Wednesday, May 10, 2006

Revenue Sharing Agreement

During the run up to the election, Coy, host of Charlottesville...Right Now, argued Albemarle County residents have a real investment in the outcome of the election because of the revenue sharing agreement between the County and the City. I agree Albemarle residents are affected by the results of the elections in the City but the revenue sharing agreement is hardly the reason why.

My understanding of the revenue sharing agreement is it came about as consideration for the City not annexing any additional County land. I have not been able to listen to every show so perhaps Coy addressed this since the election. I want to be clear this money is not haphazardly thrown at the City for no reason as sometimes Coy seemed to suggest.

A search found an Albemarle County proposed budget with the following language:

"An Annexation and Revenue Sharing Agreement dated February 17, 1982, between the County of Albemarle and the City of Charlottesville was approved in a public referendum on May 18, 1982. The agreement required the County and the City to annually contribute portions of their respective real property tax bases and revenues to a Revenue and Economic Growth Sharing Fund. Distribution of the fund and the resulting net transfer of funds shall be made on each January 31 while this agreement remains in effect. During the time this agreement is in effect, the City will not initiate any annexation procedures against the County. Also, pursuant to this agreement, they created a committee to study the desirability of combining the governments and the services currently provided."

County residents receive a benefit from this agreement, apparently at one time the County felt it very important not to have the City annex any more of its land & the City cannot under this agreement. Is the agreement relevant today? I would like to know why it was needed in the first place. Anybody...anybody?

Everyone knows I love Coy's show, those little comments about the revenue sharing agreement frustrated me a bit because it was not presented with the benefits the County receives with that agreement. Frankly I would have called in my comment but I dont have the time between 4-6 to get on the phone.


Michael Snook said...


there are parts of the county, just outside the city border, that bring in a lot of tax revenue that the city would very much like to get ahold of; Pretty much everything on 29, especially the Fashion Square Mall, parts of pantops, etc.

The previous setup required the city to pay the county a fair price for annexed land, but the county didn't have much of a choice in the matter. The city didn't have the funds to buy a plot of land like the FSM, but if it ever did get them, it would mean a serious hit to county revenue.

The current agreement keeps the city from cherry-picking the most productive segments of the county to boost revenue at the county's expense, but it also keeps the city from expanding its centralized services to areas where it might otherwise be efficient to do so, which was the essential purpose of the original annex-enabling system.

In short, it helps keeps things as they are, for better and for worse. This is one reason why it is important for the city and county to continue to work together on fire-dept and rescue squad coverage, among other things.

This explanation is certainly incomplete. Most of it comes from what I got out of my mom as a child on the way home from the FSM.

Kevin Cox said...

The county did have a choice when facing an annexation attempt by the county. They could turn to the courts and county's in Virginia often did. The result was often a contentious and expensive legal battle. One of the reasons that the revenue sharing agreement was created was to stop the battles. What is ironic is that not long after Charlottesville and Albemarle signed their agreement the state legislature put an end to all annexations in Virginia. If Albemarle had waited they would have gotten what they wanted but without having to pay the city millions every year. The revenue sharing agreement cannot be terminated without the mutual agreement of both parties. The city will never let that golden goose free.

I think we'd all be better off if the two bodies merged, which is very different from reversion. It'll be a cold day in hell though, before the politicians give up any power.

Jennifer said...

This is great information. Now I can see why the agreement would generate resentment among County residents. I wonder why the State said no more annexation- perhaps to subordinate the interests of cities in general?

Kevin Cox said...

Since World War II there has been a huge migration of people from Virginia's cities to their suburbs,which are actually in the counties. Many people left Charlottesville for Albemarle after the 1960 vote to demolish Vinegar Hill and create Westhaven and that exodus continues. It is amazing how many people who were active in city politics have left to live in Albemarle.

The counties gained immense political power with this new population and they also saw a dramatic change in the value of their tax base. They wanted to keep that tax base so they flexed their political muscle and the result was the moratorium on annexation, which has been renewed 7 times since 1987. The moratorium has not been good for cities but the counties love it.

