Tuesday, June 28, 2022

Beyond an HOA: How, and why, some Homeowners Associations became towns

How do developments run by HOAs -- sometimes accessible only via a gated entrance -- become full-fledged towns?

Every residential taxpayer of the town of St. James lives in the gated community, St. James, in Brunswick County. (Port City Daily photo/Courtesy Google Maps)
Every residential taxpayer of the town of St. James lives in the gated community, St. James, in Brunswick County. (Port City Daily photo/Courtesy Google Maps)

SOUTHEASTERN, N.C. — When homeowners associations can’t do it all, sometimes, homeowners help their developments become actual towns.

Homeowners associations can manage most of the same services local governments do. Through fees and fines, they maintain streets, provide amenities, and contract out services outside their purview.

RELATED: Here’s how Homeowners Associations get their considerable, sometimes subjective, control over residents

But what happens when homeowners associations give rise to actual governments? It’s a rare phenomenon, but it has happened at least three times in the state, and twice in Brunswick County.

Between Sept. 1998 and July 1999, Brunswick County welcomed two, new, bonafide towns: Carolina Shores and St. James. At the time, both areas were master-planned developments, with homeowners associations (HOA) or property owners associations (POA) already in place.

The HOAs and POAs don’t literally become towns. But their foundation can provide a taking-off point for bureaucratic independence. Once chartered, the association lives on and operates in conjunction with the newly-formed government unit.

Carolina Shores

A breakup freed Carolina Shores. In 1989, the development was annexed by its beach-town neighbor, Calabash. Nine years later, the town de-annexed from Calabash, and in the same bill, was incorporated into its own town.

“It’s what we call the divorce really,” Jon Mendenhall, the town’s administrator, said.

Mendenhall said residents of the 14-year-old golf course development, Carolina Shores, grew unhappy with the new arrangement. Though Carolina Shores’ residents voted in favor of the ’89 incorporation, its POA residents organized its later de-annexation and incorporation as its own town in ’98.

“They felt the services they were receiving were at odds with what they wanted,” Mendenhall said. “Sometimes like in a real divorce you’re better off friends than you are married.”

Now, as co-parents, Mendenhall said Carolina Shores considers Calabash a “great friend and ally.”

Without the development’s POA, formed in 1974, Mendenhall said incorporation would have been impossible. Now, through a series of annexations, the town has grown to consist of seven different neighborhoods with seven different POAs.

A map of St. James' initial incorporation petition, submitted to the North Carolina General Assembly in 1998. At the time, the community was home to 660 people. As of 2017, the town now hosts over 5,000 residents. (Port City Daily photo/Courtesy N.C. General Assembly)
A map of St. James’ initial incorporation petition, submitted to the North Carolina General Assembly in 1998. At the time, the community was home to 660 people. As of 2017, the town now hosts over 5,000 residents. (Port City Daily photo/Courtesy N.C. General Assembly)

St. James

Unlike Carolina Shores, which has grown beyond the original development, every resident of St. James, the town, is still also a resident of St. James Plantation, the master-planned development.

That means 100 percent of St. James’ ratepayers — and POA members — live inside the gated entrance off N.C. 211. The towns’ public community center is across the highway alongside a small commercial district — the only ungated, incorporated areas of town.

Though he later sponsored St. James’ eventual incorporation bill, former Representative David Redwine voiced concerns about setting a precedent for other gated communities.

According to the Wilmington Morning Star in 1998, a year before its charter, Redwine said St. James’ incorporation created “a slippery slope.”

St. James’ manager, Gary Brown, said the town’s late ’90s bid to incorporate was motivated in part by an attempt to avoid being annexed by a neighboring municipality. Involuntary annexation laws were less restrictive then, granting municipalities greater authority to swallow up neighboring communities.

Brown didn’t know if the development’s POA was instrumental in petitioning the state for its incorporation, and was not able to locate any historical documentation about the 1999 charter.

But in St. James Plantation’s 1999 petition to the legislature, the community of 660 maintained joining with surrounding municipalities was “impractical.” A majority of the development’s homeowners — 85 percent — supported the petition, that appears to have been prepared by St. James Plantation, the development.

After studying St. James Plantation’s “demographics” and needs, the community wanted to maintain property values, and add services like garbage collection, water distribution, and police and fire departments; services its POA could not provide.

Gated community towns

This scenario, in which all taxpayers live within a gated community, is not unusual; across the United States, that is.

“It’s actually not unusual at all,” Dr. Russell Smith, Winston-Salem State University geography professor, said.

Smith said in Florida, special districts frequently become “full-fledged towns.”  But in North Carolina, he could only recall one other development-turned-town: Bermuda Run outside Winston-Salem.

Published earlier this year, Smith compiled his decades-long research into why communities incorporate into the book, “Municipal Incorporation Activity in the United States.”

Though receiving more, or better, services is a clear motivating factor behind incorporations, Smith identified other factors: political, land use, demographics, taxation, and patterns of proliferation, or simply, when a new town forms, others follow the blueprint.

He found that between 1990 and 2010, North Carolina had the second-most incorporations in the country. At 19 municipalities, Brunswick County has the most incorporations in the state, with a “remarkable” amount of local government boundary change over Smith’s 20-year study period.

In 2012, annexation law changed, requiring a referendum from the subject area. This slowed down incorporations, with only three in the state since, compared to 172 between 2000 and 2010.

Smith’s research also identified demographic motivators. He’s seen cases when, often led by an HOA or another political group, developed areas seek incorporation to keep other socioeconomic groups, out.

“They’re literally becoming a town because they don’t want nearby communities coming closer to them, whether they’re poorer or darker,” Smith said. “Some of them aren’t walled off per se but they are exclusive in the amount of money it takes to become part of that world.”

Smith’s cites research that has found most new municipalities have higher median incomes and higher white populations than other communities. Access has also proven to be an issue with developments-turned-towns. In the case of Bermuda Run, Smith found at one point, the town was blocked from receiving state funds after refusing to open their streets. To this day, both St. James and Bermuda Run, cannot simply be driven through without question.

“To get in you have to go past the guard post – you have to stop and say something,” Smith said of Bermuda Run. “They make you announce yourself.”


Send tips and comments to Johanna Ferebee at johanna@localvoicemedia.com

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