TABLE OF CONTENTS
LIST OF FIGURES
10.1 Model Enabling Legislation
The special assessments are authorized in all 50 States either under explicit enabling legislation or by State constitutional provisions. The Center for Innovative Finance Support Value Capture website provides links to Federal, State, and local legislation that enables the use of different value capture strategies. Below are links to examples of Special Assessment State Statutes:
2019 California Code Streets and Highways Code ― SHC Division 10 ― The Improvement Bond Act of 1915, Part 12 - Redemption Fund Deficiencies, Section 8772; 20012002 SB1122 Sec. 3. (Adds) - Chaptered (Stats.2001 Ch.673); https://qcode.us/codes/glendora/view.php? topic=21-21_13-iv-21_13_220&frames=on
2005 California Public Utilities Code Sections 99000-99026 Chapter 1. Special Benefit Districts
District of Columbia-special assessment district
Idaho Statute, Title 50 Municipal Corporations; Chapter 31, Community Infrastructure District Act
2013 Mississippi Code Title 19 ― Counties and County Officers Chapter 31 - Public Improvement District §19-31-33 ― Benefit special assessments; maintenance special assessments; levy, collection, and enforcement; compensation of tax assessor and collector; installments; prepayment of benefit special assessments.
New Mexico Statute, Chapter 5 - Municipalities and Counties Article 17 ― Infrastructure Development Zone Act Section 5-17-29 - Special assessment; bonds; imposition.
This section contains sample legislation for creating a special assessment district and for levying a special assessment to fund an extension of a roadway or similar infrastructure. This sample language was drafted expressly for this primer. Readers are advised to check the requirements for legislation in their jurisdiction prior to using this sample language in any way.
___________________
[Sponsor & Co-Sponsors]
A BILL
[LEGISLATIVE BODY NAME]
To establish the _______________ Benefit Area; to authorize a special assessment on properties located within such area which are specially benefited by the construction of _[ proposed infrastructure facility ]_________ from __[ location ]____ to __[ location ] _; to authorize the __________ government to collect such assessments in the same manner as real property taxes; and to authorize revenues so collected to be used to pay for the costs of the construction of this ___________ along with __________, __________, and other essential elements of the public right-of-way.
BE IT ENACTED BY _[Legislative Body Name]__________, That this act may be cited as the “_________ Special Assessment Authorization Act of [YEAR]”.
Sec. 2. Definitions.
For the purposes of this act, the term:
(1) “Chief Financial Officer” or “CFO” means the Chief Financial Officer of _________ as established by § _______ of the __[jurisdiction]____ Code.
(2) _[“Council” / “Board” / “Commission” etc.]_ means the __[Full Name of Legislative Body]____.
(3) “_______” means the __[FULL NAME OF JURISDICTION].
(4) “General Obligation Bonds” means the General Obligation Bonds issued or to be issued by the [_jurisdiction_], the net proceeds in the amount of $___ of which shall be used to pay costs of the construction of ______________ from _________ to __________, and the debt service on which shall be the basis of calculation of the special assessment levied pursuant to section 5 of this act, and any general or special obligation bonds, notes or other obligations issued to refund such bonds or such refunding bonds, notes or other obligations.
(5) “Mayor” means the Mayor of _____________.
(6) “____________ Project” means the acquisition and construction of __________ from __________ to __________, along with stormwater systems, sidewalks, tree boxes, streetlights, traffic signals and other essential elements of the public right-of-way.
(7) “____________ Benefit Area” or “___BA” means the special assessment district established pursuant to section 4.
(8) “___BA Account” means the account established pursuant to section 6.
(9) “___BA Special Assessment Annual Collection Amount” means the amount established pursuant to section 5.
(10) “___BA Special Assessment Total Collection Amount” means the amount established pursuant to section 5.
(11) “Tax lot” means a tax lot as shown on the real property tax records of __________.
Sec. 3. Findings.
The [legislative body_]_ finds that:
(a) The development of property located on __[_legal description__]___________ will [benefit from / require ] __[ proposed infrastructure description ]_________. These properties are currently serviced only by __[ existing infrastructure description ]. These _[ existing facilities ]________ are not [appropriate / adequate / sufficient ] for _[description of essential infrastructure service]__.
(b) __[Other reason(s) why properties within the defined benefit assessment area will receive a special benefit from the provision of nearby infrastructure. ] . For this reason, the owners of these sites should contribute toward the initial construction of __[ proposed infrastructure ] .
(c) To effectuate the private sector contribution of approximately $_______ to construct this project, it is necessary to utilize the _[jurisdiction’s ]_________ authority to issue bonds and expend the proceeds thereof, and to establish a mechanism or mechanisms, such as a special assessment on property specially benefited by the construction of these ______________. Use of proceeds of the General Obligation Bonds should be a less costly means of effectuating the private-sector contribution than other means such as the issuance of special assessment revenue bonds.
