemonetaryones.

When

betrue.

These

arequestionsthat

can

be

>

X

deciding

upon

aproposedannexation.

answered

bestby

High

Point's

management

K

decisionmakersalsomustdecide

upon

the

team

and

electedofficials.Nevertheless,a

D

c

appropriatecriteriaforjudging.

benchmark

yearforcosts

and

services

was

H

z

_m

needed, so

FY'OO.

beingthelast

complete

X

2 O

>

2

3) Trade-Off

Between

Precision

and

fiscalyear,

was

selected.

Longevity

-

When

forecastingcosts

and

O

revenues,a trade-off

between

precision

and

2) AllAreas Receive EqualService

-This

>

<

(J)

longevityexists.Costs

and

revenues can be

model

assumes

that

annexed

areaswill

assessedaccuratelyintheshort-term,but receivethe

same

levelsandqualityof _i accuracydeclinesas thetimelinegrows.

A

servicesprovidedtoexisting

2 O

1

financialprediction foroneor

two

yearsin neighborhoods.This

model

also

assumes

o

thefutureis

more

reliablethan

one

for

20

thatno impactfeesarechargedto yearshence.Yetshort-termestimates are developerstodefraythecostsassociated

lessuseful forcityplanning than long-term withintegrating theannexationinto thecity.

estimates.Thistrade-offshould bekeptin

mind when

evaluatingthe

numbers

3)

Only

ServicesDirectlyAffectedare

generated

by

thespreadsheet. Considered

-

Likeany government.

High

Pointprovidesanarrayofmunicipal

4

) Trade-Off

Between

SpecificityandFlexibility services.

Some

of these services are general

-

The

CBA

developedfor

High

Pointaimsto ones providedforthe

common

good

while

beflexibleenoughtoanalyzeanyannexations others areoperatedlikebusinesses(e.g.

(6)

activitiesarefinanciallyself-supporting,they

areexcludedfromthis

CBA.

Similarly,

servicesthatareprovidedinreturn for fees

(e.g.buildinginspection)areexcludedsince

the fees theoreticallycoverthecosts.Instead

this

CBA

focuses

on

thecostsand revenues

associatedwiththeprovisionofgovernmental servicesdirectlyaffected

by

annexation.Table #1 identifiesthekeycosts

and

revenues.

4} Conservative Estimating

-

Thisanalysis

uses conservativefinancial estimates.This

means

that

when

facedwithachoice

between two

cost estimates,thehigher

estimateisused.Similarly,if

two

revenue

figuresexist,thelowerfigureisused.

5] Five-Year

Time Frame - As

mentioned

previously,thisanalysisislimited

by

the trade-off

between

precision

and

longevity. Short-termestimatesare

more

precisebut

lessuseful forplanning purpose,while

long-termestimates arelessprecisebut

more

useful forplanning.Inresponsetothe problem,this

CB A

projects costs

and

revenuesovera five-year period.

A

five-year timeframecustomarilyisusedin

CB

A

sinceprojectionsoflessthanfiveyears are

consideredtooproximatetobeuseful, whileprojectionsof

more

thanfiveyears

are

viewed

astoo imprecise.

USING

THE

CBA SPREADSHEET

As

mentionedearlier,thespreadsheet

applicationthat

High

Pointcanusetoanalyze

proposed annexations

was

designed around

threeprinciples: versatility,flexibility,

and

simplicity.

The

goal

was

tocreateanapplication

that

one

staff

member

could usetoprepare quickandrealisticfinancialanalysesof proposedvoluntary annexations.

The

spreadsheetconsistsofthirteen

interconnectedworksheetsthatorganizecosts

and

benefits

on

adepartmentalbasis.

The

last

sheetisa

summary

sheetthatunitesdata

from

the various sheets

and

computes

the net

discountedbenefits(costs)

-

thefinal

number

representingtheanticipatedfinancialgain orloss

resulting

from

theannexation.

Inkeeping withthe principleofsimplicity,

dataonly needstobeenteredintothefirst

two

worksheets

-

thesheetstitled"Constants"

and

"Data." Enteringtheinformationprovided

by

departments

on

theestimateformswillcause

the

program

to

compute

automaticallyallofthe

necessaryvalues.Iftheanalyst

wants

tosee the

precisecalculations,heorshecan simplyclick

on

theappropriateworksheet. Otherwise,the

analystcan

jump

totheworksheet

marked

'Total"and

view

thebottom-line estimate.

