City officials: SB 6 poses no threat to Richmond’s annexation strategy

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Despite Richmond’s use of annexation as its key strategic growth tool, officials said they do not expect Senate Bill 6, which went into effect Dec. 1, to cause much hindrance to growth. Some state officials have openly pushed back against the bill, saying it hinders the ability of cities to annex land, but Richmond may be an outlier to the outcries since its history of annexation has primarily been voluntary-driven.

SB 6 makes it a requirement for cities to receive voter approval before annexing new areas, making the process more difficult for cities to grow their limits.

At 30 square miles, Richmond’s extraterritorial jurisdiction—an unincorporated area of land outside of a city’s limits—is nearly complete. City officials said they are now focusing on annexing commercial properties into the city limits to diversify Richmond’s tax base.

Despite the several future sites planned for annexation within the next year, including pieces of property along FM 359 and the Fort Bend Country Club, city officials said they do not think SB 6 will hinder their plans; They and are optimistic about Richmond’s ability to grow commercially and expand its tax base.

“Because we are in a county that has a large enough population, we are going to [conduct]annexation …by consent [according to SB 6]. And in essence that’s what Richmond has been doing,” city of Richmond attorney Gary Smith said. “Are we massively in love with the bill? No. But I don’t think it’s going to have a significant negative impact for us.”

Establishing Richmond’s ETJ
An extraterritorial jurisdiction is an unincorporated area of land outside of a city’s limits that is allowed a certain level of regulation and that a city is allowed to annex over time. Cities use their ETJs to predict and shape development as the city expands, according to Smith.

“The reason for the extraterritorial jurisdiction is that ultimately you expect the city to expand into that area,” Smith said.

ETJs are established by population, according to the Texas Local Government Code. Richmond’s nearly 12,000 population allows its ETJ to extend 1 mile from the city limits, according to city of Richmond Planning Director Jessica Duet.

Smith said it is not uncommon for Richmond residents to be confused about where they stand. Residents on the north side of Richmond are in the ETJ, therefore they are not in the city and do not pay city taxes.

Another component that often leads to confusion is that some residents living even farther north may have a Richmond address, but they actually live in Houston’s ETJ—a result of regulations established by the U.S. Postal Service years ago, according to Smith.

“There are a lot of people with a Richmond address that do not live in Richmond and are not in Richmond’s ETJ,” Smith said. “It confuses people horribly; they don’t know who to call for help. The easy way to figure it out is to look at your tax bill: Who do you pay taxes to. If you’re in the ETJ, you’re not going to pay taxes to any city.”

While Richmond has filled out its ETJ, there is no limit to how large an ETJ can grow, according to city officials. Richmond has already surpassed its 1-mile ETJ boundary by accepting petitions for properties to the west along FM 723 and to the east at the intersection of Hwy. 90A and the Grand Parkway, according to the city’s 2014 Comprehensive Master Plan.

The first piece of property that was annexed into the city of Richmond was the Western Cotton Oil property in 1957, according to Smith. Since then, Richmond has grown to 4.2 square miles with an ETJ of about 30 square miles.

Richmond’s ETJ stretches to the ETJ limits of Sugar Land, Fulshear, Houston and Rosenberg as well as parts of Fort Bend County, making the possibility of expanding the ETJ any farther pretty slim, according to Duet.
“Because we are in the confines of a large metropolitan area, you almost always butt up to someone else,” Duet said.

Duet said Richmond’s ETJ probably will not grow any larger than it already is unless surrounding cities release bordering properties. This phenomenon occurred near the intersection of Hwy. 59, the Grand Parkway and FM 2759 next to the Sugar Land ETJ border, where Sugar Land released a few bordering properties. Richmond is now working to get property owners there to petition into the city limits.

Aside from these smaller areas of disjointed properties the city is working to tidy up, officials have shifted priorities from growing the ETJ to growing the city limits mainly through commercial annexations.
“The city is strategically looking at property from a commercial standpoint,” Richmond City Manager Terri Vela said. “That’s been our direction.”

Richmond’s annexation history
There are two types of municipalities in Texas; general law and home rule. General law cities are typically smaller cities that derive all power from the state level while home rule cities are more focused at the local, grassroots level and allow city leadership to govern with the least amount of state interference, according to Texas Local Government Code.

Richmond switched from a general law municipality to a home rule city in 2013 to extend its annexation powers and create a long-term development plan outlined in its 2014 Master Plan. Smith said he thinks previous city leadership was aware of the potential Richmond had to become a pro-growth city through annexation measures.

