Raising the Stakes for New Towns: State Tools to Curb Exclusionary Municipal Incorporation

Abstract

The establishment of a new city or town affects all the communities around it. Before incorporation, an unincorporated territory typically pays taxes into its county government and receives county public services, such as participation in the county’s public schools. When an area incorporates, the new city or town effectively opts out of county services and taxes. Instead, the new municipality collects its own property taxes to fund its own public services. As a result, the surrounding county loses part of its tax base. Recently, a trend has emerged in local government law whereby majority wealthy and white unincorporated enclaves, particularly in the southern United States, have incorporated and often broken away from regional school districts. These exclusionary incorporations have created negative externalities for their counties because they have segregated schools, increased income inequality, reduced county revenue, and limited resources for public services. States have broad constitutional authority to shape their municipal incorporation regimes. Some states have embraced this authority and created mechanisms to curtail exclusionary incorporation. Their statutes have created blueprints for others to follow. This Note argues that states should require communities seeking incorporation to demonstrate regional consent and should empower state-level or county-level government entities to review incorporation petitions with regional needs in mind.