A

RAMBLE

THROUGH

THE

SPREADSHEET

Sheet

#

1:"Constants"

-

Thissheetcontains

thecitywide values

needed

toanalyze

annexations.

The

sheet containssuchdataabout

the city aspopulation,landarea,

and

family

size,along withthespecificvaluesused

by

departments.

For

example,thesheetcontains

theprojectionratesused

by

the

Budget

Office

toproject

growth

inproperty

and

salestax

revenues.

A

generalinflation ratealsois

included. Partof

Sheet#l

ispicturedat right.

Placingallofthese values

on one

sheet

permitsthe

CBA

tobeupdatedeasily.

Each

cell

contains acellnoteexplaining

from where

the

value

was

obtained.

At

least

once

ayear,ideally

around

thestartofthefiscalyear,theconstants

should beupdatedtoreflect bettertherealities

facing

High

Point.

The

valuesfor citypopulation

and

squaremileage,meanwhile, should be

updatedasoften as possible.Iftheconstants

are notupdatedatleastannually,the

model

quicklywill

become

obsolete.

Sheet#2:

"Data"

- The

sheetlabeled

"Data"is

where

theinformationrelated toa

proposed annexationisenteredintothe

computer.

Data

areenteredintothe

shaded

(7)

City

of

High

Point

Annexation

Analysis

Constant Sheet

Section

1: City

Constants

If

we

are

using

performance

and

cost data

should

we

use

the

pop.

#

and

land area

that

they

give??

Constants

r

>

Current Fiscal

Year

2001

Z

O

City Population

80,789

Z

m

City

Square

Miles

50

co

>

Family Size 2.54

D

z

i

m

<

m

CO

Section

2: Financial

Constants

Q

Inflation Factorfor Real Property

5%

o

Inflation Factorfor Personal Property

4%

_Z

Average

Value

of

Car

$9,000

Q

Cars Per

Dwelling 1.5

X

>

Tax

Rate

0.622

5 o

Tax

Collection

Rate

0.995 c

Inflation Factorfor

Sales

Tax

Revenues

3%

-t

m

Total

Sales

Tax

Revenue

$6,120,023

n

z

o

per

1000

residents

$75,753

>

z

Powell Bill

Per

Capita

Reimbursement

$25

Powell Bill Street Mile

Reimbursement

$1,817

3>

<

(f)

Total Utility

Tax

_$3,200,095

>

per

1000

residents

$39,611

ID

I

Business

Fee

$50

O

Z

General

Inflation Factor

3%

—

1

o

z

Discount

Rate

6%

Section

3:

Department Constants

Police

Number

ofAuthorized Officers

190 Average

Personnel

Costs

$42,868

Average

Operating

Costs

$21,802

Average

Capital

Costs

$3,810

(8)

petition thata

landowner

fileswiththeCity

Clerk. In the

two

places

where nominal

data

must

be coded,acellnoteexplainsthecodes.

These

data

must

be enteredproperly,orthe worksheetwill

compute

erroneousvalues.

Thissheetcontains

two

nuances.First,ifthe

proposed annexationisaresidentialone.the

analystneedstomanuallyscrolltosection2of

the"Data"sheet.Inthe

column

labeled

"Number

of Dwellings"theanalystneedsto

enterthe

number

ofdwellingspresentforeach

ofthe five years. Second,for residential

developments,theanalystneedsto scroll

down

tosection3ofthe

"Data"

sheet

and

enterthe

estimatedunitprice inthepropercell. Partof Sheet

#2

ispicturedatright.

Sheet

#3

"Property"

-

Thissheet

automaticallytakes theinformation enteredinto

the"Data"sheet

and

computes

theanticipated

revenues

from

thetaxes levied

on

real

and

personal property.

Revenues

areprojected

overfiveyears

and

areincreased

each

year

by

the

growth

factorused

by

the

Budget

Office or

GuilfordCounty.Forinstance.

High

Point

currently projects afivepercent increaseinreal

property,whileGuilford

County

estimates a fourpercentincreaseinpersonal property.

