Why Paducah's new annexation incentives make McCracken County officials anxious
A Paducah City Commission meeting last month saw the unanimous passage of an annexation incentives package ordinance along with a goal-setting message from Mayor George Bray: the city wants to bring a minimum of six parcels into its bounds voluntarily every year. This new plan has McCracken County officials nervous about what that could mean for their tax rolls in the future.
Cities can increase their population and their tax base when they bring more property and people into them through annexation. This current iteration of the city commission has been talking annexation from the get-go. This plan has roots in the group’s first goal-setting meeting together in early 2021.
“It’s important to the growth of not only the city but the entire community,” Bray said. “Obviously there is, depending on whether it’s a residence or a business, a benefit to the city when something gets annexed in because it increases the tax base for the city of Paducah. I think the county looks at it as a lose-lose situation if a property gets annexed, but I don’t view it totally that way.
“I think one of the things annexing does is providing services and support that help overall growth and we all benefit from overall growth.”
This incentives package is modeled off of one passed by the city of Owensboro, according to Paducah City Planning Director Nicholas Hutchison. It includes property tax rebates reimbursing property owners the real estate property tax revenues collected for five years; free basic sanitation service for up to one year up to $10,000; and a one-time, lump-sum payment to owners that opt for annexation before selling their property, equal to closing costs with a cap of $1,000. Residents and business owners would also be able to use the city’s fire and police services.
The ordinance also states the city is not limited to these annexation incentives. That’s one of the things that has McCracken County Judge-Executive Craig Clymer concerned. The county official wrote a letter voicing his opposition to Bray and the city commission prior to the package being passed in January.
“They have an intent of annexing at least – it’s a minimum – six (parcels) a year,” Clymer told WKMS after the fact. “It’s a minimum of six a year and the ordinance they passed states certain incentives ‘but not limited to those incentives.’ I guess the bottom line is the city is looking at taking revenue from the county into the city and it will reduce our income.”
Clymer is anxious because the county has no legal bounds to fight annexations. Cities annexing county land in Kentucky is a one-way process established in state law.
The only requirements for a city to bring a new property in are that it border on current city land. Both residential and commercial property owners can choose whether or not they want to be annexed. Residential neighborhoods can be brought in by a majority vote or the neighborhood’s developer can opt in before residents move in. This kind of agreement is often reached by the city paying the developer back in ad valorem property taxes while it takes care of infrastructure costs like curbs, streets and gutters.
Once a property starts to be annexed, there’s nothing a county government can do to stop it. This can result in a massive loss of revenue when the land is the site of development – like a factory, a restaurant, or a school – because the county would then lose out on payroll and insurance premium taxes.
Through these annexations, Bray hopes to accomplish two ends: neaten up the city limits and increase the city’s population.
Hutchison said the city would like to create “a compact and contiguous boundary” over time, making it more orderly than the current – as Bray calls it – “cookie cutter” map.
“We have several areas on the periphery where there are islands of properties that are in the county that are completely surrounded by city incorporated land,’” the planning director said. “We just want to eliminate those discrepancies.”
Bray’s description of the city map holds true. The limits zig and zag along roadways, going around subdivisions and neighborhoods but snaking their way around businesses. There are islands, offshoots and gaps where the city has previously annexed practically all but the residential properties in parts of the county.
“It’s evolved over time and some of the properties that are in the county and not in the city to us don’t make sense,” the mayor said. “They just don’t make sense. One of our goals is to clean up some of that. We’re going to do that very selectively and we will certainly think about the strategy around that, making sure that we minimize the impact as much as possible to the county.”
One of the goals outlined in the annexation incentive ordinance is to increase Paducah’s population so that it would have a better chance of becoming a designated urbanized area. This is a U.S. Census term applying to area’s with a population of at least 50,000, according to Hutchison. This classification would take Paducah and the surrounding counties from a micropolitan statistical area (more than 10,000 residents but fewer than 50,000) to a metropolitan area.
“Should the city ever reach the 50,000 threshold … it would classify the city as an entitlement community,” Hutchison said in an email. “This would allow for the city to receive Community Development Block Grants (CDBG) directly from the federal government. Non-entitlement communities have to apply for CDBG funds through the state.”
