The City Council adopted the current Limits of Annexation Map on April 28, 2014. The Annexation Policy requires the City to review and consider updates to the policy and map whenever the Capital Improvements Plan is revised. Council approved the 2016-2020 Capital Improvements Plan in March. To provide guidance on Annexation Policy and Map amendments, an Annexation Committee, consisting of representatives from the Parks, Recreation and Public Lands, Police, Fire, Public Works, Transit, Administration, and Planning Departments, and Billings School District 2, advises the City Council. The Committee has met four times from December 2014 through April 2015 to discuss revisions to the map, status of City Public Safety funding in relation to service delivery, and the challenge of determining costs of delivering all City services. The amendments that were considered by the Annexation Committee this year would only affect the Limits of Annexation Map, not the Policy. The Annexation Committee recommendations for 2015 were presented to the City Council at its work session on June 1. The Council is expected to conduct a public hearing and take formal action on the Annexation Committee recommendations at this meeting.

In making its recommendations to not expand the Limits of Annexation Map Red Area and Orange Area in 2015, staff considered the ability to serve areas outside the existing City limits with existing resources, effects on City residents, and programmed improvements, including the Capital Improvement Plan (CIP). The Committee also strives not to favor one department’s ability to provide service over another department’s limitation(s).

In considering the Annexation Committee's recommendations, the Council may:

• Approve the Annexation Committee's recommendation that the City of Billings not make any changes to the Limits of Annexation Map or Annexation Policy for 2015.
• Modify the Annexation Committee's recommendations.  This option would require that the Council delay final action until the July 13 meeting because the changes must be adopted by Resolution.

Annexation of property to the City of Billings increases the City’s tax base. At the same time, the City bears the cost of additional service demands. The Annexation Policy and the Limits of Annexation Map are management tools to help City staff and the Council balance this cost-to-benefit ratio. As outlined in the third recommendation of the Annexation Committee, a cost of service analysis conducted by the City would significantly help in determining the cost-to-benefit ratio of allowing certain property proposed to be developed in certain ways to be annexed into the City.

 The City of Billings has annexed almost 4 square miles in the past 10 years (38.65 to 42.46 sq. miles). This accounts for both annexations and deannexations. Many of those annexations required a considerable outlay of City funds to ensure acceptable levels of service to the annexed properties and to maintain the levels of service within the existing City limits. As these properties developed, the cost of providing certain services exceeded the revenue generated by the development. For this reason, the City Council asked staff to draft an Annexation Policy that would limit annexations to areas that could be served without incurring significant additional costs. The adopted policy established two limits of annexation when last updated. The red area (2014-2018) coincides with the immediate five years covered by the CIP and defines an area where annexation petitions may be supported in the short term. The second time period, designated as orange (Long Range Urban Planning Area), covers areas where City services may be extended but would require additional analysis and funding to support those services.
 
In the past few years, the costs of delivering services, specifically public safety services, is outpacing property tax revenues (the primary source of funding) and so challenges have developed to delivering the services to current City residents. This has been at the forefront of the Annexation Committee’s discussions this past year and had a major impact on the recommendations it is making to the City Council to not make any map amendments. However, the Committee has maintained the premise that since the City in the past determined its ability to serve property already in the Red Limits of Annexation Area, the City’s commitment to considering annexing property already in the Red Area should be maintained. This approach is something the Council may make further determinations on as annexations are at the complete discretion of the City Council, but the Committee wants to ensure the Council understands its approach to both Limits of Annexation Map Amendments and Annexation Petition requests annually.
 
Limits of Annexation Map Amendment Requests
Staff received two requests from property owners and agents for map amendments. One request was to include property in the Orange Area (Long Range Urban Planning Area) of the 2015-2020 Limits of Annexation Map. This is referred to as the Trailhead Commerce Park Request. This request was submitted last year but withdrawn before it came to Council consideration in April 2014.
 
The second request was to include property in the Red Area of the 2015-2020 Limits of Annexation Map. This is referred to as the Viking Land Request. Both requests are described in detail below. The City did not have any changes to the Limits of Annexation Map regarding City owned property for this year.
 
