Sunday, August 14, 2022

Breaking down the cost-benefit of Leland’s town-initiated Lanvale Forest annexation

Leland agreed to fix private roads a developer abandoned in Lanvale Forest, contingent upon the area's approval of a town-initiated annexation. The town did so with the estimation taxes gained would exceed the cost to repair the roads.

After following a lengthy annexation process, Leland is close to adding 178 lots in the Lanvale Forest subdivision and 20 lots just outside the community into its municipal limits. (Port City Daily graphic/Courtesy Town of Leland)
After following a lengthy annexation process, Leland is close to adding 178 lots in the Lanvale Forest subdivision and 20 lots just outside the community into its municipal limits. (Port City Daily graphic/Courtesy Town of Leland)

LELAND — Annexing Lanvale Forest won’t immediately provide Leland a significant increase in revenue, at least not when compared to the task the town has agreed to take on as part of the annexation deal.

RELATED: Leland eyes annexing Lanvale Forest, could be put to referendum next election

The town is just a few steps away, and one referendum vote this November, from annexing 198 lots in and near Lanvale Forest into its municipal limits. So, what does Leland get for taking in these new residents? And what do the residents get in exchange?

The deal

If a majority of residents in the proposed annexation area agree to be incorporated, their biggest, and apparently only service gained, will be much-needed street maintenance. Right now, streets in Lanvale Forest are in disrepair. Because counties do not perform street maintenance, and the area’s previous developer abandoned the road, the private streets are in limbo.

It will cost the town $1.1 million to repair the streets, a task the town agreed to perform in a November 2017 development agreement with the area’s new developer in exchange for annexation. In return, Leland estimates a total increase of $149,219.31 in annual revenue, accounting for sales and property taxes. According to the town, the addition of approximately 396 residents will add nearly $100,000 in sales tax and about $53,000 in property tax for $25 million in property value.

The town’s predictions are based on its annual tax revenue. Last fiscal year, the town collected about $4.8 million in sales tax, at a rate of $24,317 per every 100 residents — that’s tax revenue recouped from that state based on purchases made inside town limits (i.e. from retail stores in Leland).

But it’s likely the town is already earning most of the sales tax factored in this estimate, cited in its annexation report.

That’s because Lanvale is all residential, so annexing the neighborhood won’t add any new retail locations inside the town’s borders. Further, the annexation is also unlikely to change the shopping behavior of its residents — that is, if they shopped in Leland before the annexation, they’ll probably shop in Leland after it (and, conversely, if they shopped elsewhere before the annexation they’ll likely continue to do so).

In short, it seems unlikely the additional $100,000 in sales tax will materialize because of the annexation.

Leland’s November 2017 development agreement with M&JM (NC), LLC shows the town will agree to fix Lanvale Forest’s roads if the town-initiated annexation is successful. The agreement states the sales tax and property tax is estimated to exceed the repair cost. (Port City Daily screenshot/Courtesy Town of Leland)

At the exact same tax rate (which could soon increase) and at the same population (also likely to increase), counting both sales and property tax revenues, it would take the town about seven years to break even.

Still, that’s an extremely rough estimate, considering some of the costs will be padded by Powell Bill funds (more on that below).

Services

Leland won’t provide any additional fire or police services to the area — it’s already covered — and won’t incur additional cost to continue these services. The town is not obligated to provide waste services, that’s covered by Brunswick County.

Each year, municipalities receive state-allocated funding through the Powell Bill, to help finance street-maintenance projects. In 2017, Leland was given $502,333 for its street projects. Some of this money is kept in a restricted general fund, of which Leland had $4.8 million available in the 2017-2018 fiscal year. Compared to the actual cost of street maintenance — typically one of a municipalities’ most costly expenses — Powell Bill funds help mitigate costs, but do not fully reimburse expenses.

At this point, it’s unclear exactly how much of the $1.1 million cost to repair Lanvale Forest’s roads will be buffered by Powell Bill funds. According to Gary Vidmar, Leland’s economic and community development director, the amount, based on today’s cost, is a “very conceptual estimate.”

Not just Lanvale

Fixing Lanvale Forest won’t be Leland’s only road cost in the coming months and years. The town is facing a tax increase, largely due to projects it anticipates tackling this year. A recent half-million dollar Waterford repaving project recently failed to meet town and resident expectations. To address the remaining issues — like potholes and missing center lines — Leland is seeking damages from the contractor, Highland Paving.

Alligator cracking, missing center lines, and poorly-patched potholes are common in Waterford, where Leland's contracted $478,296 repaving project recently came under scrutiny. (Port City Daily photo/Johanna Ferebee)
Alligator cracking, missing center lines, and poorly-patched potholes are common in Waterford, where Leland’s contracted $478,296 repaving project recently came under scrutiny. (Port City Daily photo/Johanna Ferebee)

Correctional work is being contracted to fix Highland’s mistakes, and a Waterford-wide street study will soon be underway. A town-wide street study was also moved up by a few months, also being contracted out. Though no solid estimate has been offered, fixing all of Leland’s street issues could cost millions, assistant manager, Niel Brooks, acknowledged in late December.

The two road studies will be conducted this year, with any future road projects as a result of the study still yet to be determined.

Still H2GO’s territory

Leland does not intend to pay to provide Lanvale Forest water and sewer services. It also won’t pay to extend existing lines to serve newly-annexed properties — that is, unless a judge compels the town to do so.

In town-initiated annexations, state statute obligates municipalities to provide the same or similar water and sewer services to the subject area that are provided to the town at large within three and a half years.

But in Leland, water and sewer services are provided by the town, the county, and Brunswick Regional Water and Sewer H2GO. This creates a grey area, according to Leland’s attorney, Brian Edes. (Edes also serves as legal counsel to H2GO for its lawsuit against Belville, in which H2GO is aligned with Leland as a co-party.)

“The statute doesn’t address that kind of hybrid situation,” Edes said at Leland’s Jan. 4 special council meeting about the annexation. “It’s either the annexing municipality provides all the services, or doesn’t, and we’re kind of a mix.”

Edes’ take on the law is that the town won’t be financially responsible for extending utility lines. But to play it safe, Leland is preparing for both scenarios. “We’re doing it both ways,” Edes said. “If we’re not required, then it is what it is.”

About 80 percent of the property owners are already serviced by H2GO, according to the annexation report. No agreement between Leland and H2GO is necessary, Edes said, to fill in the remaining 20 percent. (Similar utility agreements in 2018 triggered letters from Belville, objecting because the town technically owns all of H2GO’s assets, pending the results of a year-long lawsuit.)

If Leland is ordered to finance extending H2GO’s existing utility lines, the cost would not benefit the town. “Conceivably, if we had to pay for those extensions, we would be paying for those extensions to H2GO’s lines,” Edes said.


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

Related Articles