What North Carolina’s Annexation Law Reforms mean to You!

Feb 21st, 2012
by Jeanette Doran

What North Carolina’s Annexation Law Reforms mean to You!

February 21, 2012

North Carolina Institute for Constitutional Law


North Carolina’s annexation laws prior to 2011 were viewed as among the most progressive in the nation; they were held up as a model by Harvard Law School and the U.S. Advisory Commission on Intergovernmental Relations. Michael Crowell, Annexation, Gov’t and Pub. Sector Sec. (North Carolina Bar Association) Jan. 1, 2005. Annexations occur in two ways: involuntary or voluntary. The local municipal governing board initiates involuntary, or “forced,” annexations with minimal, if any, assistance of affected property owners. By contrast, voluntary annexation is initiated by property owners who express their desire to join the municipality by petition.

Generous involuntary annexation laws enacted in 1959 allowed North Carolina municipalities to expand their jurisdiction and tax base in a way municipalities in the northeast and midwest could not. Sara Burrows, Forced Annexation Could Become History in North Carolina, Carolina Journal, May 2, 2011. As a result, urban areas in North Carolina today look different than urban areas in other high population centers. North Carolina’s metropolitan areas are centered around one or two larger cities and a small handful of suburbs (i.e. Raleigh and Cary, and Charlotte and Concord, etc.) as opposed to metropolitan areas like Chicago or Atlanta, which are comprised of numerous large governing units. While beneficial to enterprising city planners, involuntary annexation is criticized because the process overrides the wishes of property owners, many of whom consciously choose to live beyond municipal boundaries, and because cities frequently annex more land than they can realistically provide municipal services to.

In response to these criticisms, House Bill 845, sponsored by Representatives LaRoque, Dollar and Owens, proposed procedural obstacles and disincentives to the rapid acquisition of undeveloped areas. Notably, by setting firm deadlines by which municipalities must provide services to annexed areas, and by imposing the costs of extending services on the municipalities themselves.  House Bill 845 was signed into law on June 17, 2011, as the Annexation Reform Act of 2011, N.C. Sess. Laws 2011-396. Below are a few commonly asked questions about the Annexation Reform Act and the straightforward answers property owners need to know.[1]


I.               How has the involuntary or forced annexation changed?

A.   What is the Process for Involuntary Annexation?

Annexation under the Annexation Reform Act is a multi-step process, which provides affected property owners with notice and multiple opportunities to comment on, and contribute to, the annexation plan. Any municipality considering annexation of new territory must first pass a resolution of consideration identifying the area to be annexed. N.C.G.S. § 160A-58.55(a).  The resolution must be filed with the municipal clerk and notice of the resolution must be published in a local newspaper of general circulation. G.S. 160A-58.55(b). Furthermore, a copy of the resolution must be mailed within thirty days of adoption to all real property owners within the area considered for annexation. Id. After the resolution of consideration is adopted, the municipality must wait at least one year before further action can be taken. G.S. 160A-58.55(c).

If the municipality intends to move forward with the annexation after one year, the municipality must pass a resolution of intent setting the boundaries of the proposed annexation, and dates for a public information meeting and public hearing to be held on the matter. Id. These events must be held at least 45 (not more than 55) and 130 (not more than 150) days respectively from passage of the resolution of intent. Id. Combined notice of the date, hour, and place of the meetings must be published in a local newspaper of general circulation and mailed to all affected property owners. G.S. 160A-58.55(d). If a mailing is returned as undeliverable, the municipality must try again, this time with certified mail, return receipt requested. G.S. 160A-58.55(d)(3). If property tax records are insufficient to notify property owners by mail, the municipality may notify affected property owners by posting notice “on all buildings, on such parcels, and in at lease five other places within the area to be annexed as to those parcels where the property owner could not be so identified.” G.S. 160A-58.55(d)(4). Along with notice of the meetings, the municipality must mail to affected property owners an explanation of their rights under Chapter 160A, Section Article 4A, a summary of the annexation process, a summary of the statutory provisions for denying and appealing annexation, and “information on how to request to become a customer of [municipal] water and sewer service, all forms to request that service, and the consequences of opting in or opting out[.]”G.S. 160A-58.55(d)(1).

