Annexations (Voluntary): Rural Fire Department Debt Service

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POLICY STATEMENT 43

ANNEXATIONS (VOLUNTARY): PROCESS AND RURAL FIRE DEPARTMENT DEBT SERVICE (includes a waiting period for the submittal of subsequent annexation petitions)

Prepared by: Department of Development Services

Supersedes: 1/4/99

Adopted by Council: 10/28/99

Effective: 10/28/99

Purpose

To establish a procedure for the voluntary annexation process and to accurately account for debt service by the Town of Cary to Rural Fire Departments on all properties requesting incorporation.

Procedure

1. Development Services Department responsibilities:

A. Receives all petitions for annexation from owners. All petitions received from November 1 to April 30 will be processed and effective by June 30. All petitions received from May 1 to October 31 will be processed and effective by December 31. However, the Town Council does have the authority to make the annexation ordinance effective immediately or on any other date within six months of the date of passage of the ordinance. The Town reserves the right to make exceptions to this general schedule.

B. Prepares vicinity maps, reviews petitions for annexation, and prepares data sheet prior to the first meeting of Council for staff and Council review. Notifies Chief, Cary Fire Department (hereafter CFD) in writing of receipt of petition describing area proposed for annexation and all rural fire districts affected prior to first Council meeting.

C. Investigates sufficiency of petition: At the first Council meeting, the town clerk is instructed to investigate the sufficiency and accuracy of the annexation petition.

D. Certificate of sufficiency and request order for public hearing notice: At the second Council meeting, the town clerk will certify that the petition of annexation is valid with the Town Council ordering publication of notice of this request. At this meeting a presentation of "Annexation Assessment Reports" on each petition is provided. In addition, a date is usually set for the public hearing at this meeting. The Department of Development Services will prepare a written report with the following information:

A statement and/or maps describing the present and proposed boundaries of the municipality, the general land use pattern, and zoning district classifications of the subject and adjacent properties.

A statement showing that the area to be annexed meets the requirements of G.S. 160A-31.

A statement of impact setting forth the plans of each town department for extending service in the area to be annexed.

E. Public Hearing: The Town Council will hear all persons owning property in the area to be annexed who allege an error in the petition, as well as residents of the Town who question the necessity for annexation (anyone desiring to speak in favor of or against this request for annexation).

F. Adopt Ordinance: The Town Council has the authority to adopt an ordinance of annexation describing the territory indicated on the petition. The effective date of the annexation ordinance will usually be on June 30 or December 31, depending upon when the application was submitted to the Town. However, the Town Council does have the authority to make the annexation ordinance effective immediately or on any other date within six months of the date of passage of the ordinance.

G. Upon annexation from the effective date of the annexation ordinance, the annexed area and its citizens and property shall be subject to all debts, laws, ordinances, and regulations in force in the Town and shall be entitled to the same privileges and benefits as other parts of the Town. The Department of Development Services shall be responsible for the following items upon annexation:

(1) Recording of the map and annexation ordinance at the Register of Deeds office and the Office of the Secretary of State.

(2) Notifying all appropriate agencies.

(3) Notifying all Town departments as to the effective date of annexation.

(4) Notifying property owner as to the effective date of annexation and (if required) request that a vested rights statement be submitted to the Department of Development Services.

2. A. When a petition for voluntary annexation has been denied by the Town Council, no petition for annexation of all or any portion of the same property may be scheduled for public hearing until a date that is at least twelve (12) months from the date of the denial by Town Council. However, the one-year waiting period shall not apply to petitions that are denied by the Town Council prior to holding the statutorily required public hearing.

For any annexation petition that has been tabled at the request of the applicant or that of Council for sixty (60) or more days, the applicant shall be required to resubmit the petition for annexation and reinitiate the annexation process in accordance with this Policy Statement and 104 unless the delay is due to the typical review of the related development plan or rezoning. This action shall be required whether the applicant withdraws the application after it has been tabled for sixty (60) days or more.

The waiting period and reinitiating process required by this Section 2 may be waived in an individual case, for good cause shown, by the affirmative vote of three-fourths (3/4) of the members of the Town Council.

3. Town of Cary Fire Department (CFD) responsibilities in connection with G.S. 160A-31.1:

A. Within 14 days of receipt of notification from the Department of Development Services that a petition for voluntary annexation has been filed, CFD shall send a form letter by certified mail return receipt requested to the chief officer of the rural fire department(s) (hereafter RFD) affected by the annexation. This letter shall be in the form of the sample herein below and will request the following information:

(1) Total amount of debt of RDF existing on date of annexation petition for equipment and facilities. This should be accomplished by having the RDF send a bank statement or other creditor statement certifying the total debt due as of the petition date.

(2) Identification of the equipment and facilities for which debt must be assumed, and copies of all promissory notes, security agreements, deeds of trust, and amortization schedules.

(3) Statement that the rural fire department must complete the form and reply to CFD within 30 days, up to a maximum of 45 days, or forfeit Section 160A-31.1 rights.

(4) Real estate tax values as of January 1 immediately proceeding the effective date of the annexation for the area to be annexed and for the total RFD district.

Sample Letter:

CARY FIRE DEPARTMENT

date

address

RE: Annexation #A________

Dear Chief:

We have had an opportunity to review the information you provided us concerning the annexation of Wake County Parcel Identification _____________.

You have provided information indicating:

1. The tax value of the area annexed as of the effective date of the annexation ordinance of _________, 19__, is $_____________ and the tax value of the district is $____________. This yields the percentage of debt for which Cary is responsible calculated in accordance with GS 160A-31.1 (b) (2) of .__%.