One

difficultyin

computing

propertytax revenues

came

inestimatingpersonal property

revenues.

Data

limitationspreventedthe

inclusionofaccurate

numbers

regardingthe

average

number

ofcarsper

High

Point resident

and

theaveragevalue ofautomobilesin

High

Point.Thisinformationiscalculated

by

Guilford

County

for

High

Point,butthe

numbers were

unavailable.

The

valuesused

by

Durham

therefore

were

included.

Sheet

#4

"Revenue"

-

Thissheet

automatically

computes

theanticipatedrevenues

from

sales taxes, franchisetaxes,gastaxes,

and

businessfees.

The

constantsusedto

compute

thesevaluesarecontainedinthe"constant"

sheet. Partofthis sheetispictured

on page

36.

Sheet

#5

"Benefits"

-

Thissheet

combines

and summarizes

alloftherevenues

computed

on

sheets

#3 and

4.

The

totals

on

thissheet

representtheestimatedtotalbenefitsexpected

from

theproposedannexation.

Sheet

#6

"Police"

-

Estimatingthecosts

associatedwith police services

was

difficult

due

tothe variednatureofthedepartment's work.

Therefore,thisanalysisusestheFebruary

2001

editionoftheNorth Carolina

Performance

Measurement

Projecttoestablish the

FY'

00

ratiosofofficerspersquaremile

and

officers per 1.000residents.

These

ratiosareappliedto

theproposed annexationtodetermineservice

costs persquaremile

and

per 1,000residents.

Inkeepingwiththeuseofconservative

estimating,thehigher costisselected.

Note

that

theGeneralStatutes

view

anincreaseinpolice

service proportionaltothepopulation increase

attributabletoanannexationasanacceptable

serviceplan.

Sheet

#7

"Fire"

-

Sincethecalculations

needed

to

compute

firecostsare rather

complex,

the spreadsheet breakstheanalysis

intodiscrete steps.

The

key

factoris

whether

or

not a voluntaryfiredepartment(

VFD

)currently

servestheannexationarea.

Depending on

the

answer

enteredintothe"Data"sheet,either ScenarioI orScenarioIIapplies.

ScenarioI:

VFD

CurrentlyServes

Annexation

Area:Ifa

VFD

operates inthe annexationarea,then

one

ofthreestrategiescan be pursued

by

thecity.

1 )

The

citycouldnegotiatea service contract

withthe

VFD.

Inreturnfora

payment

equal

tothe tax levieslostthroughannexation,the

VFD

would

continuetoservethe

annexationarea.

The

payment

iscalculated

by

dividingthetaxvalueofthe entire

VFD

areaby 1

00 and

multiplyingthequotient

by

(9)

3! "0 01 a.

>

3

CD

X

TJ 0) CD

>

H

ro 3. —a.

H

»

-<

<

-< -<

₃

31 _O, _r*

O O

0> CD

O

2

CD CD

ST B> '

B>

CD CD iCD

|

3

, _jo

03 03 03

m

w

3'

0)

?

e

SL "ti -i -i

n

—I —1

X

r

3 O

J ST 2>

co 5' ui -e> CO IV) — k

03_ 5'

O

z

™

0) -

3 O

5'

3

CD

O

c

3

cr 5' •-*

w

0) _CD _CD

0)

"1

<

>

3

*«

S

i

Z

3

M

w<f>

CA *& &>•eo

B

o>

«

s

5 z

p

-si OVOI cn cnioi cn >»

3

0)

o

-si cn N3

0|0'

~

Q. uJ

To Vi bo _ ^

cn

o

X

O

3

r;

oo -si 00 ro

o

o o

^

M

CJ1 — *

cn

o o

o

SI

3 m

CO

>

a

V*

w

a?

CD

—

c

cn CO 1

3 —

W

's± -p> CO to

C

: CTi »-*

60,77 76,28 CO ro Co 0= CO

p

cnro cn

o

w

<&

ding ation CO 1 cn

O

3lock

t-ID _ST n> *<

m

S

1

m

<

m

CO

N3 cn —

^

cn

o o o

1 _•3

0"

_X

f-h

$1,7 _to

cn CO CO c« <bo

Tot Valua -si

O

>

CD 0) CO CD ighP >n An rv

Sc

D

O

I

-z

p

cn N> co oo

o

;cn cn s:

"

(d SL

N> -»•

o

cn cn

o

—

s

cn Hen Viilvj'O

o

3

CD

<

5"

>

_X

(J) |Ul cn cn

o o

o

3

CO

w

-»• CO Oi olOI

o

s

%

3 TJ

m

c

0 X

C

7Z.'

z

=

cr .3

?