“Richmond had a reputation for a while of not wanting to change. That’s not the attitude Richmond has had for the last several years,” Smith said. “Hilmar Moore [the previous mayor]… understood there was a time for Richmond to start growing and start reaching out, and I think he put the process in place [for the city to start annexing more land].”

One of the most notable privileges of home rule cities is the power to unilaterally annex adjoining areas into a city’s limits without the permission of the property owners. SB 6 reverses this power, making the process of annexation a little more complicated for Richmond officials by requiring they go back to the petition-driven voluntary annexation model that requires voter approval.

“Since recent laws have changed for annexation, it’s back to the old way of petition-driven … [and now], there is some complexity to it,” Vela said.

Richmond’s history of annexation shows the city has not engaged in many involuntary annexations, and property owners have consistently voluntarily petitioned into the limits, according to Vela.

“Everyone that was in Richmond requested to be annexed into Richmond–it was petition-driven only,” Vela said. “People see it as an advantage to be inside the city; they prefer it [because]they get the city services … without having to pay additional fees.”

There are two types of annexation: limited and full-purpose annexation.

Full-purpose annexation requires that a city provide full municipal services, assesses taxes, imposes regulations and receives property taxes, according to the Texas Local Government Code. In limited purpose annexations, a city extends regulations in regard to land development, the city provides limited services and the city collects sales tax.

Full-purpose annexations have consistently occurred along FM 359 where primarily commercial properties are hoping to develop with assistance from the city through receiving services, according to Smith.

The two main benefits to commercial annexation are revenue from property taxes and sales taxes, according to Smith. Some limited purpose annexations involve strategic partnership agreements, which often concern municipal utility districts that provide a timetable for the city to annex a property, provide limited services and collect sales tax.

“We are collecting sales tax and sharing that with the municipal utility district because a municipal utility district cannot collect sales tax on its own,” Smith said. “The real struggle is making sure … to get the MUD’s debt down so that by annexing it, we don’t have the whole city paying to pay off that debt.”

Smith said many of the limited purpose annexations that include restaurants at Hwy. 59 and Williams Way Boulevard as well as lifestyle communities, such as Del Webb Sweetgrass and Veranda, are examples of using strategic partnership agreements with MUDs to conduct limited purpose annexations.

“We have used that to encourage development,” Smith said.

There are many benefits to being annexed into a city that include public safety services, such as police and fire protection, emergency medical services, solid waste collection, water and wastewater facilities, roads, streets and infrastructure, park maintenance services and zoning laws that help solidify property values.

The city must extend full municipal services to newly annexed areas within 2 1/2 years of the date of annexation, according to the Texas Local Government Code.

While extending these services can sometimes be a challenge for the city, there are many advantages to annexing properties within the city limits, most importantly the ability to expand its tax base.

Property tax revenue from existing and proposed development, sales tax revenue from commercial development and other potential tax and fee revenue sources like development impact fees are all potential benefits of annexation.

Richmond’s focus on commercial
Richmond’s move to focus on commercial properties is a typical one to make that is not just Richmond-specific. Growing towns like Richmond show patterns of developing residentially and then moving toward commercial, according to Duet.

“We are not a small little town anymore,” Duet said. “We start to look a lot bigger, [and]strategically, you probably always want to probably take in more commercial property for the tax dollars—that’s just a smarter move.”

The decision to focus on annexing commercial properties comes after decades of pushing for residential development. The city has had a significantly residential-heavy tax base for years, according to Smith. Another facet to the city’s tax base is that as the county seat, 40 percent of the taxable value in Richmond is tax-exempt, according to Smith.

“A good chunk of the land within the city limits is county property, and we don’t get taxes from it,” Duet said. “So being the county seat has some positives … but at the same time we don’t get a lot of taxes.”

Future areas for commercial annexation include the Fort Bend Country Club property, which the city entered into a limited purpose agreement with Johnson Development Corp. to annex, the site for Fire Station No. 2 at Williams Way and Ransom Road, as well as a site on the west side of FM 359 to the north of Del Agua Drive that will be used for an elevated water storage facility.

Duet said the city has received an increase in petitions from property owners along FM 359. This area exhibits a large potential for future development, according to Smith and Duet.

Regardless of the bill, Richmond’s vision for the future has not changed: Richmond is open for business, and officials want to use annexation to assist people in developing their property and to bring new businesses into the area.

“I think as time goes within the next however many years it’s going to take us, you are going to see the city limits continue to grow,” Duet said. “Richmond is just continuously on a path of onward and upward.”

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Originally from Houston, Rebecca joined Community Impact in June 2017 to report on the Richmond area. She covers the Fort Bend County Commissioners Court, city government, education, business and transportation.

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