Regardless of city size or geography, all cities experience some development outside their boundaries (in the “fringe” areas) due to cheaper property and less restrictive zoning laws. Not only are these fringes socially and economically linked to the city, but oftentimes the residents and industrial and commercial businesses in the fringe areas utilize the city's resources and services without contributing their share of the cost to the city. Such practices strain the effectiveness of municipal governance. In addition, the growth of separate fringe areas may produce a complex pattern of government by multiple jurisdictions, resulting in confusion of authority and an inefficient overlapping of services.
To resolve these issues, the urbanized core city may seek to annex (transfer a parcel of land from one government to another) the adjacent urbanizing fringe area in order to use resources efficiently, capture growth, gain a tax base or implement a plan across current borders. In some cases, annexation may precede urbanization as a means of capturing anticipated growth.
Annexation law varies from state to state. In Wisconsin, for example, annexation statutes are created by the legislature but are interpreted by case law emanating from the Supreme Court and Court of Appeals. The state's statutes allow several methods of annexing property: annexation by unanimous consent, annexation by one-half approval and annexation by referendum. These three types require review by the Wisconsin Department of Administration in certain counties or in certain situations. The other three methods - annexation by city- or village-initiated referendum, annexation of town islands and annexation of territory owned by a city or village - do not require review. Each of the methods has its unique requirements, process, timeline and participants.
While annexation is an important avenue of growth, it is also a contentious one. A town's desire to preserve its tax base and sense of place is jeopardized. In addition, the fiscal impact of annexation is a complex assessment. Besides the expected complexity of choosing an analysis method, impact is difficult to calculate, because adjacent jurisdictions will be impacted, tax rates will change, and social impact can be unpredictable. Furthermore, new commercial development may generate its own costs, such as increased traffic congestion along new routes, resulting in increased street maintenance and repair costs. While cost evades easy calculation, it depends on the type of land annexed, its current value, the number of residents and the expense of expanding services to those residents, if necessary.
Edwards, Mary. "Annexation: A "Winner-Take-All" Process?" State and Local Government Review, 31(3) (1999): 221-231.
Krane, Dale, Platon Rigos, & Melvin B. Hill, Jr. Home Rule in America: A Fifty-State Handbook. Washington, D.C.: CQ Press, 2001.
Municipal Research & Services Center of Washington, Annexation Handbook. Seattle, WA: Municipal Research and Services Center of Washington, 2009.
Municipal Technical Advisory Service, Annexation Guidelines: How to reduce negative impacts. Knoxville, TN: The University of Tennessee, Institute for Public Service, 1999.
State of Wisconsin, Department of Administration, Division of Intergovernmental Relations. "Annexation Law." Accessed March 22, 2011.http://www.doa.state.wi.us/subcategory.asp?linksubcatid=1432&locid=9.
State of Wisconsin, Department of Administration, Division of Intergovernmental Relations. "Wisconsin's Annexation Statues," Madison, WI: State of Wisconsin, Department of Administration, Division of Intergovernmental Relations, 2008.