Column – Revenue-sharing pact headed off annexation
Published 6:12 pm Tuesday, October 4, 2022
Second in a two-part series Read the first part here
As the decade of the 1970s ended, the legal position of rural counties facing annexation by neighboring cities did not look promising.
The General Assembly enacted legislation in 1979 enabling cities to continue the practice of annexing territory from their neighbors except in some instances in which highly urbanized counties were deemed exempt from annexation. The same legislation specifically barred rural counties from becoming cities, a procedure that had historically been a county’s only certain defense against annexation.
The new law created the Virginia Commission on Local Government, an agency empowered to negotiate disputes between cities and counties, and finally, it ordered a moratorium on annexations lifted so that annexation suits could resume across the state.
The moratorium was later extended — and would be, again and again, into the 21st century — but Virginia’s rural counties knew when 1980 dawned that the hammer of annexation could fall at any time.
Isle of Wight knew Franklin would not give up its bid to obtain the taxes generated by the industry-rich land that lay just across the Blackwater River from its municipal boundary. That territory was generating, by then, more than 25% of Isle of Wight’s local taxes each year and was too rich a plum for the city not to want it.
Given that knowledge, the Board of Supervisors in 1980 hired county native W.B. Owen as county administrator. Owen was a veteran of the county Planning Commission and had chaired a local study commission that recommended Isle of Wight pursue city status as a defense against annexation. He was considered the best-equipped candidate, given what lay ahead.
It didn’t take long for Franklin to make the first move. The city hired the Richmond law firm of Mays, Valentine, Davenport and Moore, considered among Virginia’s leading annexation attorneys. It was Mays, Valentine that had represented Franklin in its unsuccessful effort to annex the Camp territory in 1970.
Franklin City Manager Ted Reed made the announcement of the hiring, saying, “It is absolutely not a warning shot to anybody,” but nobody in Isle of wight much believed that.
The legal team went to work studying Franklin’s revenue needs and a year later proposed that the City Council pursue a variety of tax-generating ideas. Ideas included industrial development, the possibility of revenue sharing between Franklin and its neighbors, consolidation with one or both counties (Isle of Wight and Southampton) and annexation of neighboring territory.
With that legal advice in hand, the City Council named a three-member committee to meet separately with Isle of Wight and Southampton County representatives to discuss the city’s desire for a larger tax base. Reed asked Isle of Wight and Franklin to also name committees so that talks could commence.
Franklin’s opening demand was for a combination of annexing territory and revenue sharing. That plan was jettisoned fairly quickly. From then on, the focus was on revenue sharing.
Months of intense private negotiation followed, and in April 1984, the Isle of Wight Board of Supervisors and Franklin City Council voted to endorse a plan under which Isle of Wight would keep its territory in exchange for a 15% share of the taxes collected in what had become informally known as the “annexation area.” Both parties agreed the revenue-sharing agreement was in their best interest. It looked as though the 15-year tug of war between Franklin and Isle of Wight was over.
The agreement had to be approved by Isle of Wight citizens in a referendum and a three-judge special annexation court, but neither seemed to be a huge hurdle since both the city and county had agreed to the pact.
What no one counted on, though, was the Virginia Commission on Local Government. That agency, ironically chaired by former Franklin City Manager Harold Atkinson, had the right to review all local intergovernmental agreements. It took the Franklin-Isle of Wight agreement under its wing and a year later said it would oppose the pact between Isle of Wight and Franklin as well as a separate one between the city and Southampton.
County officials and state legislators were stunned by the commission’s position.
Delegate J. Paul Councill, who had walked a tightrope over the issue as representative of Southampton, Franklin and Isle of Wight, said: “I’m very disappointed and very upset by the recommendation of the Commission on Local Government. I stayed out of it and said that whatever the local governments decided, I would support.”
Franklin officials were naturally delighted that the commission had come down on their side of the negotiations. Vice Mayor Elliott Cobb said the city would stand behind the original agreement, but couldn’t embrace it wholeheartedly because of the commission’s position.
The upshot was a renegotiated deal, with Isle of Wight under the gun to offer more money. The deal that reemerged was 20% rather than 15.
Isle of Wight voters solidly backed the county’s negotiators. They had originally approved the 15% deal by a margin of 4 to 1, and when the revision was put on the ballot a year later, the margin for approval was similar.
In 1987, a three-judge panel approved the agreement and issued an order making it permanent.
The agreement has cost Isle of Wight roughly $1 million a year since it was approved. The impact on county finances, however, has diminished. When first adopted, revenue sharing represented more than 3% of the county’s annual operating budget. Today, it’s about 1%.
We’ll never know whether the county would have lost the paper mill territory and all the taxes it generates if it had balked at sharing tax revenue from there, but given the Commission on Local Government’s disposition in favor of cities, it was a gamble the county wisely chose not to make.
John Edwards is publisher emeritus of The Smithfield Times. His email address is email@example.com.