Orange Area Request
Trailhead Commerce Park (Lockwood) 
Weaver Flats Subdivision, Lots 1 and 2, Block 1; C/S 3477, Parcel 2; Section 8, Township 1 North, Range 27 East, SW ¼ West of Railroad; C/S 2807, Parcel 1A, Amended;  C/S 3477, Parcel 1.
The Annexation Committee received a request from Weave Management Group to consider bringing 600 acres of land in the Lockwood area into the Long Range Urban Planning Area (Orange Area) of the Limits of Annexation Map. The request was made to support development of a multi-modal transload, warehousing, manufacturing, and multi-use industrial park that would annex into the City of the Billings in the future. The footprint of the industrial park facility has been proposed as about 240 acres but the total property would be about 600 acres, with some of the land in the floodplain of the Yellowstone River (See attached site map).
Vu Pham, Weave Management Group’s General Counsel/Business Development officer, presented the request for the map amendment to the Annexation Committee and provided information regarding the project (See Attached Weave Management Request Letter). The industrial park is expected to be a 10-15 year phased project, with 25% of it developed in the next 5-7 years, according to Weave Management. The project would be executed best through a public-private partnership between Weave Management Group and several public and private partners that might include the City of Billings, according to Vu Pham.
Weave Management Group has several businesses under its umbrella, including Warren Transport as a major transportation firm. Vu Pham said that Weave Management Group and CMG Construction have a total of 600 acres of land north and east of Johnson Lane in Lockwood that they would like to convert into a multi-modal freight facility. Vu Pham outlined what Weave Management has accomplished to move the project forward and what it sees as the benefits to Billings of having such a facility in the City:

• Big Sky Economic Development completed its Rail-Served Industrial Park Feasibility Study in 2014 and it concluded that there is a need for such a facility and it recommended the Trailhead Commerce Park location as one the community should consider.
• Weave Management has accessed Montana Department of Commerce grant funds to engage the University of Montana’s Bureau of Business and Economic Research to complete an Economic Impact Study of the Trailhead Commerce Park project. The study is focused on the value of what the project could bring to the community in terms of wages, construction and ongoing revenues.
• Big Sky Economic Development in coordination with the Yellowstone County Board of County Commissioners and the community of Lockwood has begun the process to establish a Targeted Economic Development District (TEDD) in the area of the Trailhead Commerce Park to facilitate tax increment funding being able to help provide needed infrastructure to serve new development in the area.
• Existing industries could use the facility
• Smaller local manufacturers cannot afford their own rail spur and could use the facility
• Outside manufacturing could come into the area with this facility available
• The facility would provide warehousing capacity – now major retailers are trucking everything into Billings and straight to the stores. This facility would provide a place to drop off product in warehouses and then distribute to stores in the community as needed
• The Record of Decision for the Billings Bypass EIS was issued in 2014 and the preferred route passes through the proposed Trailhead Commerce Park property. This could further facilitate transportation access to and from the future facility. The bridge that will be built over the Yellowstone River could be the best way to deliver water, sewer and other City services directly to the Trailhead Commerce Park.
• The project concept has been bolstered by a statewide rail study completed by the State of Montana in 2013 that pin-pointed Billings as a place that needs a multi-modal freight facility. Weave Management has approached Montana Rail Link and BNSF and these companies see the advantages of such a new facility, according to Weave Management.

 
Annexation Committee Review
The Annexation Committee discussed this map amendment request over the course of two of its meetings in January and February. The Committee had questions for Weave Management similar to the previous year about why the project could not be served by Lockwood, how City services would be delivered, and whether partnerships between the City, County, Lockwood, and maybe other organizations or entities, might need to be considered to provide services to the proposed industrial park. The Committee also recognized the movement in several areas regarding the Bypass preferred route, the industrial park feasibility study findings, the movement to create the TEDD by Yellowstone County, and the failure of the City Public Safety Levy.
The Annexation Committee after considerable discussion was in agreement that the property should not be added to the Orange Area as this action would indicate that further analysis is going to be completed by the City to determine if the area may be eventually brought into the Red Area and then annexed into the City. The Committee agreed that the City would be responsible for most, if not all, of the analysis and the area is not one the City would want to analyze now for future annexation potential given its location, past history with Lockwood annexation discussion, and the current status of funding public safety services in the City. Other reasons the Committee found for not bringing in the property into the Orange Area included:

• Creation of a TEDD is in process by Yellowstone County
• There is the potential for Lockwood to provide water and sewer service to the Trailhead Commerce Park
• The City Council may develop a policy that would allow in certain circumstances water and sewer service outside City limits without the provision of other City services.