O

_

CO

=-.

3 m

H

z

CO -s| cn

K1

-t- N) co

O

(Q

3 o

cn cn

o

^n

>

_z

TJ

O

o

O

6

"3 -<

3

1 _

-i _CD _iq' CO

cu o

r* <D

cn

c

_§

m

_* _^ _i

1"

>

o

CD -C*

o

cn

c

CO

_I

CO —

^

o

r\J — *

O

CO

z

s"?

3

' —A

«

<3 co

w

_£

_sr

•-*

c

3 <

z

Fo

M

o

00 *>

o

IB

«J

m

3>

"oposed

ffective

Date

/1/2001

ro -h TJ

ropo Zoni ~~

3

#3g iction

,,

O

3

CO

<£

~

to to

(10)

Reimbu

Num

Total

G

25%

Stree Popu 75%.

Secti

(Pow

S

1

*

o

0) CD

o

q> _J; 5? R" CD

O

=

3

CO

§

0) CO

CO CD cn CD

o

O

ication

Based

on

on CD lo 5" _9L _:f

. i-i CD

»

co 2,

3

y, UJ < CD

CO 03 0}

O

s:

3

col

m

0) cn Sale es Ta

s

Tax CO

O 2

o

1

CD ci 33

H

s

Tax Cal

x

Revenc Parce : Revenui CD Rate pe n-State otal for alculati eimburs Parce btotal fo ased on 0)

X

O

2L

o

&)

O

CO CO

^

;ement Rat

H

populatio

r

Per Capit Non-State

ti

c

™

-

So

tf)

. Street Mil treet Mile freer Mile. ns CtJ ~i

o

ST 0) 5"

3

CO ulations Per 1,00 Resident Populatio

c

"» CO CD 0)

3

CD

3

CO

O

*<

a

>

3 ₃

O

1

2 W

<f> &> 60 to

s

©

CO

-SL

_oo _s _->• -* oo cn -i

i

cu "1

CD CD »<

1

bl"lO 00 "ro

w

"oo "-«g

c

X

en o> — ^

00 cn ro

^

cn cn ₀₎

5"

S

00 -P».

s

CD —* cn ooi-»- oo a)

3

1

-

—

-j

J

I

M

to" V)CD

(A

3

_CD*

i

<A to ±& <& to ->l

©

0)

>

3"

l

CD CD 00

to

"(D -»

w

-si oo

CD -»

O

CD

n

CD

3

"0

IO -J -nI cn

o

to ro

o

to

N

M

CD N) Ol IO CD ->i to CD

ysis

e

Re

3 i

2

55" Q.

«0 tO to to

©

ho Bi

<

I

5

tO -* tO e» -»• oo

© —

CD 00 CD -»•

"o "to "co

OJ

,

w

->

o

"to -»• "oo CD

3

00 ->l ->. to CD t> ro to *. CD HI

S

NOOO

O o s

SOS

CD 0) Tl

:-.

IO

5i'

S

tf>C0 tO t»

©

a>

O

IO IO to

W

-»• 00

© —

7

CO 00 -»

"U O0 "CO

Ol

"to ->•

w

Ol to

"-S -» "-J CD

0)

O

NO -» 00 oo cd to

OXDN

S

O)

M

Ol ->•-» 00 CO -> 00 3"

CD

ha

to l-K

l\J

o

<& &i to co

O

0)

00 ro to <LB -> 00

©

"-O

-C>. fO cn

S

Ol 01 _3:

oo "cn

o

OO ro co "oo ro "ro CD

^

4^ _>. Ji.

o o

ro ro

o

cd oj -» IO Ol ro CO CD cn co -»

Ol

-» <&

W

tO ri

o

oo Ol 3^

00 CD 00 CD

sr

₂

"cd bo

S

"o "* *»

-v| 00 CO CD

(11)

2) Thiscitycouldservice theannexationdirectly

from

anexistingfirestation.