At least thirty days before the public information meeting, the governing board must approve the annexation report and post the report in the municipal clerk’s office. G.S. 160A-58.55(e). The contents of the report are detailed in full later. At the public information meeting, the report must be explained by a representative of the municipality. G.S. 160A-58.55(f). The representative must also explain available municipal services and how affected property owners may go about requesting services as well as the average costs of installation and connection. Id. All property owners and residents of the proposed annexation, and of the municipality as a whole, must be given the opportunity to ask questions and receive answers regarding the proposed annexation. G.S. 160A-58.55(f).

The report must again be explained by a representative at the public hearing. G.S. 160A-58.55(g). As before, all property owners and residents of the proposed annexation, and of the municipality as a whole, must be given the opportunity “to be heard.” Id.

The Annexation Reform Act specifically requires the governing board to “take into consideration facts presented at the public hearing.” G.S. 160A-58.55(h). The board may amend the report and service plans. Id. At least 10 days (but no more than 90) following the public hearing, the board may adopt an ordinance annexation for all, or part, of the area to be annexed as noticed in the public hearing. Id. Prior to the Annexation Reform Act, the board was responsible for setting the effective date of the annexation. The Act now clarifies the effective date of annexation as the June 30 following completion of the procedural requirements (meaning the June 30 after the petition and appeal periods have expired). G.S. 160A-58.55(h)(5). A copy of the final ordinance as well as a blank petition form (see petition process below) must be mailed to property owners within the final annexation area described. G.S. 160A-58.55(h)(7). The board of elections shall accept signature for 130 days from the date of adoption of the ordinance. G.S. 160A-58.55(i)(8). Further information on the petition process and subsequent appeal process is outlined below


B.    What parcels qualify for involuntary annexation? What is the Urbanization Test?


In order for a given parcel or series of parcels to qualify for annexation, they must meet a series of criteria demonstrating adequate border continuity and urbanization. Generally, the area must be adjacent or contiguous to the municipality’s boundaries at the time of annexation. G.S. 160A-58.54(a)(1). “At least one-eighth of the aggregate external boundaries of the area shall coincide with the municipal boundary.” G.S. 160A-58.54(a)(2). Additionally, the area must either lie between the municipal boundary and an area developed for urban purposes such that the municipality cannot serve the area developed for urban purposes without extending lines through the proposed annexation, or the area must be “adjacent, on at least sixty percent (60%) of its external boundary, to any combination of the municipal boundary and the boundary of an area or areas developed for urban purposes.” G.S. 160A-58.54(a)(4)(b)(1), (2).

An area can qualify as sufficiently urbanized by meeting one of several standards. First, an area may qualify if the population is equal to at least two and three-tenths persons per acre of land. G.S. 160A-58.54(a)(4)(a)(1). Second, if the population is equal to at least one person per acre, and it is adequately subdivided such that sixty percent of the area is subdivided, and sixty-five percent of the subdivided lots are one acre or smaller. G.S. 160A-58.54(a)(4)(a)(2). Third, if the area is subdivided into tracts of three acres of less and at least sixty percent of the total lots are used for residential, commercial, industrial, institutional, or governmental purposes. G.S. 160A-58.54(a)(4)(a)(3). Fourth, that the entire area is already a part of any county water or sewer district and an adequate relationship exists between the district and the municipality. G.S. 160A-58.54(a)(4)(a)(4). And finally, that the area “is so developed that, at the time of the approval of the annexation report, all tracts in the area to be annexed are used for commercial, industrial, governmental, or institutional purposes.” G.S. 160A-58.54(a)(4)(a)(5).


