in 2016, fiscal stress caused leaders in Martinsville and Petersburg to consider reversion to town status
Source: ESRI, ArcGIS Online
Virginia has a unique pattern of keeping cities politically independent from adjacent counties. Counties view annexation by growing independent cities as a threat, because annexation of parcels paying property taxes into a city reduces the revenue paid to the county.
Annexation boundaries are typically drawn to shift properties that generate a positive cash flow to city control. Shopping centers and industrial sites generate more tax revenue than they require in costs to provide public services; commercial properties add no children to the school system. In contrast, cities typically minimize annexation of residential communities, which require more tax dollars than they generate to provide schools, fire/police, library, and other public services.
An equal threat to counties is the disappearance of independent cities when they shift to "town" status. In that case, the county gains tax-paying real estate - but the burden of providing education and social services to former city residents increases faster than tax revenue.
After World War Two, retail businesses migrated from city centers to shopping centers in the suburbs, leaving downtown areas with empty buildings. Moving across the political boundary meant that retail taxes were collected by counties, rather than cities. Vacant land in the cities lost value and generated less property tax revenue.
At the same time revenue streams were reduced, cities ended up with higher percentages of low-income residents who required more funding for social services. Federal and state grants and programs financed some of the growing costs, but city officials were squeezed. Not all Virginia cities found a way to grow tax revenue fast enough to meet increasing demands.
Virginia cities responded by annexing adjacent portions of counties. Parcels with commercial property were key targets, since they generated revenue from property taxes and sale taxes without demanding expensive social services. Annexation boundaries were also drawn to add high-end residential neighborhoods to cities. Though adding houses meant adding students and increasing costs for city school systems, high-priced houses were still tax-positive (paying more in taxes than requiring in services).
Annexation was often a "hostile takeover" by a city, generating political battles and ill-will between cities and counties that lost tax revenue and voters. Residents of annexed districts could not vote on the anexation; instead, state judges determined the new boundary lines.
The neighborhoods that were annexed were often of higher socio-economic status, and with fewer minority residents, than the cities. Annexations in the 1960's and 1970's bypassed the dispute over busing suburban school children across jurisdictional boundaries to city schools in order to achieve racial balance. When majority-white neighborhoods in Chesterfield County were annexed to Richmond in 1970, those suburban children became students in a city school system that had a majority of black students.
Richmond grew by multiple annexations of adjacent county territory, but since 1979 the General Assembly has blocked annexation by any Virginia city
Source: ESRI, ArcGIS Online
In 1979, the Virginia General Assembly temporarily blocked the right of cities to annex territory from counties. The temporary ban has never been lifted, and in 2016 it was extended again to 2024. Fiscal stress in cities has increased as businesses and high-income families moved to the suburbs.
Rush hour congestion on I-64 and other streets around Richmond reflects the first stage of city transformation, when workers move outside the city. The growth of Short Pump reflects the second phase, where jobs also migrate outside the city.
Virginia cities have ended up with less revenue to provide social services for an increasingly high percentage of low-income residents. Raising property taxes to fund increasing costs was counterproductive, when higher taxes triggered more businesses and people to move beyond the city boundary. The old strategy of recapturing residens and businesses through annexation was no longer viable after 1979, and some cities entered a death spiral.
In 1988, the General Assembly authorized cities with less than 50,000 people to revert to town status. Changing a city to town status is the opposite of annexation - land and population are added to the county, rather than removed - but reversion is also a threat to the fiscal health of counties.
Cities that change to "town" status transfer a high percentage of elderly, low-income residents to the county, and require county taxpayers to absorb additional costs to provide schools and other services to the town residents. Under the 1988 law, the reversion process is managed by the managed by the Virginia Commission on Local Government and ultimately decided by a three-judge court.
Since 1995, three cities in Virginia have reverted to status as "towns," abandoning their independent status to become part of their surrounding counties:
1995 - South Boston (now a town in Halifax County)
2001 - Clifton Forge (now a town in Alleghany County)
2013 - Bedford (now a town in Bedford County)
the three cities that reverted to town status between 1995-2013 were located in the western half of Virginia
Source: U.S. Bureau of the Census, 1990 Outline Map of Virginia (online at University of Texas, Perry-Castañeda Library Map Collection)
Fiscal stress forced South Boston, Clifton Forge, and Bedford to alter their status and sacrifice their identity as independent jurisdictions. The three cities had shared costs with their nearby counties for operating school systems prior to reversion to town status, but the cities were still unable to generate enough tax revenue to maintain other public services.
After conversion to "town" status, consolidation of some government operations and reduction in some services (such as the number of police patrols) reduced costs. The former city residents became county residents - and all county taxpayers became responsible for funding basic services in the towns.
In 1960, the Town of South Boston became an independent city, separate from the County of Halifax. The city annexed a portion of the county in 1964, but had no such option after 1979.