High

Pointalso

would

pay

aportionofthe

VFD's

debt.

Two

different costs are associated

with

this

strategy.Thisfirstinvolvesthe additional cost

tothe overall operating

budget

ofthefire

department,

expressed

as a costper square

mile.Second,thecity

must

pay

a portionof

the

VFD's

debt.

To

determine

the

payment,

calculate the ratio

of

the tax value ofthe

annexationareatothe tax valueoftheentire

VFD.

Then,

multiply

the

VFD's

total

outstandingdebt

by

theratio.

3)

The

city could service the annexation area

directly

from

a

new

firestation.Again,thecity

would

become

responsiblefora portionofthe

VFD's

debt,

and

thereare

two

relatedcosts. If

a

new

stationisbuilt,theaveragefirecostper

squaremileisappliedtothetotalsquaremileage

oftheannexationarea.Second,thedebtservice

payment

owed

tothe

VFD

is

computed

inthe

manner

explained above.

Scenario2:

No

VFD

ServestheArea: If

no

VFD

serves theannexationarea,then

two

possible optionscan

be pursued

by

thecity.

1

)

This optionresembles Scenario 1,

Option

2

withtheexceptionthat

no

debtserviceis

owed

toa

VFD.

2) This optionresembles Scenario 1,

Option

3

withtheexceptionthat

no

debtserviceis

owed

toa

VFD.

Note

thatthe

computer

spreadsheetis

designedto

choose

the

most

costlyoptionin

each

scenariotoensurethatcostsareestimated

conservatively.Itispossiblethatanotheroption

would

costthe cityless.

Sheet

#8 "Water"

&

Sheet

#9

"Sewer"

-Accountingforwater

and sewer

costsassociated

with annexationsproveddifficultsince

High

Point

operates theseservices as enterprise funds. Yet,

neitherfundistotallyself-sustaining.

When

calculatingannexationcosts,thePublic

Services

department

must

supply information

regardingtheexpectedservicelevels.

To

establish

a baseline, theappropriate

FY'OO

expensesare

divided

by

High

Point'ssquaremileagetoproduce

a cost persquaremile.

The

resultisproratedover

theproposedannexation'ssquaremileagetoyield

a cost estimate.

Besides operatingcosts,thereare additional

costsinvolvedwith water

and

sewerservicessuch

as laying largerlinesthan

needed

Moreover, maintenancecosts

must

be considered These additional costs are

added

tothe baseline,andthe

sum

represents thetotalestimatedexpenses

associatedwiththeproposedannexation.

Revenues

relatedtowater

and sewer

services

come

from

one-timefees,fixed

charges,

and

commodity

charges.

The

rates

depend

on whether

theparcelisresidential,

commercial,orindustrial.

The

computer

applicationisdesignedtohandlesthe variables.

Commodity

charges

and

fixedratesarethe

revenuesthatflow

from

providing waterservice.

The

commodity

chargesare as follows:$1.29per

unit for

commercial

areas, $1.14perunit for

residentialareas,

and

$1.00perunitforindustrial parcels.Fixedchargeswerecalculatedsimilarly.

The

assignedratesare asfollows:

$2

1.50 for

commercialareas,$107.50for residentialareas,

and $924.20forindustrialparcels. Inaddition to the

commodity and

fixedchargesforwater, there

isa one-time annexationfeeappliedto

annexationsinForsyth,Davidson,and Randolph

counties.

The

sum

ofthecommodity,fixed,and

one-time charges equalsthewatercosts

associatedanannexation.

Sewer

costsare

computed

similarly to the

waterones.

The commodity

chargesequal

$1.86perunit,regardlessofthetypeofparcel

beingannexed.

The

fixedcharges,meanwhile,

are as follows:$25.00for

commercial

parcels.

$80.00for residentialparcels,

and

$40.00for

(12)

commodity

charges, thereisanindustrial surchargefor

two

services

(BOD

and

SS);

thesecharges equal

$35.06 and $31.16 and

applyonlytoindustrialproperties. Sheet

#

1 "Transportation"-

The

Transportation

Department

estimatesthecosts

ofthesignage

and

trafficsignalsrequired

by

an

annexation.