C.    What is an annexation report? What goes in an annexation report?

The annexation report released prior to the public information session is prepared by the municipality and meant to clarify and publish the municipality’s analysis and plans. Included are maps showing the proposed municipal boundary changes and the existing and proposed water and sewer mains, interceptors, and outfalls. G.S. 160A-58.53(1). In terms of explaining municipal reasoning for annexation, the municipality must explain why the parcels at issue are ripe for annexation – in part, how they are sufficiently urbanized. G.S. 160A-58.53(2). The municipality must explain its plans for extending services to the proposed annexation on substantially the same basis and in the same manner as they are currently provided within the rest of the municipality. G.S. 160A-58.53(3). The municipality must provide police protection, fire protection, solid waste collection, and street maintenance services on the effective date of annexation (or show contracts for the same as to fire protection and solid waste collection). G.S.160A-58.53(3)(a). The municipality must provide water and sewer service to the annexed area within three and one-half years from the effective date of the ordinance. G.S.160A-58.53(3)(b). Finally, the municipality must explain how the proposed annexation “will affect the municipality’s finances and services, including municipal revenue change estimates.” G.S. 160A-58.53(5).


D.   Can property owners appeal?

After the annexation ordinance has been adopted, real property owners of the parcel to be annexed may request judicial review of the municipality’s actions. G.S. 160A-58.60(a). Accounting for the new petition process, an affected real property owner now has sixty days from the close of the petition signature period in which to file an appeal with the North Carolina Superior Court, as opposed to the old rule of sixty days from the adoption of the annexation ordinance. Id. As before, the Superior Court may stay the annexation ordinance while the appeal is considered. G.S. 160A-58.60(e). Of greater significance, the standard of review has changed. Before the Annexation Reform Act, the North Carolina Superior Court reviewed the annexation proceedings for substantial compliance with the statutory scheme. Under the new amendments, a remedy may be ordered, “if procedural irregularities are found to have materially prejudiced the substantive rights of any of the petitioners.” G.S. 160A-58.60(g)(1). The Superior Court may remand the ordinance for further proceedings if there is material prejudice. Id. Any errors in defining the boundaries of the annexation or in the provision of services may be remanded with direction from the Court. G.S. 160A-58.60(g)(2), (3). The Court may “declare the ordinance null and void, if the court finds that the ordinance cannot be corrected by remand[.]” G.S. 160A-58.60(g)(4). If a municipality refuses to fix procedural irregularities as ordered by the Superior Court, the annexation proceeding is also null and void. G.S. 160A-58.60(g). Court costs and reasonable attorneys fees will be taxed against a municipality found to be in violation. G.S. 160A-58.60(n).


E.    What is the Role of the North Carolina Local Government Commission?

After the annexation process is complete, municipalities must submit progress reports to the Local Government Commission. Within 30 days of the effective date of annexation, the municipality must report as to whether police, fire, solid waste services, and street maintenance have been provided. G.S. 160A-58.55(o). If the Local Government Commission determines that the municipality has not met these service requirements, the municipality may not count residents of the annexed parcel in the municipal population for the purpose of receiving any State, federal, or county dollars. G.S. 160A-58.55(o)(1). The same punishment is applied if after three and one-half years the municipality cannot show the Local Government Commission that water and sewer services have been provided. Id. Furthermore, the municipality may not progress with any other pending annexation until water and sewer services are provided to the earlier annexed parcels. G.S. 160A-58.55(o)(2).


F.    What services must local government provide to annexed areas?

Prior to the Annexation Reform Act, jurisdictions were required to make municipal service commitments; however, the new reforms shift more of the financial burden onto municipalities and tighten timeframes. After passage of the resolution of intent, property owners must be notified in writing of the opportunity to obtain water and sewer connection. G.S. 160A-58.56(b). If a majority of property owners in the affected parcel request these services, the municipality must provide services and cover the cost of infrastructure and connection. G.S. 160A-58.56(b)(3). If less than a majority of property owners request water and sewer services, the municipality is not required to provide blanket services, and may charge a connection fee to requesting owners. G.S. 160A-58.56(b)(4). The connection costs are still limited to a fraction of the normal rate for five years. G.S. 160A-58.56(d). Property owners applying for services within the first year of annexation will be charged a discounted rate of 50% the average cost of the installation. Id. As the years progress, property owners will be charged a progressively higher percent of the average cost. Requests made in the fifth year of annexations will result in fees 90% the average cost. Id. Municipalities that fail to provide services within the required three and one-half years, because of no-fault permitting delays, may petition the Local Government Commission for an extension. G.S. 160A-58.56(f). Municipalities at fault for failure to provide services within the required timeframe may not charge property owners applying for services any more than periodic user fees. G.S. 160A-58.56(f). By imposing more of the cost of extending services on the municipalities themselves, the Annexation Reform Act will suppress the likelihood of annexation.

