The Benefits of Incorporating
There are various reasons why towns should incorporate. Some of them are listed below.
Take control
Local representation
When a town is unincorporated, it falls under the jurisdiction of the county government, which serves a much larger area. By incorporating, the town can elect its own officials, such as a mayor and city council members, who live in the community and are more responsive to local needs.
Financial control
An incorporated town can levy its own property and sales taxes and use that revenue to pay for community-specific services and amenities. In an unincorporated area, the taxes paid by residents are distributed across the county, with no guarantee that they will be spent locally.
Protection and growth
Control over zoning and development
An unincorporated community has very little control over land use, meaning the county's rules dictate what can be built in the area. Incorporating allows a town to establish its own zoning and building codes to manage local growth, protect property values, and prevent unwanted developments.
Avoiding annexation
A primary motivation for incorporation is to prevent a larger, neighboring city from annexing the community. Once annexed, a small community would lose control over its own development and be subject to the annexing city's regulations and taxes.
Community identity
Incorporation can solidify and enhance a community's unique identity. It can also create an official government body to advocate for the town's quality of life and compete for state and federal grants to fund local improvements.
Access to new revenue streams
Incorporation significantly affects a town's ability to get funding for projects, granting it direct access to new revenue streams, state funding, and federal grants that are not available to unincorporated areas. While unincorporated communities rely on the county government, incorporated towns can pursue funding for their specific local priorities.
Levy local taxes
Incorporated towns can implement their own local property and sales taxes. A small sales tax, which must be approved by voters, can fund economic development projects through an Economic Development Corporation (EDC).
Charge fees
Cities can levy fees for services and permits, such as for utilities, parks, or building permits.
Use hotel occupancy taxes
Through local ordinances, a city can implement a Hotel Occupancy Tax, with the revenue designated for tourism and historic preservation projects.
Access to services
Direct control of services
Unincorporated communities often have limited services, relying on the county or informal arrangements. Incorporation allows a town to create its own police and fire departments, manage road maintenance, and establish utilities like water and sewer services.
Economic development
An incorporated town can create a focused economic development strategy to revitalize commercial areas, attract businesses, and foster local entrepreneurship. It can also use its authority to invest in infrastructure and offer incentives to new businesses.
Eligibility for state and federal grants
Incorporated cities, especially small ones, are eligible for various grants from state and federal agencies that are otherwise funneled through counties. Key grant programs include:
Texas Community Development Block grant
This program from the U.S. Department of Housing and Urban Development (HUD) provides federal funds directly to the state, which then provides grants to small, rural cities for projects that benefit low- to moderate-income residents.
Texas Department of Agriculture grants
The Texas Capital Fund offers grants and zero-interest loans for infrastructure development and real estate acquisition to create or retain jobs in rural communities.
Texas Parks and Wildlife Department grants
The Local Park Grant Program offers 50% matching grants to cities for the acquisition and development of public recreation areas.
Texas Historical Commission grants
Programs like the Main Street Improvements Program provide matching grants to eligible Texas Main Street communities for infrastructure improvements in historic districts.
LIMITATIONS FOR UNINCORPORATED COMMUNITIES
While some federal funding is designated for unincorporated areas, most grant opportunities require an incorporated government as the official applicant. For example, some federal funds are distributed to states, which can then establish their own grant programs for unincorporated communities. In general, though, unincorporated communities lack the direct access that an incorporated city has:
Limited grant applications
Unincorporated areas often have to rely on their county government to apply for funding on their behalf, which may prioritize other projects outside of the community.
Reduced tax base
Since unincorporated communities cannot directly levy local sales or property taxes, they have a smaller local tax base to generate funds and cannot secure financing via mechanisms like municipal bonds.