I searched for "Virginia annexation moratorium" and there's a lot more to this than I remember. I am not sure of the timeline of the moratorium. Apparently it was around earlier, expired in 1979 and then was renewed later.

Kevin Cox said...

Here's something that you may find interestingt.I had to cut and paste it into a word document to make it easier to read.

I also discovered that the moratorium is going to expire in 2010. Well, I think it is. I am not totally certain.

We are now witnessing a reversal of the migration out of cities. People with influence and money are returning to the citites. This is bound to influence the pending battle over the annexation moratorium.

Roll Tide said...

To answer your original question, Virginia is the only state that has independent cities and counties, so if a city is successful in its annexation effort, the county would lose permanently population, tax base and land area. Back in the early 1980s, Charlottesville was studying its annexation options and Albemarle County approached the City about a revenue-sharing agreement in lieu of a boundary expansion. The rest, as they say is history.

Unfortunately, some of your responders do not have all the information. Municipalities cannot "cherry pick" the most productive areas; the courts that ultimately decide the issue would see to that. I am not sure that counties would agree with the statement that cities were required to pay counties a "fair price for annexed land"; yes, there were financial settlements required, but some say it was no where near the amount of tax base lost. And some would argue that "counties didn't have much choice in the matter." Counties have put up pretty tough fights in the past; just ask Petersburg.

The revenue-sharing agreement is basically a payment to the city to forego its annexation rights. Fortunately for Albemarle County, a cap was put on the payments since that ceiling was reached by the second or third year of the agreement. Also, the agreement in your area served as a model of sorts for others that followed: Lexington-Rockbridge County, Franklin-Isle of Wight and Southampton Counties, Bedford-Bedford County, etc.

Further, it was five years after the agreement was signed (1987) that the General Assembly put a "temporary" moratorium on city-initiated annexations to give a legislative study committee an opportunity to review the state's annexation laws without creating a rush to the courthouse by cities seeking to grandfather their annexation rights. Of course, there were several large counties-Roanoke, Henrico, Chesterfield, York, etc.-that received permanent immunity from annexation in 1980, but that is another story. Anyway, the "temporary" moratorium, which was due to expire in 1990, has been extended about 8 times and will not expire until 2010, if then. With the redistricting of the General Assembly over the years, there are few members that represent city areas, and thus, may not sympathetic to municipal concerns, like annexation. Yes, Albemarle could have waited, but if Charlottesville filed for annexation in 1981 or 82, they may have lost territory before the "temporary" moratorium was initiated.

You may be interested to know that towns still retain the right to initiate annexations. Towns are not independent, so their annexations do not affect counties like those of cities. Of course, no citizen is likely to want to be annexed into a town because of a number of reasons. I bring that up because several years ago a group of citizens filed a petition to force the courts to consider the reversion of Charlottesville from a city to a county. The city council opposed the initiative for a number of reasons, one being that the revenue-sharing agreement might terminate-and the County opposed it and was ultimately successful in having the effort stopped by the courts on a legal issue.

This may be more information than you need. I have been involved with boundary change issues in this state for longer than I care to admit, so if you need more information, just post your questions.

Kevin Cox said...

Roll Tide,
Thanks for the informative post. I'd like to hear more of your opinion on annexation and city/county issues in Virginia.

Do you think that the Commonwealth is better off now that cities cannot annex or would it have been better to leave things alone?

Counties in Virginia are evolving into large city-like entities as the demand for more and higher quality services increases. I think that this had begun to happen before the moratorium. Has it been accelerated by the moratorium? Counties do not have to provide all the services that cities do. Roads and highways are the responsibilities of the cities but the state takes care of them in the counties for example. Cities often have a greater percentage of low income residents than counties and face the challenges of providing services to residents who don't pay a lot into the budget. It's only logical that the poor live in the cities since it takes a car to live in the suburbs and cities usually have some form of mass transit. Cities face a greater economic "challenge" than the counties and this is reflected in local taxes. Charlottesville's taxes are higher than Albemarle's and many people choose to live in the county for this reason. This seems unfair and unwise in that it encourages rural development and the degradation of urban areas. Is there any hope of legislative steps to level the playing field?