No later than fifteen months after the effective date of annexation, any affected property owner may apply for a writ of mandamus if the municipality is not providing services “on substantially the same basis and in the same manner as such services were provided within the rest of the municipality prior to the effective date.”.S. 160A-58.55(n).


G. How can forced annexation be stopped?

Affected residents and property owners do not have a constitutional right to vote on annexation issues. Hunter v. City of Pittsburgh, 207 U.S. 161 (1907) (annexation issues are not subject to vote as they are entirely within the power of the state legislature to regulate); see also, Barefoot v. City of Wilmington, 306 F.3d 113, 121–122 (4th Cir.) (annexation concerns may be resolved without opportunity for vote even in face of fierce opposition from citizenry), cert. denied, No. 02–390, 2002 WL 31072354 (Nov. 12, 2002). Nonetheless, an intent of House Bill 845 was to grant a voice to affected property owners. G.S. 160A-58.50(6) (“That it is essential for citizens to have an effective voice in annexations initiated by municipalities.”). Prior to the effective date of annexation, property owners in the affected parcel have an opportunity to object to annexation by petition, and with a sufficient majority, prevent annexation for three years.

After passage of the ordinance, it is the responsibility of the county tax assessor to prepare a list of property owners of the affected parcels. G.S. 160A-58.55(i)(1). The County Board of Elections must then prepare petitions for each affected property owner to sign in opposition to the annexation ordinance.[2] Id. Petitions are then mailed for signature.  G.S. 160A-58.55(i)(3). If the municipality has a website, a blank copy of the petition must also be “conspicuously” posted online and made available for download. G.S. 160A-58.55(h)(8). Property owners who want to join the petition may return the signed documentation by mail to the county board of elections. G.S. 160A-58.55(i)(4). Further alleviating the administrative burden on property owners, the Board will also accept petitions that are collected by a third party so long as the petitions arrive at the county board of elections in a sealed container. Id. At the close of the 130-day signature period, the Board of Elections certifies the number of property owners in opposition to annexation. G.S. 160A-58.55(i)(10). If property owners of at least 60% of the affected parcels oppose annexation, the annexation ordinance is void and the municipality may not attempt to annex the given parcel again for three years. G.S. 160A-58.55(i)(11).


II.             How has voluntary annexation changed?

A.   Who can seek voluntary annexation?

As stated previously, voluntary annexation arises when neighboring property owners desire annexation as a means to obtaining municipal residence. Voluntary annexation operates through a petition process. Prior to 2011, the petition was a tool exclusive to property owners. Furthermore, the process still relied heavily on subsequent approval by the local governing board. After the Annexation Reform Act however, one new mechanism makes some voluntary annexations mandatory, while the other opens the petition process to non-property owners.

Under both new mechanisms, fifty-one percent of household incomes in the proposed annexation must be 200% or less the poverty threshold. G.S. 160A-31(b1); G.S. 160A-31(j). In the first mechanism, the population of the proposed annexation must be less than or equal to ten percent of the population of the municipality as a whole. G.S. 160A-31(b1). Also, one eighth of the aggregate external boundaries must be continuous. Id. If these standards are met, and the municipality received petitions signed by seventy-five percent of the property owners in the area to be annexed, the municipality must approve the annexation. Id. While this is a mandatory annexation, the municipality is not required to accept more than one such annexation in a three-year period. Id. The municipality may also opt out of the annexation if the annual debt service payment required to cover the cost of extending services would be too high. G.S. 160A-31(d2).

