Annexation, Local Government Spending, and the Complicating Role of Density

Annexation is often touted as a strategy to improve the overall fiscal environment of a municipality. The empirical literature on the role of annexation in municipal finance, however, has yielded inconsistent results. This article examines annexation in nearly 1,000 municipalities for its effects on local government spending. Results show that spending is influenced by annexation, but the effects on spending are complicated by accompanying changes in municipal density levels. If annexation is accompanied by higher densities, the local government will certainly experience lower increases in per-capita spending levels. However, if annexation is accompanied by lower densities, the local government may or may not experience lower increases in per-capita spending levels, depending on changes in land area relative to changes in density.