The city's staff has tentatively supported the annexation of Midbury Street, a small neighborhood in an unincorporated area of Los Angeles County just outside Brea.
But officials are still seeking ways to pay for an estimated $228,000 in street repairs.
The Midbury Street issue was discussed during a recent City Council study session, in which members expressed concern about placing the financial burden on other Brea residents.
The 42-home neighborhood has an Orange County ZIP Code and uses Brea emergency and utility services and north Orange County schools.
Residents seem to agree that annexing the area makes sense, but they are waiting to hear more details on how the change would affect them.
City officials said they will explore a property tax agreement with Orange County, or seek help from Los Angeles County, to pay for the street repairs.
If residents and city leaders endorse the annexation, Orange County officials would need to gather signatures on a petition from a neighborhood majority.
Supervisors in both counties would make a final decision after hearing public input.