The City Council voted 5-4 on Tuesday night against deannexing a section of Hixson including the Ramsgate subdivision.
Phil Noblett, assistant city attorney, urged denial of the request, saying there had been a legal battle and a settlement was reached delaying the start of the annexation until the end of this year.
However, Councilman Ken Smith urged approval, saying that the annexation had not yet gone into effect, no taxes had been billed and no services rendered. He said the residents were almost 100 percent against being annexed.
It appeared the resolution would pass when the first four council members - Smith, Jerry Mitchell, Larry Grohn and Chip Henderson - voted in favor.
But then Yusuf Hakeem, Russell Gilbert, Moses Freeman, Carol Berz and Chris Anderson were opposed.
Chairman Hakeem said it might cause other disgruntled sections of the city to make the request. He also said the residents were going back on an agreement they had reached.
Councilman Henderson said he felt the city "should take care of what we have before we take on more."
Councilman Mitchell said it would have led to decreased services for his district.
There were varying figures given on the taxes it would bring in and the expenses. Attorney Noblett said the tax take would be almost $1 million per year.
Opponents said there would have to be a fire hall and expensive sewers put in along with other services.
One resident called it "taxation without representation" and equivalent to "a hostile takeover in business."
Another who said he is on a fixed income said his taxes would be going up over $1,600 a year.
The area also included the subdivisions of West Point, Laurel Cove, Rose Garden and Jackson Square as well as property in the vicinity of Boy Scout Road. Ten small businesses and over 500 homes were involved. The area is less than a square mile.
It was annexed by the city in 2009.
Attorney Noblett said if the city of Chattanooga had not done any annexations it would still be limited to just downtown near the old Ross's Landing.