Special Assessment /Special Service Districts:Purpose of Tool:
Special assessment, or special service, districts are a means for local governments to finance specific infrastructure or services in a pre-defined area. Special assessment and special service districts have been in use since the early 20th century to finance local public improvements. They are authorized in various forms in all 50 states. Financing mechanisms vary by district; the local government may issue bonds for large infrastructure projects, or it may choose to assess separate fees through property taxes or other assessments on a per unit (acre, square foot, etc.) basis. If bonds are issued, the district may be dissolved once the bonds are paid off.
In most states, special assessment and special service districts are essentially identical in structure and governance. The precise differences between these types of districts and the specific names used vary by state. Sometimes, a special service district applies to all property that is physically connected to the public improvement, while a special assessment district includes properties that specifically benefit from the public improvement. For example, all properties within a watershed are physically connected to and impacted by the construction of a new dam (hence, a “special service district”). A special assessment district, however, may refer to all the properties in a pre-defined downtown district that will use and benefit from a municipal parking deck. Also, depending on state regulations, a special service district sometimes funds more general improvements, such as economic development, promotion and marketing, and police and fire protection.
Benefits of Using Tool:
Special assessment and special service districts have several benefits. They provide infrastructure and services for a specific group of taxpayers who will benefit from the projects, rather than burdening the entire community with costs for local projects. In addition to improving a specific area within a community, these projects may raise revenue or enhance economic development across the community as a whole. For the local government, special assessment and service districts provide a reliable source of funding for capital improvements, which is critical considering the increasing scarcity of federal, state, and local funds for local infrastructure improvement projects.
Steps Involved to Use Tool:
Although special assessment districts are still created throughout the country, many states have authorized more specific types of these districts to serve different purposes. Local governments often take advantage of these “hybrid” special assessment districts. Examples include municipal utility districts and public improvement districts. Depending on the specific type of district formed and the state’s regulations, the procedures for establishing these districts vary. For example, in Texas, at least 50% of property owners in a district must agree to form a public improvement district or MUD and petition the local government. In other jurisdictions, taxpayers must vote on the formation of the district and/or the issuance of any bonds.
Special Requirements to Use Tool:
The major limitation of special assessment and special service districts is that they can only be used to finance projects or services of local benefit, that is, to benefit only those taxpayers who are being assessed within the district. This prohibits projects with a larger scope, such as new roadways spanning an entire city, for example, from being financed through special assessment districts. Over the past several years, several states have adopted legislation to create “hybrid” forms of the original special assessment and service districts, whereby an identical financing mechanism can be used to fund improvements on a community or regional basis. For example, in 1985, the Texas legislature expanded the use of special assessment districts to roadways by authorizing municipal utility districts (MUDs) to finance transportation projects in addition to strictly local types of infrastructure improvements.
Specials Resources Needed to Use Tool:
No specific resources are needed to use this tool.
Communities / Agencies that Have Used Tool:
The Downtown Manchester Special Services District in Manchester, Connecticut was established in 1991 to promote economic development and general welfare for local citizens. The district promotes and markets the district, recruits business, manages parking, and participates in supplemental maintenance and beautification in the downtown area. The district is funded by an additional mill rate on property tax for approximate 134 properties, which is set annually. Contact:
Tana Parseliti - Downtown Manager
983 Main Street
Manchester, CT 06040
Washoe County, Nevada has created Special Assessment District 37 for the construction of new sewer mains in the City of Spanish Springs. Federal grants are paying for 75% of the project; the remaining 25% of project cost will be funded through the special assessment district. The assessment is being levied based upon parcel size. Contact:
Rosemary Menard - Head of Water Resources Department
Washoe County, Nevada
4930 Energy Way
Reno, NV 89502
Metrics to Use to Monitor Tool Effectiveness:
Because special assessment and special service districts vary greatly in their objectives, there are no standard metrics to determine whether these districts have improved quality of life. Typically, successful districts implement improvements or services in a timely manner and assess property owners based on the true cost of the improvements/services, without creating undue tax burden on those who do not benefit from the improvements.
List of Resources to Obtain Additional Info:
- Special Assessment Districts (Innovative Finance): http://www.innovativefinance.org/topics/revenue_sources/local_revenue/value_capture/special_assmnts.asp
- Special Assessments (Innovative Finance): http://www.innovativefinance.org/topics/revenue_sources/local_revenue/value_capture/special_assmnts.asp
- Special Assessment Districts (National Association of Homebuilders): http://www.nahb.org/generic.aspx?sectionID=1307&genericContentID=93524
- Downtown Manchester Special Services District: http://www.downtownmanchester.org/about.htm
- Spanish Springs Sewer Phase 1a – Special Assessment District 37: http://www.co.washoe.nv.us/water/ssphase1a.htm