These

costsincludemaintenance

and

the electricity

consumed by

trafficsignals. Costs vary

depending

on

whether

the

annexed

areaisresidential,commercial,orindustrial.

First,one-timecosts forsignage

and

signals

arecomputed.

The

averagecitywidecost foreach zoningtypeis

computed and

proratedoverthe proposedannexation.Second,theongoingcosts

formaintenanceandelectricityarecalculated

Inadditiontosignage

and

signal costs,

two

other transportation costsshould be

considered.

These

variable costsarethetraffic

impact assessment(TLA.)studies

and

costs

associatedwith upgradinga

Computer

Signal

System. Sincethese costsvary

from

projectto

project

and

may

notapplyinallcases, the

numbers

must

be estimatedindividuallybythe

Transportation

Department and

then entered

intothemodel.

Once

the variable costs

(TIA

and

CSS)

arecalculated,theyare

combined

withtheone-time

and ongoing

coststoyieldthe

totaltransportationcost. 12

Sheet#11"Solid

Waste"

-Servicecostsvary

depending

on

whethertheproposedannexationis

residential,commercial,orindustrial.

Thereare

two

kindsofresidentialareas for

solidwasteservices,each of

which

istreated

differently:single-family(house)andmulti-family

(apartment,

condominium,

townhouse). Trash

pickup,

which

includesyard wasteaswellaslarge

itemssuchas refuse furnitureorrefrigerators,for

single-familyresidentialdwellingsisfundedbythe

generalfund

and

currentlycosts$ 100per

residence peryear.

The

cityalsoprovideseach

residencewith a small recyclingbin.costing $4.

Trashpickupformulti-family residences

comes

outofthegeneral

fund and

varieswith

the

number

of

dumpsters

presentinthe

development

A

single

dumpster

generally

services

between

75

and 100

dwellingunits.

The

citycontractswithawaste

removal

firmat

the costof $14.61 per

dumpster

per

week,

for

an

annualcostof $759.72.

Trash pickupforcommercialareas also

varies. Ifthebusinessissmall

and

generates

no

more

thanthree trashcans perweek,thenthe city

may

optto service thebusinessatacostof $1

00

peryear. Thereis

no

trashpickupservice for

industrialareas,andtheenterprise

must

payfor privatecarting.

Sheet

#12

"Parks"

- The

annexationcosts

connectedtoparks

and

recreationare virtually impossibletoassessat thistime.

Due

tothe

variabilityin

how

parks (both largescale

and

linear)

and

recreationalfacilities(bothpassive

and

active)arebuilt,thereare

no

averagecosts

per acreor 1,000personstoapplytoan annexationarea,

and

parkcosts are not

includedin the'Total"worksheet.

Sheet

#13

'Total"

-

Thisworksheet

summarizes

allofthecosts

and

benefits

computed

previously

by

theprogram.

Each

year'stotalbenefits

and

costsarediscounted

by

6%

inordertoconvertallmonetaryvaluesinto

presentvalues.

The

discountedcostsandbenefits

alsoare

summed

toproduce afive-yeartotal.

Next,thediscountedcoststhenaresubtracted

from

thediscountedbenefits toproducethe

Net

Benefits(Costs).This

number

expresses

how

much

the citycanexpecttoearn orloseeachyear,

aswell asoverafive-year period.

A

sample of

thissheetisincluded

on

theprevious page.

RECOMMENDATIONS

High

Point'sdifficultiesinevaluating

proposed annexationsmirror those confronting

other

growing

citiesin

North

Carolina.

Some

of

these

problems

stem

from

theuniquenatureof

thegovernmentalsector.Itconsequentlyis

impossibletoproduceperfectlyprecise

estimates. Nevertheless, the

CBA

describedin

thisreportwillpermit

High

Pointtoconduct

(13)

>

«

>

CO

3 <D 3 »

3

_|

3(D

a

—

x X

fi> 3 W 3

-H O

»

-i O "

<? =

_H

3

_H

£

_H

O ff O

f^ r* CD O 2L to J?

m

V) 33

CD

m

to 01 3

m

CD

<

(0 (A _cr o) m -s A

3 r»

_H

01

_{Z £}

_< _CD TJ ₃

CD

3! u

U

—1

CD ft

&|

cF?