In 1986, the City of South Boston and Halifax County began to explore merger options. Both jurisdictions were relatively poor. The average resident of South Boston had an annual adjusted growth income equal to just 79% of the state average, while the average county resident's income was just 63% of the state average. The county had lost population steadily for 40 years, dropping by 18% since 1950. The city had 17% more population in 1990 than in 1960, but had dropped in population over the previous decade.1
In 1990, South Boston decided to shift to "town" status. The city council acted despite Halifax County's opposition, which feared complete consolidation of the school systems would require increased taxes or politically-unpopular decisions to close city schools. The city's decision to revert to town status triggered the decision process based on the 1988 law for the first time.
as a town, South Boston retained authority over land use planning; town officials remained responsible for defining zoning districts and approving site plans
Source: Halifax County, WebGIS
In 1995, there were just 7,000 residents in the City of South Boston, and taxes from just those residents (plus state a Federal funds) paid for city services. After reversion to town status, 29,000 additional residents of Halifax County had to share the cost of providing public services within the boundaries of the town.2
Residents of South Boston became a separate magisterial district, the eighth voting district within Halifax County. That change resulted in a county board with an even number of supervisors. In the 2001 and 2011 redistricting efforts, the eight magisterial districts were retained. That number was not unique; Wise and Prince William County also had eight supervisors.
In 2015, the board deadlocked in a series of 4-4 votes and could not elect a chair to serve for the year. One solution was to revise districts to create an odd number (seven or nine), but the board decided to propose electing a ninth member to serve as the tiebreaker. The position would be elected "at-large," in a countywide vote.3
Bedford abandoned its status as an independent city in 2013. After reversion, the costs for the city's water system were transferred to a new public service authority, some services (such as recycling) were reduced or eliminated, and the new town budget ended up 20% lower than the old city budget. The elected officials for the Town of Bedford were able to reduce the property tax rate by two-thirds, compared to when Bedford was a city. Town residents had to pay the county property tax as well as the reduced town property tax, but the combination after reversion to town status was less than when Bedford was a city.4
the reversion agreement between the City of Bedford and the County of Bedford planned for a three-phase expansion of the new Town of Bedford
Source: Reversion Agreement, Proposed Town Boundaries Map
Other Virginia cities may choose to abandon their charters in the future, potentially over the opposition of their adjacent counties.
In 2005, 2013, and 2016 Martinsville officials considered reversion to town status, anticipating it would result in substantial reductions in taxes. The city and surrounding Henry County still operate independent school systems, and the county has not indicated any desire to absorb the city as a town. County residents are reluctant to increase their taxes and city residents are reluctant to dilute their political authority by merging with the county, so Martinsville remains an independent city - for now.5
Petersburg officials discovered they were deep in debt in 2016. The city had been borrowing heavily to pay for annual operations as well as capital investments, and the financial crisis revealed a structural imbalance in revenue vs. expenses. Virginia officials made clear that the state government would not provide a bailout for the city's financial mismanagement, leaving the city few options for recovery. Reversion to town status became a viable, if unpopular, possibility.
As descrbed in a Richmond Times-Dispatch editorial titled "Could reversion help Petersburg?"6
1. "Report on the City of South Boston - County of Halifax Reversion Issue," Virginia Commission on Local Government, January 1992, pp.2-10 http://www.dhcd.virginia.gov/CommissiononLocalGovernment/PDFs/South%20Boston-Halifax%20Co%20Reversion.pdf (last checked March 14, 2014)
2. "South Boston fielding calls about reversion," Fredericksburg Free Lance-Star, August 24, 1995, http://news.google.com/newspapers?nid=1298&dat=19950824&id=6ekyAAAAIBAJ&sjid=zgcGAAAAIBAJ&pg=4620,5059932 (last checked March 14, 2014)
3. "Halifax supervisors opt to put tiebreaker on November ballot," SoVaNow.com, March 2, 2015, http://www.sovanow.com/index.php?/news/article/halifax_supervisors_opt_to_put_tiebreaker_on_november_ballot/ (last checked March 5, 2015)
4. "Bedford reversion to town becomes official today," The News & Advance, July 1, 2013, http://www.newsadvance.com/news/local/bedford-reversion-to-town-becomes-official-today/article_5dcbc886-e1e9-11e2-a412-001a4bcf6878.html (last checked March 5, 2015)
5. "City to town reversion: Area issues differ," Martinsville Bulletin, July 11, 2012, http://www.martinsvillebulletin.com/article.cfm?ID=33865 (no longer available online); "Martinsville again rejects reversion to town," The Roanoke Times, December 11, 2013, http://www.roanoke.com/news/news/martinsville-again-rejects-reversionto-town/article_a415c36c-9b61-5efa-a0ba-b47cbda557cc.html; "Martinsville council urged to reconsider reversion," Martinsville Bulletin, September 29, 2016, http://www.martinsvillebulletin.com/news/martinsville-council-urged-to-reconsider-reversion/article_f2496b57-c5a4-55f3-b06d-8f4345ad6e82.html (last checked October 11, 2016)
6. "Editorial: Could reversion help Petersburg?," Richmond Times-Dispatch, October 9, 2016, http://www.richmond.com/opinion/our-opinion/article_15baabf2-a407-5513-b3d8-21f33ff90e79.html (last checked October 11, 2016)