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Basically I just want the outline of a shapefile, and nothing inside it. I have tried creating a buffer and dissolving but i still get some stuff in the interior of the polygon. I just want the outside. Also tried clipping the parcel file with itself but that leaves all the parcels intact. There are a lot of edges on the outside so creating a trace polygon is not gonna work for me. Is there another way?

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If you know that you want to have only the perimeter, you could use the following process.

Please note that though the screenshots are from ArcGIS 10, the process and commands are the same for ArcGIS 9.3.1.

  1. Existing Parcel Layer in ArcGIS. Parcel Layer - ArcGIS

  2. Start Edit Session, Delete majority of Interior Parcels. The purpose of this is to remove the potential for as many internal slivers to be created as possible in the next step. It is also quicker to delete these parcels than to try to merge them all together. Delete Interior Parcels

  3. Select All remaining Parcels, Use Merge Command on Editor Toolbar. Merge Command Select one of the Parcels to keep attribute information. It doesn't matter which one as the outline is what is desired, not the attributes.
    Select First Parcel
    Result
    Merge result

  4. Double click on remaining parcel, and then open Sketch Properties window. Sketch Properties

  5. Delete all Sketches except for the one representing the outer ring. This will leave you with a single parcel.
    Delete sketches

  6. This will leave you with just the exterior sketch. Finished sketch

Even though this is a multi-step process, it is pretty quick. The step that will save the most time is deleting the interior parcels. The fewer there are remaining, the easier the merge will be, and a smaller number of potential interior sketches that have to be deleted. In this case, I had 8 interior sketches that had to be deleted, which took about a minute to do.

Hope this helps.

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I love your clear detailed answers. Did you consider the alternative of (1) subtracting the shapefile features from a simple surrounding square (easily created for the purpose), (2) deleting all but the outermost component, and then (3) subtracting that from the original square? This ought to be quicker and more reliable. It can also be automated. –  whuber Aug 22 '12 at 19:45
    
@whuber - Thanks. I've started to go a little crazy with screenshots, but I think they really help clarify a process. that is a good alternative process. I've not had to do this often, so haven't really looked at automation, but that is important. The parcel layers here in So Cal usually don't have polygons in the rights of way, so there is generally additional editing to do to bridge those gaps to have a continuous boundary. –  Get Spatial Aug 22 '12 at 20:58
    
@whuber - It would be interesting to do some timing on which operations are quickest with parcel layers. I've seen some pretty serious performance hits when dealing with a large area due to the number and complexity of polygons. That is why I usually try to get rid of as many as possible. On the alternative note, you should post your comment as an alternate answer, as the automation aspect was something I hadn't considered at all. –  Get Spatial Aug 22 '12 at 21:00
    
I don't believe we should be too concerned about speed here (if we are, we ought to consider using different GIS software :-). My principal concern lies in the lack of reproducibility, possible inefficient use of human time, and potential for error, of methods that require manual intervention. The workflow I outlined can be completely automated. For instance, the layer's extent can initially be expanded outward by a factor of sqrt(2) to guarantee that the outer ring after the initial subtraction has the largest area of any component, making it reliably and automatically identifiable. –  whuber Aug 22 '12 at 21:05
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