3

T3 C CD Sew isportati olid Was ited Cos Net Cos ts (Cost 0) Tl TJ O Revenu Revenu Revenu erty Tax Sales

T

GasT Utility

T

siness

T

Revenu

W

n

3

U) r»\r+ ^- O m m —I 0' CO CD CD CD OJ CD DJ CD CD

V— en in CD 3 —\ —1 CD CO cn (A cn cn x x x x!cn

H

n

in'

O

_

m

if) 6060 OO hO

O

V» _v _v COif) if, ; C10 hO hO —

^

0) f*

Wl O) O)

U

M M U

U

A A if> if> if) if) CO Q)

>

-

P P

fcO

P

P P

P

-""' -b.^.^,-' hOOOCOOO

<

<«»

U

U J

05 "cn"-* "co 00 Vi'Vii co ho "en1

00 CD

O

Cityi nnex

S

-*• -*• 3 -vi j>- cn -vi -i-»c7)co<fl-'cn*>* &)

<0 O) CT> 00

onus

en en ho -»|O|IS3|-»J|00|01 1

_O

$ 13

4^ _». _i if) if) if>if) en en if)

CO

cn

CO

O

D) CD

Q)

O

<«>

OO

M

hO GO eo ctj co if) -> if) CO

_{O —}

ro ro High Poin on Anaivs

„«• -* -si

^, J-J CO CO ho

**» O)"-vj CO "co 00 CO CD

an 00 _^g -1.

1*^

|

j^i!j~>i10*

"_* _co _co ₀₀ '-> 01"co'co

hO -<

CD

"* a)O)00€OCT).U0000

oocncococfl^hOhoeo

fi)

>< CO

W

O)

O

SiW

* *

0|-» -^

OIO

Ol'-vl -vl

O

H

'

-n

15 «*

55 *» -»• if>to CO if) on -j. «5 eo CO"vl

hO

55' DJ

<0 CD -> ho ho ro co CD -vl C« CO CO hO -* CO

O —

3

1,1 8.9 3,4' eo en

00 j>- J>- co

"-» _en ₀₀

ho -J1-k -^ cn co -^ en

co"co "0 co "00 "0 "hO"-fe

8

<\

V)

S

ro en •60 00 en 00 h CO -J hO "Vl •09 -vl CO hO cn 0)

<o en -^ j> 00 00 en CD 01 en

O

-» -vl ^1 "1

0)

3 L

if)

3

£» i«» •eor* -* ro UlO

^J *» -1 «<9co-&oCO 00 ,!. ,,'

<5 0)

tp CO -* ro ho ho eo CD CD 60-69 CO hO -*

O

""

^> 00 -vl _to CO Ol

A S

co _j> -» ->• 00 cd en 00

_{s <}

<o 01 CO en ho 00 en oi.'-j- "&• "ho '-* ->ii"cn CD

N

co en -g i»i eoi co! j>

OCDtll-'WfcOCBCO

0)

ls> j>. an ho

OU1O1

00 00 «nI|-M_»._vO 05 -vl CO ^j n Tl

Cfl CO

in"

£> &} •».-* _KJ

00 _^0 -* if)if> if>if> CD -^ -60if) —

1

DJ

•!0 CD hO

M

M A

K> (J) <f>if) €OiCO -*

"

*.

s

u

w

CO

O

Cn ->

-

O

-"-> CD

O

-J _.£* _cn -<

JO V|'^ _O) _CO

_O

_Ul

_M

_CO _CD "0"-C* "OiCO CO

i->l CD

S

-vi co ~g «o 01 01 en

cooofflui«flcn^w->

SJ

co IO OIIM -fc» J> ho eo -^ _co *>. co co cn -vl •n

*» v>\&> CO

N

coc* 60 if)C/3CO CO CO if) eo -1 Ol

!S Ul O) 00 -* -* -^ -* hoVi coi -^ *f> en _O

<

O

cnhococo-Uhoco-vj encx>-&960

hooenoo

ST <D

r* -vl

O

hO CD -> hO CD -vl co 03 cn 01 cooocDco Si. Q)

S£f NJ

O

CO CT>

O

"00"-v| CO "-vi "ho"-^ "00 "co on "0"->• -1

°>

-^NJCnOCDCDOOCO

NOOUlMCONKOJi

*<l hO-fc-hOOhO-vlhOO _CD _CO -vl 05

O

COO

^1

O

(14)

method'sutility,

High

Pointcouldtakethe

followingfive steps:

1) TailortheEstimate

Forms

tothe

Departments

-

As

mentioned

previously.

