A consultant outlined the costs of Summit’s proposed annexation of land west of Interstate 55 to the town council Tuesday night, estimating that extending services to the nearly half square mile could cost upwards of $1 million.
Mike Slaughter of Oxford-based Slaughter & Associates had already discussed land area, demographics and other issues during a previous meeting with the council.
Tuesday’s visit centered around the cost of the annexation.
The proposed annexation area, which stems west from Highway 98 and south to Robb Street Extension, includes 18 residences and four businesses, Slaughter said.
The biggest expense associated with annexation would be providing water and sewer service, which would require boring pipes underneath Interstate 55.
“The cost to do that is right at $660,000,” Slaughter said. “... That’s the cost to provide sewer service to every structure out there on the west side of the interstate.”
The North Pike Water Association provides water in the area, but the town would need to install water lines for fire hydrants, which would cost about $376,000.
The town would need to finance the expansion of infrastructure over 15 to 20 years, Slaughter said. The town would most likely carry that out with the issuance of revenue bonds tied to sewer and water funds.
However, Mayor Percy Robinson noted after the meeting that sewer bills are tied to water bills, which would make billing for sewer services difficult at best, and town officials are hoping that there would be little demand from residents in the annexed area to get on town water and sewer. Summit residents have seen steep water rate increases over the past five years as the town recovers costs associated with building a wastewater treatment plant.
Slaughter said other departments, including fire and police, wouldn’t need any additional resources to provide coverage to the annex.
While there’s a big price tag associated with acquiring the annex, revenues from property taxes aren’t as robust.
Slaughter said the estimated assessed value is $450,000, which would bring in about $55,000 based on the town’s 38 mills dedicated to the general fund and another $6,200 for debt services, which receives 1.5 mills.
“There’s going to be some sales tax but we were just not able to get that number from the Department of Revenue,” Slaughter said, adding that the small number of businesses in the area didn’t meet the threshold for state officials to release data.
If the town proceeds with the, Summit would intially accrue $78,700 in expenses, which would fall to about $60,000 over three years. Part of that is based on the need to update zoning ordinances and the comprehensive plan.
Slaughter recommended the town shift a mill from debt service to the general fund into order to help mitigate the deficit.
However, sales tax revenues, which are unknown at this point, will help offset expenses.
“We looked at growth patterns and all and we didn’t want to overestimate revenues without a good, sound basis, and I hope these numbers are going to go up,” Slaughter said. “One business out there, one development could change it.”
Property owners in the proposed annex would automatically see a drop in insurance rates, with an improved Class 6 fire rating, down from the current Class 7.
Slaughter said he believes the town stands to gain financially in the long run if it proceeds with the annexation.
“In the general fund, I feel good about that. You’re going to have additional sales tax,” he said. “The key is on the water and sewer, putting together a financing package for that.
While town officials flinched at the cost of the annexation, Slaughter said it’s not that bad compared to other annexations he’s seen.
“A million dollars is a million dollars, let me tell you,” Slaughter said. “I’m used to seeing way more than that cost when I’m working on annexations.”
If the town council agrees to proceed with the move, it would direct board attorney Wayne Dowdy to prepare a legal description of the proposed annexation area and for the enlarged town, Slaughter said. The council would then need to adopt an annexation ordinance.
“Right now, Summit is not annexing one square inch. We’re just studying it,” Slaughter said.
After the ordinance is adopted, a hearing would be scheduled in chancery court, and a judge would decide whether the town’s annexation request is reasonable based on 12 indicators outlined by the Mississippi Supreme Court.
“We’ve got a lot of work to do,” Councilman Joe Lewis said.