RECOMMENDATION FOR TRAILHEAD COMMERCE PARK PROJECT
The Annexation Committee recommends that the City Council not amend the Limits of Annexation Map to include the Trailhead Commerce Park property in the Orange Area.
 
 
Red Area Request
Viking Land Request
Tracts 2, 3, 4 and 5 of C/S 234, 2nd amendment; Tract 6-A-1 of amended Tracts 6-7 of C/S 234, 2nd amendment; and the unplatted North ½ of the Southwest Northeast & the North ½ of the Southeast Northeast of Section 24, Township 1 North, Range 25 East
 
Property owner Viking Land, LLC submitted a request and Urban Planning Study in November 2014 through Sanderson Stewart to include its property in the Red area on the Limits of Annexation Map. The property is about 98 acres in size. The full Urban Planning Study that accompanied this request is available electronically and for review at the City-County Planning Division Office.
 
The property is currently zoned Planned Unit Development with underlying allowances for residential and commercial development and is used for sod farming operations by Tvetene Turf. The property owners still have a few years left on the sod farming lease for the property and have no immediate plans for development, but would like to begin positioning it for commercial uses with City services.
 
Department Comments: Below are comments regarding this map amendment request provided by the various City Departments through the Annexation Committee. Overall, City staff did not support including this property in the Red Area on the Limits of Annexation Map at this time. However, as outlined below, Public Works found it could serve the property with water and sewer and therefore could support the property if brought into the Red Area and annexed:

Public Works: Public Works found that based on two projects in the City’s CIP in the next few years it could serve the property with water and sewer. The City is currently working on a $3 million project to install water and sewer lines in the area between Mullowney Lane and East Lane that would facilitate service to this property. Further, the City has a project in the CIP in Fiscal Year 16-17 to run a water line under the railroad and Interstate 90 corridor at the approximate location of where East Lane intersects the corridor that would provide looping of the water system and better service capacity.

Fire Department: The City Fire Department currently serves the subject property as it is within the Billings Urban Fire Service Area. However, the current sod farming operation on the property is very different than proposed residential and commercial uses that could be developed if the property were brought into the Red Area and then annexed into the City. The Fire Department is concerned about providing service to the developed property as the Fire Department is strained now with staffing and resources in covering the City and possible future annexation in the Red Area now.  

MET Transit: MET has no service in the area of the Viking Land property, and no immediate plans to provide services based on funding limitations. MET is seeing flat funding annually from the Federal Transit Administration, and the annual mill levy and fares do not provide enough funding for expansion of services.
 
Police Department: Police had comments that were similar to the Fire Department in that the Department will continue serving new areas but is now facing challenges to serve the existing City. Calls for service continue to increase while available officers and resources remain stagnant. The Department has no specific patrol assigned to the southwest area of the City where this property is located, current patrols are being supplemented with officers that have previously been on other assignments like traffic enforcement, school resources officers, and other special projects. The Police also are prioritizing calls now and are using a volunteer force to handle some calls. If the property were included in the Red Area, and eventually annexed, the Police will respond, but response times may be longer in both newly annexed areas and areas already within the City Limits.
 
Parks: While residential development on a portion of the Viking Land property might provide an opportunity for parks, the larger area where the property is located will need larger park space if larger areas of land are annexed and residential development occurs. PRPL does not currently have the resources to purchase a large property for parks, so it is not likely that the inclusion of the Viking Land property would have much impact positively or negatively on the park system.
 
Planning:  The City has analyzed the existing Red Limits of Annexation Area to determine the City’s ability to serve future development in that area. While not all property owners in the Red Area have chosen to request annexation and develop their property, the Red Area is significant in size and has been roughly estimated to be able to accommodate about 20,000 people, or 10,000 housing units. The current service challenges for public safety are significant. The latest effort to secure additional funding for public safety services made basic assumptions about the growth of the City and what various costs for added fire and police services might be. While not done using the Red Area as a specific future area that would require services, it seems safe to assume that with the current public safety challenges of serving the City, the current Red Area alone poses an additional service challenge today.  For this reason under the current situation, it does not seem responsible for the City to add additional Red Area that it might need to provide services to until the current and future provision of funding for public safety is resolved.