High

Point currentlyasksalldepartmentsto

preparecost estimates

on

astandardform.

The

form,however,oftenfailstoprovide

departments with

enough

informationto

produce

accurate estimatesreflectiveofthe

department'srealities.Insteadof usinga

standardform,specific

forms

could

be

developedforeachaffecteddepartment.

2) ConsidertheProcess

- High

Pointshould askitself

how

tobestusethe

CBA

methodology.

For

instance,isthe

most

logical

home

for the tool inthe

Department

of Planningor the

Budget

Office? Also,will effortsbe

made

to refinethetoolas

new

cost data

becomes

available,orwillthe

applicationbeleftasitis?

Addressing

these

process questionswillrenderthe

methodology

more

useful.

3)

Update

theSpreadsheets

- The computer

spreadsheet

needs

tobe

updated

atleast

annually,or thetool will

become

obsolete.

Additionally,departmentsshould

work

togethertorefine the

numbers and

assumptionsoperating withinthemodel.

The more

accurate thedepartmentalcost

estimatesare,the

more

accurate the

CB

A's

predictionswillbe.

4)

Study

Petition

Fees

-

Preparing acost

estimatefora

proposed

annexationisa

processthatrequires thetimeof

numerous

cityemployees.

To

help defraythesecosts.

High

Pointcouldconsider apetitionfee.

Otherjurisdictions in

North

Carolina

require individuals petitioning forvoluntary

annexationsto

pay

anapplicationfee.Cary.

for instance,charges $150.

While

a fee

would

notrecoupallofthecity's costs,it

would

helpoffsetthem.

5) SolicitDepartmental

Feedback

-

Some

of individualsinterviewedforthisproject

appeared

wary

ofitTheir sentiment

was

that the

CBA

would

notaccuratelycapturetheir costs.Inspiteofitslimitations, thistoolisa

sound

way

forestimatingcosts

and

benefits,

and

ata

minimum,

itrepresentsan

improvementover

High

Point's current

system.However,the

model

onlyisas strong

as theinformation being enteredintoit If

departmentsfeeltheircostsarenotbeing

representedfairly,they shouldbe giventhe

opportunitytosuggestimprovements.

Collective actionisnecessarytoinsure the

usefulnessofthecomputerspreadsheet

©

Endnotes

I

UnitedStatesCensusBureau, (http://

www.census.gov/population/cen2000/phc-t3/

tab01.pdf)

-_UnitedStatesCensusBureau, (http://

www.census.gov/population/cen2000/phc-t3/

tab03.pdf)

3

NorthCarolinaStateDataCenter,(http://

census,state.nc.us/frame_start_pl.html)

4

Firestone.David."The

New

LookSuburb:Denseror

MoreFarHung."The

New

York Times.4/17/01.

5_North

CarolinaStateDataCenter,(http://

census,state.nc._us/frame_start_pl.html)

6_Department

ofPlanningand Development.City of

HighPoint. 7

TheseagreementsarewithGreensboro.Jamestown,

DavidsonCounty,Kernersville.Archdale,and

RandolphCounty (DepartmentofPlanning and

Development.CityofHighPoint).

8

Throughouttherestofthisdocument,theterm

"annexation"referstovoluntary annexation.

9

TheGeneralStatutes(160A-58)differentiatebetween

contiguousandsatelliteannexations.

Municipalities are limitedintheamountof landin

satelliteannexations they

may

hold.

10

This discussion ofcost-benefit analysis isbasedon

AdministrativeAnalysisfor Local Government

by David

Ammons

( 1991).

II

From

thispointforwardtheterm

CBA

referstothe

modified

CBA

usedspecificallyin thisproject. 12

Formulaically.totaltransportationcosts

=

(fixed costperacre *_number_of_acres_in_proposed

annexation)-!-(utilitycostperacre*numberof

acresinproposedannexation *5years)+ (maintenancecostperacre*numberofacresin