The North Carolina Supreme Court recently held, for the first time, that in order for a municipality to involuntarily annex an area, the municipality must provide a threshold level of public services to the annexed area that would benefit property owners in that area in a meaningful, tangible way.  See Nolan v. Village of Marvin, (No. 488A05, filed 27 Jan. 2006).  At issue in this appeal was the Village of Marvin’s attempted involuntary annexation of 324 lots on 467 acres contiguous to its corporate limits.  Owners of the property to be annexed challenged the annexation as unlawful on the grounds the Village would not be extending any services to the property to be annexed, yet property owners would be required to pay real property taxes.  The only municipal services provided by the Village were administrative services.  Other types of municipal services, for example, police and fire protection, streetlights, solid waste removal, street maintenance, water and sewer services, animal control, and parks and recreation, were provided to Village residents by the State, Union County, volunteer organizations, or not at all.  In defending its annexation, the Village contended that the statute authorizing involuntary annexation only required it to extend the services it provided at the time of the annexation to the area to be annexed in a non-discriminatory manner.  The Supreme Court disagreed.

The Village of Marvin appears to have followed all of the statutory procedures for involuntary annexation.  It passed a resolution of consideration identifying the property to be annexed, adopted a resolution of intent, noticed and held a public informational meeting and a public hearing, and made publicly available a report regarding the proposed annexation.  In the report, the Village described its plans for extending municipal services to the area to be annexed, and estimated that as a result of the annexation, it would incur $14,240 in additional annual administrative costs, but would not incur any additional costs for the other public services provided to its residents.  The Village also estimated its total annual revenues would increase by $80,395 from the collection of ad valorem taxes, utility franchise taxes, local option sales taxes, cable TV franchise taxes, motor vehicle taxes, and development fees.

The Supreme Court looked beyond the letter of the involuntary annexation statute, N.C. Gen. Stat. § 160A-35, to the General Assembly’s objective in adopting the law.  The Court relied in large part on the statutory declaration of policy supporting involuntary annexation, which provides, among other things: that municipalities are created to provide governmental services essential for sound urban development and for the protection of health, safety and welfare in developed areas; that municipal boundaries should be extended to provide the high quality of governmental services needed for the public health, safety and welfare; and that areas annexed by municipalities should receive services provided by the annexing municipality.  See N.C. Gen. Stat. § 160A-33 (2003).  The Court determined that these underlying public policies which reflect the General Assembly’s intent in granting municipalities authority to involuntarily annex, must be considered in construing that authority.  The Court concluded that since the primary purpose of involuntary annexation is to promote “sound urban development,” the involuntary annexation statute “is grounded in a legislative expectation that the annexing municipality possesses meaningful (quantitative) services to extend to the annexed property,” in addition to the provision of public services on a non-discriminatory basis. 

Based on this analysis, the Court ruled the Village’s annexation was unlawful because the administrative services such as zoning administration and tax collection which would be furnished by the Village to the newly annexed area would simply fill needs created by the annexation itself, without providing any significant benefits to the annexed property owners and residents.  The Court made clear that its ruling did not mean a municipality is required to provide all types of public services to an involuntarily annexed area, but rather that the services provided by the municipality must confer some significant benefit to the annexed property owners and residents.  Finally, the Court found that the property owners would suffer material injury, in the form of municipal taxes, if the Village’s annexation proceeded.

Since the Village of Marvin set forth principles new to North Carolina, municipalities should carefully consider its holding before proceeding to involuntarily annex property adjacent to their borders.

If you have any questions regarding this alert or other annexation issues, please contact Pam Scott at 919.783.2954 or pscott@poynerspruill.com or Robin Tatum Currin at 919.783.2931 or rcurrin@poynerspruill.com.