Under the second mechanism, the proposed annexation need not meet any population requirements. G.S. 160A-31(j). The Annexation Reform Act requires the proposed annexation be contiguous to the municipality, but it does not say to what extent. Id. The second mechanism is far more liberal than the first in that it broadens the class of petitioners. Id. The Act requires the signatures of “at least one adult resident of at least two-thirds of the resident households.” Id. (emphasis added). Thus unlike all other petitions under the Act, this one may be signed by renting, non-property owners as well as real property owners. Yet, this mechanism is different than the first in that it does not mandate annexation. Id. The ultimate decision to annex the area is still left to the governing board. 


B.    What is the procedure for voluntary annexation?

There are still numerous procedural steps before the voluntary annexation may take place. For example, a public hearing must still be held. G.S. 160A-31(c). The Annexation Reform Act made key changes to public hearings held under this provision. Prior to the Annexation Reform Act, only property owners within the proposed annexation alleging an error in the petition and municipal residents questioning the necessity of the annexation had a right to be heard. Now, all residents of the proposed annexation and of the municipality are guaranteed an opportunity to be heard. G.S. 160A-31(d). Earlier described provisions for the extension of municipal services, also apply to both new annexation mechanisms. G.S. 160A-31(d3).


III.           Do annexation reforms apply retroactively under N.C. Sess. Law 2011-173 and 2011-177?


In House Bill 56 and Senate Bill 27, the General Assembly retroactively applied the new petition process of G.S. 160A-58.55 to several municipal annexations already underway or completed.  Pursuant to both bills, pending annexations in the cities of Kinston, Lexington, Rocky Mount, Wilmington, Asheville/Biltmore Lake, Marvin, and Southport were suspended effective June 1, 2011. Pursuant to Senate Bill 27, a pending annexation in Fayetteville was also suspended effective June 1, 2011. N.C. Sess. Laws 2011-173, 177. Under Section 2 of Senate Bill 27, an already enacted and effective annexation in Goldsboro was subject to what the bill referred to as “a petition by residents to disallow and repeal the annexation.” N.C. Sess. Laws 2011-177.

The procedures mimic those outlined in the Annexation Reform Act. Within thirty days of the effective date of the acts, county tax assessors of the named areas must prepare a list of real property parcels and owners located in the annexed areas. N.C. Sess. Laws 2011-177. Those lists must be forwarded to the county boards of election, which in turn will prepare and mail petitions to the named owners. Boards must accept signature until 130 days after mailing. Id. “If the board of elections delivers to the municipal governing board petitions signed by property owners of at least sixty percent (60%) of the parcels located within the area to be annexed . . . the annexation shall be terminated.” Id. As in the Annexation Reform Act, if the annexation is terminated, the municipality may not seek to annex the concerned area for at least the next three years. Id. Section 4 of House Bill 56 clarifies that if 60% of the parcels in the annexed area in Goldsboro object to the annexation, “the annexation shall be repealed effective immediately.” Id. This deannexation provision is exclusive to Goldsboro. Nothing in the Annexation Reform Act grants municipal residents a process for seeking deannexation.


IV.           Are farms exempt from annexation under N.C. Sess. Laws 2011-363?

House Bill 168 clarifies the definition of bona fide farm purposes; striking language requiring a “domestic or foreign market” for “all other forms” of agriculture not previously listed. § 1 lists both state and federal tax and identification statuses that will qualify as sufficient evidence that property is being used for bona fide farm purposes.

The bill goes on to explicitly preclude from annexation any parcel used for “bona fide farm purposes” unless the municipality obtains consent of the owner or owners of the parcel. The bill also exempts property used for bona fide farm purposes from extraterritorial jurisdiction. Critics have expressed concern that by excluding property with a bona fide farm purposes from municipal annexation, the law will create unfavorable “doughnut holes” in municipal territory. However, there is nothing to prevent the municipality from later capturing these parcels for municipal annexation when the bona fide farming purpose ceases, or, when the parcel owner or owners choose to join the greater municipality.


[1] Related whitepapers available at ncicl.org include a whitepaper addressing alleged Voting Rights Act issues triggered by annexation reforms as well as a whitepaper discussing the right of municipalities to sue the State to challenge certain annexation reforms.

[2] The petition must be preprinted with the name and address of the property owner. G.S. 160A-58.55(h)(7).