since the Bureau of Census created this map for the 2000 Census, two more cities (Clifton Forge and Bedford) have followed the path set by South Boston and reverted to town status
Source: Bureau of Census
Virginia has an almost-unique pattern where 38 cities are politically independent from 95 counties. One result of separate governance is that 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.
Cities receive real estate and personal property taxes for property located within the boundaries of a city. In addition, Virginia shares a portion of the sales tax with the jurisdiction where the store was located. Sales taxes collected at a Wal*Mart located within a county will help support just the county's services, even if most of the customers at the store happen to live across the boundary line within a nearby city.
until 2013, the Wendy's fast food restaurant paid taxes only to the City of Bedford; the Wal*Mart Supercenter paid taxes only to the County of Bedford
Source: ESRI, ArcGIS Online
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, since commercial properties (unlike residential properties) add no children to the school system. 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.
Many of Virginia's cities have engaged in annexation boundary wars with adjacent counties, with both sides paying expensive legal bills to challenge proposed changes in city-county boundaries. In Hampton Roads, several counties ended the threat of annexation by getting charters from the General Assembly as independent cities. Cities can annex territory from counties, but cities are not able to annex land from other cities.
For example, in 1952 Warwick County became the City of Warwick. Elizabeth City County joined with the town of Phoebus and the City of Hampton, which consolidated to form a larger City of Hampton.
One threat to counties is the disappearance of independent cities when they shift to "town" status. The county gains property tax and sales tax revenue from the area that used to be an independent city, but the additional costs of providing education and social services to former city residents will exceed the additional tax revenue.
After World War Two, retail businesses migrated from city centers to shopping centers in the suburbs, leaving downtown areas with empty buildings. After businesses moved across the political boundary, 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. Better highways and easy access to mortgages for veterans spurred the growth of suburbs after World War II. Middle class residents moved out of cities into new subdivisions in counties, reducing the tax revenue for the cities. 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.
in 2014, incorporated cities were experiencing the greatest fiscal stress in Virginia
Source: Commission on Local Government, Part 1 - Overview and Fiscal Stress
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. Relatively wealthy people purchase new houses in the suburbs, and counties get increased tax revenues from the high-priced new houses. Out-migration of wealthy residents leaves cities with a higher percentage of poor people.
As the suburbs expanded after World War II, Virginia cities ended up with less revenue to provide social services for their 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. There were limits on the option, including:1
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 choosing "town" status, the former cities balanced their town budgets by consolidating some government operations, reducing some services such as the number of police patrols, and shifting costs for funding schools and other services to all taxpayers within the county.
South Boston was the first to abandon its status as an independent city. It had been the Town of South Boston within the County of Halifax until 1960, when it became an independent city. The city then annexed a portion of the county in 1964, but further annexations were blocked by the General Assembly 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 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 still had 17% more people in 1990 than in 1960, but the population had begun to decline in 1980.2
In 1995, South Boston shifted 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. Taxes from just those residents, plus state and Federal funds provided through various programs, paid for all 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.3
After 1990, 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 even 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 local officials feared redistricting might be delayed for Federal review under the Voting Rights Act. The board decided to add a ninth member, elected "at-large" in a countywide vote, who will get to vote only in case of a tie. The first Halifax County tie-breaker was elected in November, 2015.4
The City of Bedford notified the County of Bedford in 2008 that planned to abandon its status as an independent city. That triggered negotiations which concluded in 2011 with a deal the two jurisdictions submitted to the Commission on Local Government, and ended with reversion to town status on July 1, 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. The city's property tax rate had been $0.86/$100 assessed value. In 2014, it advertised an initial rate of $0.82/$100 assessed value. In 2016, homeowners and business in the town paid $0.82/$100 assessed value in property taxes, and the town budget was $9 million compared to $17.5 million before the reversion.
The merger increased the amount of state funding for the local school system. Under Virginia law, jurisdictions receive state funding based on the "composite index." That number is based on a juridsdiction's ability to generate tax revenues, based primarily on assessed value of land within the boundaries of that jurisdiction. The City of Bedford had a lower composite index than the County of Bedford, so the state was paying a higher percentage of the costs to operate the city's school system.
After a city reverts to town status, the state applies the lower composite index for 15 years. Halifax County used the extra state funding over 15 years to build two new elementary schools, after South Boston reverted to town status. Alleghany County used the extra funding, after Clifton Forge reverted to town status, to upgrade the heating, ventilation, and air conditioning system at the county’s high school.
