Everyone who lives in Raleigh knows rent is going up, traffic is getting worse, and a cup of coffee costs more than ever. But growth isn’t just happening inside the city limits.
From 2021 to 2022, the city received 74 annexation requests and expanded by more than 1,000 acres. That’s a big jump from a decade ago, when the city received only 35 annexation requests and grew by 337 acres between 2012 and 2013.
Annexation is when a property owner, often a developer, requests their land be made an official part of the city and pays taxes in exchange for water connections, trash pickup, road maintenance, and other city services. When an annexation request is submitted, it goes before the city council for a public hearing with an estimated price tag. The council then votes to approve or deny the request.
“Overall, there has been a constant but gradual increase in annexation petitions submitted,” city spokeswoman Katie Dombrowski wrote in an email. “This is especially shown in the years following 2016, where [in] each year but 2019, [the city] received [more] than 30 petition submittals.”
Much of the growth on the outskirts of Raleigh is happening northeast and southeast of the city limits, near Rolesville, Knightdale, and Garner, said Pat Young, director of Raleigh’s Planning and Development Department, at a city council workshop last week.
Undeveloped land in these areas is cheap and plentiful, which makes it a tempting prospect for developers looking to build new neighborhoods.
Last year, the city council approved the annexation of about 280 acres of woodland near Knightdale, north of Buffaloe Road. The developer plans to turn the undeveloped plot into hundreds of townhomes, single-family homes, ranch-style houses, and duplexes with a pool, playground, and tennis court.
Just three miles west, another developer plans to turn nearly 50 acres of woods outside Raleigh’s borders into a neighborhood with up to 400 homes. Even farther west, inside I-40 but not officially part of the city, yet another 200 acres of undeveloped land is set to be turned into a mixed-use development with up to 1,100 homes. The list goes on and on.
The growth is being driven in part by the expansion of I-540, the outer beltline, which will eventually run through those areas, Young said.
New sections of I-540 are expected to make driving to and from rural areas outside of Raleigh a lot easier for people who live or work in other parts of the Triangle, said Young. Garner, one town on the planned route, has already seen a huge boom as people buy homes there that are much cheaper than in other areas of the county.
Next month, the city council is set to hear six more annexation cases, with another two in the pipeline. The largest annexation request, which covers about 531 acres near the intersection of Poole and Hodge Roads (just south of Knightdale), would add some 4,000 single-family houses and townhomes, and perhaps 10,000 residents, to the city.
Raleigh Fire Department stretched thin
While these annexations will help grow the city’s tax base (adding money for important projects like affordable housing or transportation improvements), the city is already struggling to keep up with its growing population. The Raleigh Fire Department (RFD), in particular, is spread thin, said Lorraine Eubanks, RFD planning officer.
“In the past seven years, Raleigh Fire’s call volume has increased 36 percent, but we’ve had 0 percent increase in new fire station infrastructure,” Eubanks said during the city council work session last week, noting that the number of fire stations, 28, has remained the same since 2015.
In addition, nearly 11 percent of calls RFD received in 2022 were for incidents outside of the city limits, where it’s difficult for the fire department to respond quickly, Eubanks said. With no new fire stations currently planned for these areas, RFD will continue to have trouble responding quickly (in accordance with national safety standards) to the developments proposed north and southeast of Raleigh.
In order to adequately serve these areas, RFD needs a new fire station in the northeast and two new fire stations in the southeast, Eubanks said. The problem is, building these fire stations is expensive. The cost of one new station, including land acquisition, construction, staffing, and equipment, is more than $30 million, Eubanks estimated.
For a project like building a new fire station, the city council typically provides funding in phases, said City Manager Marchell Adams-David. After funding is approved, it takes three to four years to finish the construction of a fire station, said Raleigh fire chief Herbert Griffin. That delays the city’s ability to annex property.
When a city prepares to annex a property, it’s kind of like they’re a landlord getting ready to rent out a house. Eventually, they’ll make money off of the property. But before that, there are all of these up-front costs they have to pay. They have to clean the house, hire a real estate agent to put it on the market, and fix anything that’s broken.
Per state law, the city is required to provide some services—like fire, police, and sewer—immediately, as soon as a property is annexed. If they can’t afford to provide those services, it becomes much more difficult to annex property and ultimately receive the property tax revenue that goes with it.
Without services, the city has three options when it comes to annexation requests: First, to deny them and lose future tax revenue. Second, to delay them and possibly lose future tax revenue if developers decide to pull out (because they’re losing money every day the project is delayed). Third, to approve them and look for a temporary solution to providing services, like partnerships with the county or other municipalities.
“The bottom line is, approval of any of these [annexation requests] within the next several years … [means] we’re not gonna meet the fire service standards,” Young said. “So I think we would probably have to talk about both interim service agreements [and] partnerships, temporary service, and then also a capital plan to put in permanent infrastructure.”
The future of annexation
In a case study of the costs associated with a “high-growth” development southeast of Raleigh—one that is dense and includes different types of homes as well as retail or commercial space—researchers found that costs to the city could total close to $235 million. Over a 30-year period, operating expenses would add another $25 million to that bill.
On the other hand, over the same 30 years, the new development might bring in about $275 million in tax revenue. In addition, if a new fire station is built, it could serve more than one high-growth development, which means even more tax revenue could be added to the city’s coffers in the future.
It sounds good, but Bynum Walter, a senior planner with the city, was careful to add a caveat during the city council work session.
“The property tax revenues are very, very hard to estimate here,” she said. “This is a range, not a certainty. The costs are much more predictable than the revenues.”
In addition, for the city to get peak revenues, the development has to be dense and mixed-use, Young said. However, a lot of developers in the last few years have passed that up in favor of building only traditional or ranch-style homes. For example, “when 540 was extended in western Wake, the communities out there decided to allow almost exclusively single-family development,” he said. “[That type of development] is often revenue-negative growth.”
As the city expands, staff are making “intentional efforts to try to move towards that higher-growth side,” Young said. Ultimately, it’s a race between how much money the city can make off growth and how much money is required to sustain that growth.
“There is a cost of growth,” Adams-David said. “We just need to figure out what that balance is and what we’re comfortable with before it gets to a point where it’s financially unstable and not sustainable.”
“Greenfield” development in particular—construction in empty fields, grassy lots, and wooded areas—is the least expensive for real estate moguls and the most expensive for the city. These undeveloped areas are where Raleigh is seeing the most demand for annexation, but they’re also the areas where the city has the least infrastructure in place, according to Young.
The struggle RFD is facing “is one of the very obvious examples of what happens when we sprawl,” said council member Jonathan Melton. “We’re pushing farther and farther out and it makes it harder to provide the services that are required. It’s a greater strain on the city and our budget.”
The practical problem of providing fire service is just one of the issues created by urban sprawl, Melton added. It also makes the city’s aspirations, like providing public transportation, more expensive.
“I understand land is cheaper in these areas and that one size doesn’t fit all for housing, but this is why it’s really important to continue our policies that allow for infill and other types of growth in our urban core,” Melton said. “This is not a sustainable way to grow the city.”
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