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Sen. Rabon files bill that would strip Leland of annexation authority

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A bill filed in the North Carolina State Senate by Sen. Bill Rabon aims to curtail Leland's ability to annex new land.

The bill would suspend the town’s ability to allow voluntary annexations for two years. The bill also seeks to prevent the town from using utility services as a bargaining chip to solicit annexation petitions.

The bill, S.B. 911, was filed in the North Carolina State Senate at the end of May by influential six-term Senator Bill Rabon, whose district covers Bladen, Brunswick, and Pender counties, along with a small sliver of New Hanover County.

The first and most straightforward section suspends the “authority of the Town of Leland to annex territory” until July 1, 2024, taking effect at the end of this month.

The next section would take effect after the sunset of the moratorium, and adds new restrictions to the way Leland could annex property once its authority was restored; namely, the bill would prohibit Leland from representing that water and sewer service provided by H2GO, which recently merged with Leland, would only be available to property owners if their land was annexed into the town.

Last year, Leland and H2GO settled their years-old rivalry by merging — but that process left the lingering question of whether property owners would need to be annexed into the town to get H2GO’s utility service. That’s an important question because H2GO and Leland serve different areas, with only some overlap — and some places split services, with Leland offering sewer and H2GO offering water. Brunswick County also offers some utility services in the area, as well.

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The byzantine collection of water and sewer services, in several combinations, in northeastern Brunswick County.

Under current law, municipalities need a petition from the owner of any property they want to annex: “The governing board of any municipality may annex by ordinance any area contiguous to its boundaries upon presentation to the governing board of a petition signed by the owners of all the real property located within such area. The petition shall be signed by each owner of real property in the area and shall contain the address of each such owner.”

Rabon’s bill adds the following language:

“... and a statement that the owner's petition for annexation is not based upon any representation by the municipality that a public enterprise service available outside the corporate limits of that municipality would be withheld from the owner's property without the petition for annexation."

There are a number of “public enterprise services” defined by state law — including government-owned services like public transportation, water, and sewer, and private utilities like power, gas, and cable television. But the bill almost definitely refers to the service most conspicuously available outside Leland’s boundaries, which is H2GO.

Could Leland leverage H2GO services to compel annexation?

Whether the situation implied by the bill, where Leland withholds H2GO service from a property owner unless they agree to be annexed into the town, could arise is a complicated question.

H2GO covers areas both in and outside of Leland’s corporate limits; the sanitary district was, in fact, formed to provide services to areas outside of towns and cities but not close enough to connect to county-based infrastructure. H2GO’s merger with Leland has, for many, blurred the lines between what sanitary districts are intended to do and what municipal utilities do (namely, provide service to taxpayers inside the town or city limits).

Related: ‘Give a little, take a little’: H2GO-Leland merger settles competition, raises questions (Port City Daily) 

Rabon did not respond to requests for comment; his legislative assistant, Paula Fields, said Rabon was “busy meeting with constituents and has a full schedule today.” Asked if he would be available for comment later, Fields replied only “not at this time.”

Leland Town Manager David Hollis said that the town was aware of S.B. 911, and that Leland values its “good relationship” with Rabon and “has had discussions on the matter,” but did not respond to a follow-up question about how plausible it would be for Leland to use H2GO service as leverage to encourage annexation.

H2GO Director Bob Walker offered a fuller explanation. According to Walker, "Leland and H2GO, via an Interlocal Agreement (ILA), are partners and as such have agreed that only properties within the corporate boundaries of the Town and the District will be eligible for the Offering and Provision of water and sewer services." In other words, in order to receive H2GO service, most customers would need to either be in Leland or annex into the town.

Walker added that this would apply to the area around Leland where state law would allow satellite annexations — property added to the town without being contiguous with its corporate borders.

As defined by state statute, that area extends three miles from the town's "primary corporate boundaries," not including other satellite parcels. State law also prohibits satellite annexations of property that is closer to another town (for example, the Town of Belville) than to Leland, as well as property that is larger than 10% of the area of Leland's primary corporate limits.

Outside of this area, H2GO could offer water and sewer services without annexation into Leland, but it could be cost-prohibitive, according to Walker.

Walker also expressed concern over the potential impact of Rabon's bill.

"Senate Bill 911, if passed in its current form, would have significant unintended consequences to growth and development in NE Brunswick County," Walker wrote in an email.

Voluntary annexations

There’s also the question of why Leland would want to use H2GO services as leverage.

Access to potential H2GO customers was long seen, especially by Leland’s political and economic rivals, as a way to grow the town’s borders — and that’s because of how municipalities are limited in annexing new territory.

Annexation reform laws passed a decade ago restricted involuntary annexations — that is, annexations initiated by a town or city — and made them much more difficult. Since then municipalities have largely pursued what’s called ‘voluntary annexation,’ which requires that every property owner in an annexed area sign a petition giving their approval.

The process of voluntary annexation is much simpler when the land is in the early stages of development and has only a few, or one, corporate owners: the developer or developers. Once the land is parcelled up, with more and more individual property owners, things get complicated.

But in either case, municipalities can no longer easily pursue ‘involuntary’ annexation, and instead often have to convince property owners that living inside town or city limits, and paying additional taxes, would be better than living in the unincorporated county. Some of the enticements could include public safety services — like fire and police departments — or access to utilities, often attractive if property owners are relying on well water and septic tanks.

A previous attempt to curtail Leland's annexation efforts

Rabon’s bill is not the first attempt to block Leland from using H2GO to push property owners towards annexation. Last May, Rep. Frank Iler filed House Bill 831, which did not specifically name Leland, but mandates that “[a] city shall not enter into any agreement that conditions or otherwise restricts the provision or extension of a public enterprise service, as defined in G.S. 160A-311, upon the annexation of the area to be served by the city."

In June of last year, Iler confirmed that the bill was intended to curtail Leland and that the Brunswick County Board of Commissioners requested the measure — and later supported it with a resolution passed unanimously as part of the consent agenda during their May 17, 2021 meeting.

The background of that resolution read as follows:

Approximately 10 years ago, the General Assembly made changes to the involuntary annexation statutes that protected citizens in unincorporated areas and made it more difficult for municipalities to annex the property of those citizens against their wishes. Municipalities responded by conditioning the provision of water and sewer services outside their corporate limits with a requirement that the property owner “voluntarily” petition to be annexed.

This practice is not addressed by any specific statute and has resulted in what amounts to circumvention of the prohibitions against involuntary annexation. This resolution acknowledges and supports the need for legislative action to prevent municipalities from entering agreements with sanitary districts or other water and sewer providers whereby the districts agree to only extend service to areas if the property owner petitions to be annexed into the municipality.

After several tweaks, Iler's bill stalled out in the Rules, Calendar, and Operations of the House Committee in June of 2021. Last week, Rabon’s bill was referred to the State Senate’s standing State and Local Government Committee.