RECOMMENDATION FOR VIKING LAND
The Annexation Committee recommends that the City Council not amend the Limits of Annexation Map to include the Viking Land property in the Red Area at this time.
 
City Council Strategic Plan Service Cost Recommendation
While the Annexation Policy is designed to address the burden on existing tax payers as part of its criteria, City staff are not able to easily determine in detail how adding property to the City that is proposed to be developed to various densities and uses affects the City’s financial ability to provide services. A cost of service study, or similar analysis, as outlined in an action item in the Council’s 2015 -2019 Strategic Plan to determine acceptable level(s) of city services and analyze service costs is critical for the Annexation Committee, other City staff, and the City Council to better evaluate where and what type of growth should occur to most efficiently deliver services to all City residents.

As per the Annexation Policy, an Urban Planning Study (UPS) is prepared when a property owner wishes to request an amendment to the Limits of Annexation Map to bring a property into the Red Area. These UPSs are intended to provide detailed information for the Annexation Committee to determine the impacts the property might have to City services if the property were annexed in the future and developed. Often, these studies have not provided detailed property tax and fee calculations to show the estimated revenues that the City might realize of the property were developed at a given residential density and commercial use. However, a UPS submitted by McCall Development in coordination with Sanderson Stewart in 2013 for requested amendments to the Limits of Annexation Map, which the Council approved in April 2014, provided detailed property tax and fee revenue estimates from the proposed development. While the Annexation Committee found the data compelling and helpful, staff had no way to compare the information to costs of City service delivery to determine whether the revenues would meet or surpass the costs. This is an example of why an analysis of City service costs would be so beneficial to staff and the Council when trying to make decisions.

While staff has not looked in detail into how a cost of service analysis might be conducted to meet the City’s needs, preliminary research has found that while some basic models can be applied to multiple communities, there is a significant amount of customization that is required for a community to ensure its assumed financial inputs are correct for its jurisdiction. Studies that staff have reviewed include a multiple jurisdiction project between agencies in Ohio, Kentucky and Indiana that involved a significant amount of staff and a consultant team, to a newly released Model for Municipal Analysis focused on the Fiscal Implications of Development Patterns developed by SmartGrowth America and rolled out in Madison, Wisconsin and De Moines, Iowa. Based on the various resources that appear to be available for consideration, the Annexation Committee is willing to further research options and opportunities based on City Administration and Council direction.

RECOMMENDATION FOR CITY SERVICE COST ANALYSIS
The Annexation Committee recommends that the City Council direct staff to investigate options to conduct a cost of service study, or similar analysis, as outlined in an action item in the Council’s 2015 -2019 Strategic Plan to determine acceptable level(s) of city services and analyze service costs.

Two written requests were received by the City from property owners and agents to include properties in the Red Area and Orange Area of the 2015 Limits of Annexation Map. The areas are referred to as the Trailhead Commerce Park Request and the Viking Land Request. As per the Annexation Policy requirements, an Urban Planning Study was completed for the Viking Land Request that is asking to be included in the Red Area. A letter and supporting documents was provided for the Trailhead Commerce Park request as it was asking to be brought into the Orange Area. Public comment was formally taken at the City Council work session on June 1 regarding the requested amendments to the Limits of Annexation Map and the Annexation Committee's recommendations. Informal comment also was provided during the Annexation Committee Meetings when the agents of the property owners and some of the property owners attended the meetings. A public hearing is also scheduled for this item on the regular City Council meeting on June 22 and additional input from the public may be provided at that time before the Council takes action.

In making its recommendations, the Annexation Committee takes into consideration many plans and policies, including, but not limited to, the Water and Wastewater Master Plan, Stormwater Master Plan, Yellowstone County and City of Billings Growth Policy, 2014 Billings Urban Area Transportation Plan, neighborhood or area plans as applicable, and the CIP. These recommendations are based on an effort to be consistent with adopted policies and plans, and attempt not to favor one department’s ability to provide service over another department’s limitation.