To annex or not annex

City Manager, Scott Lazenby, has initiated a study

of the benefits (and drawbacks) of annexation for two of the city's 6 unincorporated neighborhoods that lie within the Urban Services District.  Rosewood and Lake Forest neighborhoods have been singled out for the study and potential annexation.

Note:  In a June 6, 2016 report to City Council from Lazenby, the word "annexation" does no appear - the project is now being called "Sewer Extension Options."

The unincorporated neighborhoods are: Birdshill, Forest Highlands, Lake Forest, Rosewood, Southward Park and Skylands.  No serious reason was given for why these two neighborhoods were selected, though many believe it is because of their low property value and the lower income/political clout of their residents.  The official reason given for wholesale annexation rather than done as lots redevelop or septic systems fail is that it is easier to extend city services like sewer lines all at once.

The reason for large-scale annexation is speculated to be to grab new property taxes from these areas to support the city's looming PERS costs.  If this is true, it is a foolhardy "solution" to a financial crisis since residential property costs the city more money in services (roads, sewer, fire and police) than it brings in.

In fact, annexation is no solution at all - more urbanized land, even with anticipated new development, would be a net drain on the city's General Fund, putting the city in worse financial shape than before.  The full effects wouldn't be felt right away, so the influx of dollars would at first give short-term relief to a city financial crisis, but this would not last.  Think of it as a Ponzi scheme - eventually the ability to annex dries up but the need for new money does not.  Any bureaucrat who seriously suggests that annexation is a good financial bargain for the city is either fooling themselves or the citizens.  Annexing would, however, give a city more bonding authority (more debt) than before as well as over-burden existing sewer systems.  (See links at bottom for more information on impacts of [involuntary] annexations.)  Last thought on the subject - it would take hundreds of new homes to pay for one staff person's cost of benefits.  Do we cut costs, or fool ourselves into spending like there's no end to the money supply?

This year, home builders and owners of land within the urban reserves successfully lobbied the state legislature to remove the ability of citizens to choose whether or not they would approve annexations. Some argue that the state intervention into city affairs is contrary to Oregon's doctrine of Home Rule.

This sets the stage for cities to annex large areas at will.  West Linn, in opposition to the new law,  has chosen to continue  having voters assist in making annexation decisions.  To stay within the law, they have instituted a mandatory,non-binding advisory vote on all annexations, giving back to citizens what the state took away.  Future councils could ignore such votes, but that would face political repercussions.

What will Lake Oswego's City Council do?  Will they be more concerned with what citizens want, or with the idea of more money coming into the city - ignoring the money going out?  Many citizens living in the unincorporated areas feel they are living in semi-rural areas and do not want to be part of Lake Oswego or pay higher taxes, fees and sewer lines many cannot afford.  Can LO afford new roads, stormwater facilities and sewer capacity? (See LO Cost of Annexation and Related Fees below.).

Note:  Zoning and density significantly impact tax revenue. Mixed use, commercial uses, taller buildings, smaller lots and expensive homes are preferred.

West Linn Tidings, November 3, 2016. By Patrick Malee
[West Linn] Council adopts new annexation policy

Moving forward, the council will retain sole authority over annexation proposals - in keeping with the new law - but it will also have the ability to call for an advisory vote to assess public opinion.

Shortly after the 2016 Legislature passed Senate Bill 1573, which placed the power to approve annexations solely in the hands of a city’s representative body and prohibited the voter-based procedures seen in West Linn and other cities, the West Linn City Council expressed strong opposition to the bill and vowed to take action in response. 

That action took shape Oct. 10 in the form of a new policy that was approved 4-0 by the council (City Council Jenni Tan was not present at the meeting). Moving forward, the council will retain sole authority over annexation proposals — in keeping with the new law — but it will also have the ability to call for an advisory vote to assess public opinion. Annexations are a two-step process in West Linn, and the initial land use hearing process — which has historically taken place at the City Council before a public vote — will remain in the hands of the council under the new ordinance. 

Lake Oswego, Cost of Annexation and related Fees

Involuntary Municipal Annexation: The Ugly Truth.  Barbara Hunter, Foundation for Economic Education, 9/1/07

Sorting Through The Property Tax Burden,  Tax Policy Center: Urban Institute and Brookings Institution

Cost of Community Service Studies, Dr. Staley, Macinac Center for Public Policy
"Thus, while farm, forest and open lands generate more revenues than expenditures, COCS studies find that "residential land uses . . . are a net drain on municipal coffers: It costs local governments more to provide services to homeowners than residential landowners pay in property taxes."

Calculating the Cost of Community Services Ratio,  Penn State University 

Fiscal Impacts of Different Land Uses, Pennsylvania State University
"In other words, residential land generally costs local taxpayers, while commercial, industrial, farm, and open lands help taxpayers by paying more than they require back in services. These results are consistent with other states’ experiences and with other Cost of Community Service studies from across the country.."