CBDGs are federal funding slated to aid entitlement communities in meeting their housing and development needs. This funding comes in the form of annual grants aimed at neighborhood revitalization, economic development and improved community facilities and services.
Paducah’s population, as taken in the 2020 Census, is just north of 27,000. This means, in order to eventually achieve this goal of becoming a designated urbanized area, the city would need to almost double its population within the existing boundaries or eat up large chunks of the county’s non-city properties. McCracken County’s population is currently just under 68,000, meaning that about half of the non-city residents in the county would need to be annexed in.
Despite Bray’s stated effort to minimize impact, Clymer is concerned about this plan and what it could mean for the county’s finances moving forward. He objects to references of voluntary annexations under this “aggressive” incentives package because “if it were voluntary then there would be no need for them to be incentivizing the properties to move into the city. It’s voluntary without an ordinance designed to do this.”
“It’s not a one time thing. They plan to do this a minimum of six times a year and so each time they annex county property into the city that wound kind of reopens,” Clymer said. “I suspect there is a goal of certain properties. I don’t know what they are. It’s a recurring problem with us that each time that happens, if it happens 6, 15 or 30 times a year. Each time we lose revenue, they gain it.”
Clymer isn’t alone in thinking the incentives are aggressive. Kentucky Association of Counties executive director Jim Henderson agrees. KACO is the main legislative advocacy group for counties in the state.
“If the city’s having to incentivize (annexation) by essentially putting money on the table, I’m not sure that the citizen would make that choice on their own,” Henderson said. “We’re not against cities growing. We’re against cities taking money away from counties in order to grow. Strong cities are important to counties, just not at the expense of county government.”
Henderson, too, fears what annexation like this could mean for McCracken’s County services in the future. Funding from their tax base covers statutorily-mandated services like the county jail, being the depositor for county records and deeds, car registration services and collecting taxes for schools, the county and special districts.
“Counties always have to provide the services outlined by state government but taking money from the county will just deteriorate those,” Henderson explained. “There are huge responsibilities a county government has that don’t change whether there’s a city or not a city. A city can choose to do police and fire and parks and recreation. Counties don’t really have that option.
“You can’t not have a county jail because it’s costing you too much.”
And what the City of Paducah is doing with their minimum annexation goal is not a common practice. Michele Hill with the Kentucky League of Cities called it a “unique” approach and noted that she hadn’t seen one quite like it.
Bray called the six-parcel goal “aspirational” during the meeting when the package passed. And both Bray and Hutchison clarified that the six-property minimum is a “soft goal” not included in the passed ordinance.
“One of the goals that came out of our first goal setting meeting together we talked about annexation, and so it was suggested that if we’re going to have a goal of annexation we needed to put a number so we just kinda pulled a wild number out and just said six,” the mayor said.
The McCracken judge-executive and the Paducah mayor have collaborated frequently since Bray was elected in 2020 and there’s no desire by either party to let this disagreement stop that.
“I didn’t make the (annexation) rules. I don’t want the county to be upset. We’ve got unprecedented cooperation right now going on between the city and the county,” the mayor said. “I think our community wins when there is cooperation and collaboration between the city and county, but just not to ever annex property because the county is upset about is not in the best interest in the City of Paducah.”
Clymer spoke positively of the city’s getting involved in county projects, like the sports complex project, and the mutual efforts on a new E911 system. He wants to make sure the two governmental bodies continue to work as a team.
“We will continue to work with the city. I certainly don’t want to disparage our relationships and they have been working with us,” the judge-executive said. “We want to continue working with the city and will do so. It just does cause some concern.”
Bray thinks there’s an opportunity for them to work even closer together by jointly writing the city and county’s statute-mandated comprehensive five-year plans. He thinks conversations surrounding this plan would include talks regarding annexation.
“The last time that we filed a comprehensive plan, the city and county filed their plans separately, which to me as a leader of this community makes absolutely no sense,” Bray said. “If you look at the relationship between the city and county over the last 25 years you have some mayors and county judges that get along, some that don’t. When they don’t work together I feel like it hurts the community.”