2. Your total debt principle on facilities and equipment as of _________, 19__ is $____________. At the present time, your annual payments are $__________.

Cary proposes to prepay the Town's total obligation under GS 160A-31.1 in one lump sum of $______, provided your department applies all of such prepayment toward the debts to which it pertains within 90 days of payment by the Town.

If you are in agreement with the lump sum payment, we have prepared an agreement for execution by Cary and your fire department, and approval by the Local Government Commission. Please execute the attached contracts on behalf of the ______ Fire Department and return to me for processing.

B. Fire Department shall confirm accuracy of information provided. For instance, the department should confirm the tax values, confirm that any debt for which the rural fire department seeks payment was actually existing on the date the petition was submitted, that the debt is for facilities or equipment, ad that the amount of principle and interest owed is correct as of the effective date of annexation. When the CFD is satisfied with the information received, the CFD shall determine the percentage that the city must pay. This percentage is determined by dividing the assessed valuation of the area annexed by the assessed value of the entire fire district as of the date the annexation ordinance becomes effective. Normally, this would mean using property values determined on the January 1 immediately preceding the effective date of the annexation ordinance. The percent yielded is the percent of debt for which the Town is responsible. This percentage will be used to determine annual payments or may be used to determine a one lump sum payment

FORMULA:= VA

VFD

P = percentage of debt for which Town is responsible

VA = tax value of area annexed

VFD = tax value of entire Fire District

EXAMPLE: Assessed value of entire district is $200,000,000.00. Assessed value of area annexed is $2,000,000.00

$2,000,000.00 divided by $200,000,000.00 = .01

C. Under the statute, the rural fire department must certify each year to the Town the amount the rural fire department will expend for debt that year that is subject to being shared (i.e., is for equipment or facilities and was existing on the date of the petition). However, the Local Government Commission (LGC) has advised us that because the total amount of debt subject to assumption is usually relatively small, the Town may prefer to pay the total amount of its obligation in one lump sum. In that case, the total debt (not annual payments) subject to assumption should be multiplied by the percentage for which the Town is responsible. The total debt should include principal and all interest that has accrued up until the time the Town pays its portion of that debt. However, because amounts are generally small, to simplify computations, interest may be paid through the end of the calendar year in which the Town makes it payment. (For instance, if the total debt for equipment and facilities is $100,000, the RFD may be making annual payments of $20,000 per year for five years. If Cary makes a lump sum payment, it would use the total debt of $100,000 and multiply that by the Town’s percentage. If the Town’s percentage is 1%, the Town may make a one lump sum payment of $1,000.00.) Alternatively, if the Town wants to make annual payments, the RFD must certify to the Town each year as to how much debt the RFD will pay that year. The Town would then pay its percentage of that amount each year. For example, if the total debt is $100,000, the Town’s share is 1%, and the annual rural fire department’s payment is $20,00 for five years, then the Town would pay $200.00 for each of five years until the debt is paid in full. In the event the Town agrees to prepay in one lump, the CFD must obtain a certification from the chief officer of the RFD that the whole amount paid by Cary will be applied in prepayment of the RFD debt. This certification shall be obtained on or before payment by Cary.

Examples and Formulas

Annual Payments

CS = Cary’s share

TD = RDF total debt subject to assumption

AD = RDF annual payments on TD

VA = tax value of area annexed

VFD = tax value of entire fire district

P = percent for which Town is responsible

FORMULA:VA = P

VFD

Step 2 for annual payments: P X AD = CS Step 2 for lump sum payments: P X TD = CS

Example One for annual payments:

Cary annexes part of YRAC:

The assessed value of the area annexed (VA) is $250,000. the assessed value of the entire YRAC district (VFD) is $20,000,000. The yearly debt service of the department if $20,000.

Step 1: $250,000 = .0125 $20,000,000 Step 2: .0125 X $20,000 = $250.00

Example One for Lump Sum Payment:

The assessed valuation of the area annexed (VA) is $250,000. The assessed value of the entire YRAC district (VFD) is $20,000,000. The total debt including principal and interest through the end of the year in which payment will be made is $400,000. The yearly debt service on this total debt of the department is not important for this calculation.

Step 1: $250,000 = .0125 $20,000,000
Step 2: .0125 X $400,000 = $5,000

D. The CFD shall negotiate with the RDF and payment schedule based on one of the formulas set out above (also see NCGS Section 160A-31.1[b]) and determine whether there will be one lump sum payment in prepayment of the total debt or whether there will be annual payments. Any agreement with the rural fire department shall be conditioned upon approval by the Town Manager and the Local Government Council. Upon approval by the Town Manager, the agreement shall be submitted to the Local Government Commission for its approval. No payment shall be made prior to approval by the Local Government Commission.

E. The CFD shall budget for the expenditures annually as to all amounts paid to volunteer fire departments in connection with voluntary annexations effective during that fiscal year. Specifically, the CFD shall identify the Town total obligation for each annexation and whether it was paid as a lump sum payment or will be paid over several years in annual payments.

F. The following records shall be kept in connection with each voluntary annexation:

(1) Copy of initial letter to Fire Department requesting information along with signed receipt for certified mail delivery.

(2) Information form completed by RFD.

(3) Copies of all promissory notes, security agreements, and deeds of trust, amortization schedule. (This item may be omitted for individual annexations if one permanent file is kept on each RDF identifying al debts or the department and containing these documents.)

(4) Copy of final agreement reached and payment schedule along with proof of payments.