The proposed annexation of several plots of land in Magnolia has some residents and business owners within those plots wondering what it means for them.

"I don't see the benefit to me as a business owner," said Rene Hancock, addressing City Council at a public hearing Jan. 10. Hancock lives on the largest of the five tracts of land the City of Magnolia is looking to annex in the first quarter of 2012.

Following the annexation, businesses in the area will be required to charge an 8.25 percent sales tax instead of the 6.25 percent tax many of them charge now. The sales tax revenue is used to help the city provide these areas with services such as water, sewer, police and fire protection.

Hancock, who also owns Hancock Center—a strip center along FM 1774— said that he is all for city growth, but worries about the fate of some of the businesses once the taxes increase. His concern is that the tax increase may force him to raise the cost of rent.

"With the economy the way it is, it's going to put a bind on some of my tenants," he said.

Andy Enzenauer, who owns a feed store in the same area as Hancock Center, said he was concerned with having to bump up the sales tax to 8.25 percent.

"As a business owner, you can't afford to gouge your customers," he said.

Twenty-two businesses will be affected by the annexation, according to Deborah Miller, the city economic development coordinator. The majority of people she's spoken to favor the annexation, she said.

Many businesses are already charging an 8.25 percent sales tax, Miller said. The difference is the tax revenue is going to the state. After the annexation, that money will be coming back to Magnolia.

"Most people don't even know they're paying an 8.25 percent tax versus 6.25 percent," she said, adding that there is not any statistical evidence the sales tax increase would hurt business.

One of the main goals of annexation is to increase Magnolia's sales tax base, something that simply extending extraterritorial jurisdiction would not accomplish.

Any resident who is annexed involuntarily is allowed to dis-annex after a year if the individual is still dissatisfied, Miller said. In that case, the city would no longer provide water, police protection and other benefits.

"That gives time for both the city and the individual to see the value of the annexation," she said. "We're all about creating good neighbors and working together."

A second public hearing on annexation will take place Jan. 24 at 6:30 p.m at Magnolia City Hall, located at 18111 Buddy Riley Blvd.