Leander welcomes geographic growth

"On the water and sewer side, if your rate structure is appropriate, every class pays its own way," he said. "In general, single-family [residential areas] can be kind of a break-even as far as how much revenue the annexed land brings in and how much cost is associated with serving it. Multifamily developments cost you more to serve than they bring in in revenue, and commercial almost always brings in more revenue than it costs you to serve."

Upfront costs to annex undeveloped land is minimal compared with the potential long-term value, Cagle said. Sometimes the city annexes pricey roadway assets such as Ronald Reagan Boulevard in hopes of eventually annexing the surrounding properties.

"When you have this huge network of roads without the surrounding development, that's more expensive right now, but in the long run it will pay off hugely for us," he said. "There's going to be incredible development out along [Ronald] Reagan [Boulevard] and out along the tollway."

Land use

As Leander expands, so does the city's power to dictate how developments will be laid out. Annexed land adheres to stringent planning and zoning guidelines compared with property outside the city limits in the extraterritorial jurisdiction (ETJ)—abutting land claimed but not yet taxed by the city. Property in the city's ETJ is subject to some platting and sign ordinances but no other regulations.

City Planner Robin Griffin said land buyers and owners weigh the benefits and restrictions of living in the city limits or ETJ depending on their priorities.

"In the ETJ, there's no zoning, so we only plat subdivisions, and [land] use restrictions don't apply," she said. "You could be platted as a residential lot in the ETJ, and your neighbor could open an auto body shop next door. We don't have any jurisdiction over use."

In addition to regulations, some homeowners find the monetary benefit of living in the ETJ, said Deb Groom, agent with Keller Williams Realty.

"The obvious benefit is the lower taxes because of not being taxed by the city," she said, adding that for every $100,000 of assessed value, a property owner within the Leander city limits pays about $675.

But homebuyers do not normally make a conscious decision to live in the city or its ETJ, Groom said. Typically, they are swayed by the neighborhood and nearby schools.

"Many buyers are doing their own research before coming to an agent. They don't say, 'I want to live in the ETJ or the city limits.' They say, 'I want my home in this school district,' and that's truly it," she said.

When comparing the values of properties in an ETJ and those in the city limits, there is typically no difference, said Mark Sprague, state director of information capital at Independence Title Co. He uses property, banking and other data to analyze trends in the Texas real estate market.

"ETJ has very little impact on values in almost all communities that I'm aware of, in Texas and across the country," he said. "It depends on what is happening in that community. Whether it is urban or ETJ, real estate values are determined by job growth or lack [thereof.]"

Benefits of a robust ETJ

Less than half of Leander's land claim is inside the city limits, where taxes are collected and services are provided. But through gradual annexations over many years, Cagle said Leander's city limits will expand to fill the boundaries of its ETJ, eventually occupying 64.85 square miles. Although Leander's ETJ cannot extend more than 2 miles from the city limit, Cagle said it is important for the city to establish a strong perimeter.

"If the city of Leander had not established an ETJ, other cities would come in and take this land, and they would determine how it grows. Then Leander is landlocked with no growth, and when that happens, it becomes more and more difficult for the city to afford services," Cagle said. "So Leander in the past has been very aggressive about preventing that from happening, and I think it's a very smart thing."

Future growth

A weak economy slowed applications for annexation, Cagle said. But the largest annexation in Leander's history is not likely to be the last this year.

"Starting out in 2012, we have one huge annexation, and then there's a smaller one. There's no doubt that there will be more annexations this year," he said.

Cagle expects the newly annexed property to bring about $1.2 billion of value to the city over the next 20 years . The area is set aside for future homes and businesses.