All 50 states authorize some form of special assessment district that allows for the assessment of property or sales taxes to fund a project or projects that benefit a limited geographic area. Special assessment districts allow stakeholders to fund projects that do not fit within a municipality’s budget or that benefit only a portion of the city. These special districts generally are found in two categories — temporary and ongoing — and may or may not require separate governing bodies.
Special assessment districts provide opportunities to improve your community without overburdening the entire tax base. The key is understanding how governments and citizens can leverage the service to fund improvements by convincing those affected of the benefits.
What is a Special Assessment District?
Special assessment districts should be a tool in your arsenal to handle needed community improvements that benefit specific geographic areas. Special assessment districts can fund issues from infrastructure to parks and libraries to marketing for business districts.
The development of a new subdivision would be a prime example of a temporary special assessment district. A special property tax assessed on all new homeowners in the development over five or 10 years would fund the sewer and water services and access roads. No governing body would be needed to oversee the district, as it would simply be a matter of applying the special assessment to annual property taxes.
On the other hand, if a downtown shopping district wants to form an entity to provide services and support to the business community, it could assess fees to business owners and form a nonprofit organization to maintain the ongoing operation. These fees and structures often must be reviewed and renewed annually.
Characteristics of a Special Assessment District
The legal structure of a special assessment district is defined differently in each state. They typically feature the following characteristics:
Targeted Funding
The funding generated by the assessment must be used for a defined project. For example, if a neighborhood wants to build a swimming pool in a local park, the district could be set up to levy a one-time property tax to fund only the construction of the swimming pool, but not include ongoing operations.
Specific Purpose
Districts also can be established to meet a specific purpose, such as supporting a business district. In such a case, a tax may be created and a nonprofit organization established with board members from the affected district. This board would decide how the funds would be spent to meet the needs of businesses within the district. This may include marketing, training, or organizing special events.
Geographic Boundaries
Special assessment districts must be limited to a geographic boundary that normally is different from the municipality’s boundaries. Typically, this would be a smaller district. But in some cases it might be larger. For example, citizens could propose to create a library district that serves members of the county. In such a case, voters in the city and the affected area of the county would have to vote in favor of the district.
Temporary or Ongoing
The majority of special assessment districts will be temporary to fund a one-time project, such as the infrastructure in a new development. Others are ongoing, such as business or neighborhood improvement districts. Some temporary districts might desire the creation of an oversight board if a project is large enough. Ongoing districts normally have a nonprofit organization that works with the city as the funding agency.
Formation of a Special Assessment District
The formation of special assessment districts can be initiated by government staff, councils, or through citizens’ efforts in collaboration with the government. The formation steps include:
1. Proposal
An initial proposal will define the purpose of the special assessment district, determine the geographic area, establish any needed structure, and create a timeline. The proposal is designed to give stakeholders a clear understanding of the project’s scope, the expected benefits, and the responsibilities of property owners within the district.
2. Cost Allocation
The costs for a special assessment district are allocated among the property owners within the district, usually based on factors such as property size, frontage, or usage. The goal is to ensure a fair and equitable distribution of expenses.
3. Approval Process
Special assessment districts must be approved by a majority of voters in the geographic bounds of the district. Ongoing districts must be renewed annually by a city council. A taxpayer vote is only required if there is a protest petition.
4. Assessment
Assessments are determined for a defined period and applied in addition to a property owner’s annual property taxes. In the case of a sales tax, these must be coordinated through the state’s sales tax collection agency. City staff and tax collection agencies are responsible for carrying out the assessments.
5. Project Implementation
City staff normally oversee the implementation of the special assessment district and coordinate with any district board to ensure the project is completed as proposed. Regular updates and progress reports are often provided to stakeholders, including property owners within the district, to keep everyone informed.
Examples of Special Assessment Districts
Special assessment district examples include:
Transportation and Infrastructure Districts
Transportation and infrastructure districts are created to fund and support improvements related to public transportation systems, roads, bridges, and other essential infrastructure.
Seattle leveraged this process to construct the South Lake Union Streetcar Project to connect the popular residential district to downtown with a 2.6-mile streetcar line that featured 11 stops and a maintenance facility, all financed by assessments on property owners that varied from 1 percent to 8 percent, depending on their proximity to the line.
Stormwater and Drainage Districts
Stormwater and drainage districts are designed to address issues related to flood control, drainage systems, and stormwater management. These districts are often formed in areas prone to flooding or with inadequate drainage infrastructure. The assessments collected within these districts are used to fund projects that manage stormwater runoff. This may include the construction of retention ponds, culverts, or improved drainage systems.
Getting Started with eScribe
Two challenges that arise with special assessment districts are coordination and accountability.
Large cities can have hundreds of special assessment districts operating at any given time. Staff must coordinate with citizens, boards, contractors, and more to ensure the projects are completed as planned. The formation of special assessment districts also requires coordination between different city departments to meet local, state, and federal regulations.
The formation of nonprofit agencies to oversee ongoing special assessment districts also requires extra oversight to ensure they maintain accountability to taxpayers and regulators.
eScribe’s cloud-based meeting management software eases the burden for municipal employees overseeing these various special assessment districts. Staff can leverage eScribe features such as:
- Collaboration tools: Multiple participants can collaborate on documents and reports.
- Public engagement: Allows public comments and webcasting of meetings, along with live video streaming.
- Agenda and meeting management: Simplifies the creation of meeting agendas and materials.
- Minutes and voting: Captures meeting minutes, tracks action items, and manages electronic voting.
See how the City of Greensboro, N.C., replaced its cumbersome government management software with eScribe to handle its meeting coordination across multiple agencies.