I am encouraged by the trend we are witnessing now of upper income people choosing to move into cities. I think it will give the cities more power and influence. It will be interesting to see how this is reflected in coming years in the state legislature.

Roll Tide said...

Kevin, If I have learned anything, it comes from a quote of H. L. Menken's: There is an easy solution to every human problem - neat, plausable and wrong.

Annexation is one of those things that has been cited as being helpful in keeping cities healthy. Look at Oklahoma City, the large cities in Texas and Arizona and other places. Unfortunately, if you Google annexation you will come across many cities by those who want to end annexation in their state by any means necessary. Take our neighbors to the south. The State of North Carolina has a system of city annexation that has been determined by the "experts" to be the "best" and most efficient, but every session of the legislature for the past 25 years there have been attempts to cripple it and they might succeed soon. The NC system is responsible for the growth of mighty urban centers like Charlotte, Greensboro, etc.

The experts say that in Virginia, the principle problem goes back to the independent city system. Some say thay system of separation has out-lived its usefulness. Back when cities and towns provided the only urban services around, annexation ensured that those services were extended to areas of need that grew around the municipalities. After the Second World War the General Assembly began giving counties greater authority to provide urban services to area of need within their jurisdiction which took away one of the many factors to be considered in annexation.

There are some that think the end of annexation has been helpful in some instances and in some areas. In those parts of the state where counties still need something from a city, then the counties have appeared willing to negotiate with the city over things like revenue-sharing, joint provision of services, etc. Your area is an example, but some say that if there were not elected and appointed officials that were interested in intergovernmental cooperation, then what would bring the city and county to the negotiating table. It has been said that some county officials objected in the past of having the "gun" of annexation pointed at their head which made them negotiate things like revenue-sharing and joint service provision. One can see their point of view. But as the Institute for Environmental Negotiation at UVA might say, it takes two sides to negotiate and they might point out that the sentiment, "What's mine is mine and what's yours is negotiable" is not the best way to approach intergovernmental cooperation. Also many have said that there are not enough state carrots and sticks to make localities work together. In the past, it has been reported that officials in Richmond and Petersburg have often cited that absence of major, substantive intergovernmental agreements they with their surrounding counties.

You talk about the "logic" of the poor living in the cities, but some may say that it might be by design. They note that in many urban areas, mass transit stops at the city border or if it goes into a county, it is on a limited basis. In the past, it has been noted that counties were less generous with social service, health, mental health and educational help for the needy. Zoning and land use policies enacted in the name of smart growth have been cited by experts as also capable of discriminating against low and moderate income housing. Others have noted that some policies concerning the construction of assisted housing require central water and sewer, something that is often lacking in some county areas or beyond the fiscal capability of a developer of such housing to afford.

As I noted in my earlier post, there are those who have studied the issue who noted that with each legislative redistricting the political power of the urban areas grows weaker. If one were to look at the number of members of the legislature that represent central cities, one might find few. Also, it has been noted that there is no political gain in trying to address the problems of city-county relations. The last time that was tried was in the late 1970s and it took two attempts and the threat of a veto by a governor at the end of his term. If one tries to help the central cities, then counties or smaller cities might complain. Unfortunately, one size might not fit all.

About the trends you cited. As someone who reads a lot, I can count on two hands and a couple of feet the number of stories about the revival of cities. But some of the major problems of central cities in Virginia and in other states appear to remain the same as before. Yes, there are bright spots. Look how long it took C'ville for its investment in the Downtown Mall to pay off. On the other hand, look what happened in Norfolk when they tried to do the same thing with Grandby Street. They ended up tearing it up just as the area started flourishing because of the appearance of downtown housing, additional investment in the area, etc. It all keeps coming back to what HL said.

Roll Tide said...

Oops! HL would be mad with me. Got the spelling of his last name wrong. It's Mencken. Where is the spell check on this thing?

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