The change in city status was relatively smooth for Bedford because the city had previously arranged for Bedford County to manage schools, courts, and social services. The city's school board was abolished, and town residents had to deal with the county school board after 2013. The city manager, who became the town manager, noted:5
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
Of the 38 cities in Virginia, those with a population of less than 50,000 people may choose to abandon their charters and become a town without special approval by the General Assembly, and over the opposition of the adjacent counties. The other cities with over 50,000 people would require action by the legislature before altering their status.
If a city decides to become a town, it would gain the authority to expand its boundaries through annexation. That option is not available to cities due to a moratorium imposed by the General Assembly, but there is no moratorium on annexations by towns.6
If a town generated additional tax revenue after annexation and shifted some costs to the county, then a town council might do something a city council could not achieve: balance the budget.
27 Virginia cities (red) had the option of becoming a town within the adjacent or surrounding county (beige) in 2017, unlike 9 cities with more than 50,000 people (blue)
Source: Commission on Local Government, Part 1 - Overview and Fiscal Stress
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. County residents are reluctant to increase their taxes by having Martinsville revert to town status, and city residents are reluctant to dilute their political authority by merging with the county.
Martinsville's mayor asked Henry County officials in 2017 to discuss cooperative measures to reduce costs, but the county supervisors were not willing to talk until the city developed specific proposals. Martinsville remains an independent city, for now. However, the local paper reported a response by the mayor to a citizens's question that provided a lot of wiggle room for changing the city's status:7
in 2016, fiscal stress caused leaders in Martinsville and Petersburg to consider reversion to town status
Source: ESRI, ArcGIS Online
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 described in a Richmond Times-Dispatch editorial titled "Could reversion help Petersburg?"8
1. "Table of Contents » Title 15.2. Counties, Cities and Towns » Subtitle III. Boundary Adjustments and Changes of Status of Counties, Cities and Towns » Chapter 41. Transition of City to Town Status » § 15.2-4106. Hearing and decision by court," Code of Virginia, https://law.lis.virginia.gov/vacode/title15.2/chapter41/section15.2-4106/; "Charlottesville, Other VA. Cities Consider Reverting To Towns," Washington Post, November 26, 1995, https://www.washingtonpost.com/archive/local/1995/11/26/charlottesville-other-va-cities-consider-reverting-to-towns/ec5b9e53-e424-45f7-8f80-af8c44a19cae/ (last checked January 30, 2019)
2. "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)
3. "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)
4. "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/; "Voters to elect new member whose only role is tie-breaker," The Gazette-Virginian, March 4, 2015, http://www.yourgv.com/news/local_news/voters-to-elect-new-member-whose-only-role-is-tie/article_5e668338-c14b-11e4-8ab5-83aa533be401.html (last checked March 5, 2015)
5. "Bedford—City & County: Reversion & Cooperation," The Column, Virginia Institute of Government, Spring/Summer 2012, https://vig.coopercenter.org/sites/vig/files/TheColumn.Spr-Sum.2012.VaInstofGov.pdf; "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; "A city no more? Petersburg mulls change from city to town," Progress-Index, June 28, 2016, https://www.progress-index.com/news/20160628/city-no-more-petersburg-mulls-change-from-city-to-town; "School system funding dominated reversion debate," News & Advance, July 1, 2013, https://www.newsadvance.com/news/local/school-system-funding-dominated-reversion-debate/article_b422cce8-e1e9-11e2-a894-001a4bcf6878.html; "Council to advertise tax rate of 30 cents," Bedford Bulletin, May 8, 2013, https://www.bedfordbulletin.com/content/council-advertise-tax-rate-30-cents; "Bedford leaders see post-reversion money savings," WDBJ, June 8, 2016, https://www.wdbj7.com/content/news/Bedford-leaders-see-post-reversion-money-savings-382290751.html (last checked January 30, 2019)
6. "Part 1 - Overview and Fiscal Stress," Commission on Local Government presentation to Joint Subcommittee on Local Government Fiscal Stress, June 15, 2017, http://sfc.virginia.gov/pdf/Jt%20Sub%20Local%20Govt%20Fiscal%20Stress/061517_No3_Comny_CLG.pdf (last checked August 24, 2017)
7. "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; "“No active plan” for reversion, city officials say," Martinsville Bulletin, April 26, 2017, http://www.martinsvillebulletin.com/news/no-active-plan-for-reversion-city-officials-say/article_bdf6f26d-e669-571d-a8f8-f0235b37232c.html (last checked April 26, 2017)
8. "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)