Annexation: An Economic Analysis

Abstract

Abstract. Cost/revenue analysis is used to determine the economic feasibility for annexing various types of land uses into a municipality. Operating costs for municipal services within existing municipal boundaries are apportioned to land uses according to the percent of the service utilized by each. Capital expenditures Site averaged over the expected life of the capital facility Sind then allocated to land uses in the same proportional manner as operating expenditures. Tax yields by land use type are estimated by allocating property taxes and income taxes to land uses which generate them. For example, income taxes are allocated to the commercial and industrial land uses where the employment resulting in tax yields is found. Tax yields are then compared by land use through use of an areal average of one acre. Estimates of revenue to be produced through annexation would result from comparing tax yields with service costs using the same acre average. Thus a city is in a better position to make a decision about the economic merits of specific annexation proposals.