The Planning Division is requesting the City Council conduct a public hearing and consider whether to exclude or de-annex property described as Lot 2, Hobby Subdivision at 550 Garden Avenue. Based on the Deannexation Policy criteria and infrastructure issues, staff does not support deannexation of this property. The deannexation would result in about 2.7 acres of land being taken out of the City. The property is currently developed with several residences and out buildings. The property is zoned Residential-9600. Petitioners and property owners June and Leonard Hobby have signed the attached petition to request that this property be deannexed. The property was annexed into the City in 2001. A 20-day public comment period beginning June 14 was legally noticed on June 14 and June 28. No comments have been received as of July 6, 2012.

The City Council may:
• Approve the Resolution to Exclude Property to deannex the subject property; or
• Not approve the Resolution to Exclude Property and not deannex the subject property.

This 2.72 acre property has been partially developed (3 units) for residential uses and has been providing City tax and assessment revenue for the past 11 years. The property also has been receiving some city services, including water service. The tax year 2011 taxes and assessments equal $3,090, most of which is City storm and street maintenance revenue that will be lost if the property is deannexed. While the property does not currently connect to the City sanitary or storm water systems, the property is connected to City water. It is within the City's Limits of Annexation designated for annexation into the City within the next 5 years. This means that the City could deannex the property now and be petitioned to annex the property again at any time.

The Planning Division is requesting the City Council conduct a public hearing and not move forward with excluding this property described as Lot 2, Hobby Subdivision. The deannexation would result in about 2.72 acres of partially developed land being taken out of the City along the west side of Garden Avenue.

This property was originally included in a City initiated annexation and zoning process in the early 1980s in anticipation of a large commercial development in this area. When the development did not occur, the City deannexed some of the land in 1983, but left a portion adjacent to Garden Avenue on the west side in the City. Part of the property now described as Lot 2, Hobby Subdivision was left in the City. When the property owners completed a subdivision of the property in 2001-2002, a condition of final plat approval was to annex the remaining portions of the property into the City and to have the property rezoned to R-9600 zoning. These two conditions appear to have been met and the property has been in the City since 2001.

Staff has reviewed this deannexation petition and finds that the requested deannexation does not meet most of the criteria in the City's Deannexation Policy for deannexation. The requested deannexation is not consistent with the City’s Deannexation Policy in that:
1. The property is currently connected to City water service in Garden Avenue. The property has been served by City water since it was annexed in 2001. However, the property is not connected to sanitary sewer at this time and storm drainage facilities are not currently near the property. It appears that connecting to sanitary sewer would require extension of services along Garden Avenue in this area for a long distance based on current service locations.
2. The property is adjacent to the public-right-of way of Garden Avenue for its entire east frontage
3. The property is bordered by other property with the City Limits on the north and is adjacent on the east, west and south to the acceptable limits of annexation as defined on the most recent update of the Limits of Annexation Map.

The requested deannexation is consistent with the City’s deannexation policy in that:
1. The property is not encumbered by any indebtedness of any improvement district of which the territory is a part.
2. The property is located on the outer perimeter of the City limits and upon exclusion of the property will not result in a parcel wholly surrounded by City limits.

From a service standpoint, City staff has significant concerns with deannexation of the property, specifically regarding domestic water service. The location of the property in relation to the City's Limits of Annexation area and some inconsistencies with the City's Deannexation Policy also were raised by staff. The main staff concerns are as follows:

Water Service
In 2007, the water main in Garden Avenue was replaced through a county Rural Special Improvement District (RSID). Yellowstone County assessed each property for the cost of that upgrade. The City paid the assessment for each of the City parcels including this one and the City paid for approximately 50% of the entire RSID project. The City now maintains the water line in Garden Avenue through an agreement with Yellowstone County. If the deannexation is approved by City Council, the Public Works Department should be reimbursed for the RSID assessment for this property. Staff is not aware of a mechanism for this reimbursement aside from it coming from the property owner.

Limits of Annexation and Development Potential
The property along Garden Avenue in this area that remains in the County is all within the Red Area on the City's Limits of Annexation Map. This means that this area is all expected to be considered for annexation into the City at any time by petition of the property owners to the City Council. While some City services are not available currently in this area, including storm water and sewer, extension of these systems is occurring to the west of this area and as property is annexed the services will be expanded. Some of the services paid by this property, including the Arterial Fee and Street Maintenance Fee still benefit this property since any travel from this property involves travel on City streets. It is also important to note that this property, while developed with three residences, could have possibly seven or eight more single family units developed on it based on the 2.7 acre lot size. This density would currently require extension of sewer services to the property, which could be costly due to distances to sewer lines at the present time.

The property owner petitioning to deannex is the primary stakeholder in this process. The City has followed the procedures for deannexation as per 7-2-48 of the MCA, including advertising and allowing for a 20-day comment period on the deannexation request prior to conducting a public hearing on the request. The Planning Division has not received any public comment aside from the information submitted by the subject property owner. 

This deannexation petition is not in alignment with all of the deannexation critera as set out in the City's Deannexation Policy and this is discussed in more detail in the Background Section of this report.