The City Council has exempted the Indian Waters subdivision from its annexation ordinance, which would have forced the property owners to join the city when their land changed hands and became contiguous to the city limits.
Citrus County officials said requiring the community to annex into the city would violate an agreement the city has with the county.
By exempting Indian Waters, the city's plan to push for annexations north of the existing limits hits a serious problem. Indian Waters is a crucial piece of the puzzle in the city's continued drive northward.
The city's annexation committee had set up a logical sequence of annexations to build the city's tax and population base by moving north. But in December, residents of Carpenter's Country Square, Country Oaks and Indian Springs rejected annexation in a referendum.
Indian Waters would be the next large chunk at the city's northernmost edge.
On Tuesday, City Manager Terry Leary said that although dropping Indian Waters from the annexation plan is a setback, it may not be permanent. She said the state may require subdivisions like Indian Waters to hook up to a central sewer system.
If the community turns to city sewer service, then it would be covered by the annexation ordinance.
The city enacted the annexation ordinance several months ago to formalize the position that anyone who receives city services, including water or sewer usage, should be part of the city.
County Attorney Larry Haag has told the city that the ordinance violated an agreement made with the county in the 1980s. The agreement set out the conditions under which the city would provide water service to Indian Waters.
"Haven't you got any pull with the county?" Mayor Curtis Rich quipped to City Attorney Jeannette Haag, the county attorney's wife.
"Apparently not," she said.
Mrs. Haag said county officials erroneously think the city would never change its rules.
But the council voted 4-0 Monday night to avoid a confrontation with the county by dropping Indian Waters from the annexation ordinance.
In other action related to expanding city borders, the city gave final approval Monday to annexing the property of the Crystal River Yacht Club and a couple who live in Indian Springs into the city.