A tax break long enjoyed by one of the area's ritziest neighborhoods is facing scrutiny by City Hall.

A portion of the Sylvan Highlands neighborhood is in unincorporated Multnomah County, virtually surrounded by the City of Portland. That geographic oddity means its 55 homes pay county property taxes, but none of the additional city levies for services such as parks and urban renewal.

And that arrangement angers a nearby resident whose home is assessed all those taxes within the city boundaries.

"They're getting all the services the city offers to everyone else," says Southwest Portland resident Michael Cannarella, who lives just a few blocks from unincorporated Sylvan Highlands. "Taxpayers should not be subsidizing an upper-middle-class neighborhood. They can afford to pay taxes, too—they should be a part of this city."

Cannarella has made his case to City Council and gotten the offices of Mayor Tom Potter and Commissioners Erik Sten and Sam Adams to begin researching the feasibility of a city annexation.

At least a dozen homes in unincorporated Sylvan Highlands have market values of $1 million and up, with one 6,300-square-foot house selling last March for $2.2 million. If the neighborhood were annexed, the estimated property-tax increase would range between $1,500 and $6,000 per home, meaning about $150,000 in new tax revenues from the neighborhood, according to tax officials.

But it's not that simple.

An annexation could happen if a majority of Sylvan Highlands residents voted to become a part of the city, which most agree is unlikely.

If an area is surrounded by the city, Portland could also perform what's known as an "island annexation," an often-controversial move in which an area is incorporated without property owners' consent. But that appears virtually impossible.

That's because a now-defunct boundary commission that examined Sylvan Highlands in the mid-1990s decided only to annex portions of Southwest Highland Road, a main thoroughfare running directly through the unincorporated area, and only the pavement, not the houses alongside. That left the boundaries such that an island annexation may be nearly impossible.

"The issue for the city is: Can we annex the property?" says Shoshanah Oppenheim, a policy analyst for Commissioner Adams. "And if so, what are our tools for doing it?"

An attorney representing the neighborhood asked local powerhouse lobbyist Len Bergstein to look into the boundary question further.

"You shouldn't change the rules on someone arbitrarily," Bergstein says, "because one citizen raises an issue and says, 'I'm upset about this.'"

At least one Sylvan Highlands resident agrees with Cannarella, however. Gretchen Hollands, whose home on Southwest Upland Drive is the only one on her street not in the City of Portland, says she'd be willing to give up what is now about a $1,500 annual tax benefit to be annexed.

"It's a little hard to give up the tax break, especially when our neighbors are enjoying our Cayman Islands tax retreat here," Hollands says. "But I love our city, and we need to be paying for the taxes. It's just the right thing to do."

IF YOU LIVE IN THE SHADE: you've got it made, if you don't want to live in (and pay taxes to) the City of Portland.