Annexation Agreements

• Author: David L. Callies/Daniel J. Curtin Jr./Julie A. Tappendorf
• Pages: 115-128

city passed the costs on to the consumers at a direct rate—not making any

profit.685 Plaintiffs contended that these new charges were really impact fees

and violated the terms of their development agreement.686 Because the city

does not make a profit, but bases the charges on those charges it must pay to the

regional authority, with no money going toward capital improvements, the

court found that the charge was simply cost-based and within the parameters of

the development agreement.687

Courts regularly label sewer systems as a typical government function, but

consider general water and stormwater systems to be proprietary. Thus, on bal-

ance, a development agreement often provides that the subdivision developer

install the water and sewer lines needed both within the subdivision and to con-

nect the subdivision to existing lines. Sometimes the development agreement

also requires payments for upgrades to the city’s water facilities to manage the

greater flow requirements of the new development. In return for the improve-

ments, the city agrees to maintain the pipe infrastructure within and connected

to the subdivision.

IV. Annexation Agreements

A. Introduction

As discussed above, a developer desires to protect its ability to develop its prop-

erty once it has obtained all land use and discretionary approvals. One way to

protect the developer from changes in land use and zoning laws and permit the

developer to complete its development is for the developer to enter into an

agreement with the local government to freeze these regulations. One type of

agreement used frequently,particularly in Illinois, is the annexation agreement.

B. Bargaining Away Police Power

The issue of whether a local government bargains away its police power by en-

tering into an agreement under which it promises not to change its land use reg-

ulations during the life of the agreement is the same for annexation agreements

as it is for development agreements. Although specific statutory authorization

is helpful to show the necessary public purpose that is recognized by the state,

only a handful of states appear to have adopted legislation enabling local gov-

ernments to enter into annexation agreements.688 Apparently,the prevalence of

statutory annexation provisions, together with a recognition that local govern-

ments have the powers they need to exercise their authorized powers (such as

115

IV. ANNEXATION AGREEMENTS

685. Id. at 10.

686. Id.

687. Id. at 11.

688. Ariz. Rev. Stat. Ann. §9-500.05; 65 Ill. Comp. Stat. 5/11-15.1-1; Minn.

Stat. §414.0325; N.C. Gen. Stat. §160A-58.21 (1989); Wash. Rev. Code

§36.70B.170.