The revolution in 1775 established that the colony of Virginia was independent from England. A state constitution was adopted by the Fifth Revolutionary Convention in 1776, the last of the conventions that served between the end of the House of Burgesses in 1774 and the establishment of the General Assembly in 1776.
That 1776 state constitution centralized all political power in the state government as the representative of the people. The House of Burgesses had chartered local municipal governments, and the General Assembly continued to establish new counties and cities as subunits of the state government, but the power of "we the people" has never flowed up from the people to a simple hierarchy of local government, then state government, and finally to the Federal governments. All local government jurisdictions in Virginia (cities, counties, and towns) were "creatures of the state," created by the colonial/state legislature. Since 1776, the state has always held supreme power over local government.
Philosophers may consider that all power belongs first to the people, and therefore smaller units of government - Home Owner Associations (HOA's), neighborhood advisory committees, etc. - serve as the building blocks of democracy. However, political authority starts at the state level, not at the local level, in Virginia. Authority to make decisions on zoning, road locations, and taxes will trickle down to the cities, counties, towns, and regional agencies only when the state legislature grants authority via charters to local governments and regional organizations.
Reinforcing the point that local governments are subordinate to state authority, the Virginia Supreme Court has adopted the Dillon Rule, based on the philosophy of Judge Dillon in Iowa. He considered local government to be easier to corrupt than state government, so it was wiser to place power in the state rather than local officials.
Virginia law, as interpreted under the Dillon Rule, severely limits the freedom of local governments. The Virginia Supreme Court requires that the General Assembly make a clear delegation of specific authority to local governments, before those governments are empowered to act. For example, the legislature has refused to authorize counties/cities to pass an Adequate Public Facilities ordinance. Some counties/cities may desire to limit development on private property until schools, roads, parks, and other public services meet a local standard of "adequate," to minimize new traffic congestion and overcrowded schools - but the General Assembly has refused to empower local governments to impose such restrictions.
The General Assembly controls the boundaries of towns and cities (after all, the state legislature created those boundaries in the first place). Virginia towns and cities exist only as subdivisions of the state, not through any independent compact with "the people." The first three local government charters were granted by the colonial General Assembly to Jamestown, Williamsburg, and Norfolk (which was initially called a "borough"). Each charter was a unique document reflecting the circumstances of each community.
The distinction between a town and city was not significant, except in terms of civic pride, until after the Civil War and a new state constitution was adopted in 1869, under the leadership of Judge Underwood. By the 1902 Constitution, in a confusing evolution of case law and legislative practice rather than by a single simple act of the General Assembly, Virginia cities had become politically independent from surrounding counties while towns remained subunits of counties.
The distinction between city andtown is important. Expanding the boundaries of a town does not remove voters or tax base from a county. Incorporating an area into a city, however, means that residents in the annexed area no longer vote for county officials an no longer pay county taxes. (Until additional revisions in the state constitution in 1970, there was also a distinction between "first class" cities with 10,000 people and above vs."second class" cities with a minimum of just 5,000 people.)
Cities can annex parts of a county adjacent to the city, changing the status of residents and property owners from county to city. It is a one-way process; counties can not annex parts of cities, but counties can try to block annexation to maintain existing county boundaries. Not surprisingly, cities and counties compete to control the property taxes and votes from the periphery of cities, paying lawyers to fight boundary changes in complicated court procedings.
In 2013, the city of Bristol and Washington County disputed the city's plans for commercial development at Exit 5 on I-81, for 140-acre "The Falls" project with over 1 million total square feet of mixed use commercial/retail/motel development. The project, financed in part with $25 million in general obligation bonds borrowed by the city, would attract a new Cabela’s sporting goods store, a Sheetz convenience store, and various restaurants. Under a Virginia law passed in 2012 to allow adjacent jurisdictions to capture sales tax revenues from a "development of regional impact" to repay bonds, The Falls had to create 2,000 jobs, generate $5 million in new annual tax revenues, and attract 1 million visitors a year in order for Bristol to receive sales tax revenue.1
Washington County was specifically concerned that a Lowe’s home improvement warehouse located at Exit 7 in the county would move to Exit 5. If sales and property taxes associated with that one business would shift from the county to the city, the Board of Supervisors in Washington County would need to raise their property tax rate by $0.01/$100 in order to maintain the tax revenues required for schools, fire/police, and other public services in the county. County property taxes in 2012 were $0.63 per $100 of fair market value, so the loss of one store would force the seven elected county supervisors to raise taxes by 1.5% or cut county services.2
The conflict between city/county was miirored by competition between the states. Downtown Bristol is divided by the Tennesee/Virginia state line, and there is competition between the states. The 250-acre Pinnacles development, in Tennessee just south of the border on the Exit 74 interchange on I-81, is anchored by a different sporting goods store, Bass Pro Shops. Each project proposed 10 Walmart Supercenters
The process of annexation kept taxes (as well as services...) low in the counties, and allowed town/city officials to manage logical extensions of services and to shape development that otherwise would occur outside the city boundaries. By 1902, after an annexation the rural counties were no longer obliged to pay for servicing the population and acreage that was incorporated into a city. Counties stayed rural and focused on agriculture, cities offered extra services to landowners and charged higher taxes, and the separation between the rural/developed areas was marked by the city boundary.
1. "Va. budget amendment favors Bristol, Va., tax stance," Bristol Herald Courier, March 27, 2013, http://www.tricities.com/news/local/article_31ed3c88-9741-11e2-8ba9-001a4bcf6878.html; ""A lot of nastiness," Bristol Herald Courier, Bristol Herald Courier, http://www.tricities.com/news/article_dbae2c90-671e-5d92-8da0-d82fc13762c2.html (last checked August 13, 2013)
2. "Bristol Va., officials bracing for possible lawsuit from Washington County over The Falls development," Bristol Herald Courier, August 12, 2013, http://www.tricities.com/news/local/article_d0a3d726-03c3-11e3-85c9-001a4bcf6878.html; "Taxes," County of Washington, Virginia, http://www.washcova.com/business/taxes (last checked August 13, 2013)