(d) The value of certain real property on _[ legal description of the area within the benefit assessment area ] __ will be increased as a result of the construction of the __[ proposed infrastructure ] and other essential elements of the public right-of-way.
(e) For these reasons, the _[ legislative body ]___ finds that creating this benefit assessment area will ensure the fair and efficient collection of contributions from the owners of specially benefited property.
(f) It is necessary to the public safety and welfare that (1) the _[ jurisdiction ]___ assist in carrying out the ___BA Project, (2) a portion of the cost of this project be assessed against the lands specially benefited by it, and (3) the _[ jurisdiction ]_____ use the proceeds of the initial general obligation bonds to provide funds for the project in anticipation of the receipt of such special assessments.
(g) This act is being adopted following public notice and hearing at which persons interested in the ___BA Project and the levying of the special assessment were afforded the opportunity to present to the _[ legislative body ]___ oral and written testimony concerning these matters, and the _[ legislative body ]_ has considered the testimony and information presented at such hearing.
Sec. 4. Establishment of special assessment district.
There is hereby established the “________ Benefit Area,” (“___BA”) which shall encompass those tax lots on Squares ____, _____, _____, … and _____.
Sec.5. Levy of special assessment; protest; termination of levy.
(a) Commencing with real property tax year ____, there is hereby levied, for any period prior to the expiration of such special assessment during which such tax lot meets the criteria stated in this subsection (a), a special assessment upon each tax lot of real property located within the ___BA which
(1) is shown on the zoning map of the _[ jurisdiction ]__ as being located in a district that is zoned “_____________”; {this clause is used only if some properties within the benefit assessment area will be included or excluded because of certain zoning}
(2) is not exempt from real property tax; and
(3) at any time on or after January 1, _____, included a land area of at least ______ square feet. {This clause used only if a minimum lot size is required to participate in the special assessment.}
(b) The total amount of the assessment levied by this act shall be the Special Assessment Total Collection Amount determined in accordance with subsection (c) of this section. The annual amount of the assessment levied by this act shall be the Special Assessment Annual Collection Amount determined in accordance with subsection (c) of this section. The _[legislative body ]_hereby finds and determines that the properties upon which the special assessment is levied pursuant to this section are specially benefited by the construction of _[ the proposed infrastructure facility(ies) ]__ mentioned above in an amount not less than the special assessments determined pursuant to this act.
(c) Within 120 days after the effective date of this act, the CFO shall determine the total debt service projected to be paid on the initial General Obligation Bonds from their date of issuance through maturity, which shall constitute the Special Assessment Total Collection Amount; provided, however, that the Special Assessment Total Collection Amount shall be subject to adjustment after such initial determination if the CFO determines and certifies that the actual debt service payable on the initial General Obligation Bonds will be less than the amount so projected. The Special Assessment Annual Collection Amount shall be one-thirtieth of the Special Assessment Total Collection Amount.
(d) Within ___ days after the effective date of this act, the CFO shall determine the tax lots of real property which are subject to the special assessment pursuant to subsection (a) of this section, the total assessed value for _[jurisdiction]___ real property tax purposes of each such tax lot, and the aggregate total assessed value for _[jurisdiction]_ real property tax purposes of all such tax lots, all based on the assessed land value for each such tax lot as of the valuation date applicable for tax year ____.
(e) Within ___ days after the effective date of this act, the CFO shall determine the Special Assessment Factor, which shall be the factor obtained by dividing the Special Assessment Annual Collection Amount by the aggregate total assessed value determined under subsection (d) of this section; provided, however, that the CFO may increase the Special Assessment Factor at any time but only by the amount that the CFO determines shall be necessary to ensure that special assessments hereunder shall be at least equal to the Special Assessment Annual Collection Amount in each year. The special assessment applicable to each tax lot shall be the amount derived by multiplying the Special Assessment Factor by the total assessed value of each tax lot as of the effective date of this act or, for any tax lot which becomes subject to the special assessment levied hereby after the effective date of this act, the date on which such tax lot becomes so subject. Each such special assessment shall be made part of the public record.
(f)(i) Within ___ days after the effective date of this act, the CFO shall give notice of special assessment, stating the amount of the proposed special assessment and the procedure for any protest with respect to the assessment, to the owner (as shown on the real property tax records of the _[ jurisdiction ]_) of each tax lot of real property which is subject to the special assessment pursuant to subsection (a) of this section as of the effective date of this act.
(ii) The CFO shall give notice of special assessment, stating the amount of the proposed special assessment and the procedure for any protest with respect to the assessment, to the owner (as shown on the real property tax records of the _[jurisdiction]_) of each tax lot of real property which becomes subject to the special assessment pursuant to subsection (a) of this section subsequent to the effective date of this act, promptly following the change which causes such tax lot to become so subject.
(g) The amount of any special assessment levied by this act on any tax lot shall be subject to protest by the owner by filing, within 30 days after notice of assessment, with the _[ Real Property Assessment Appeals body ] on a form prescribed by the [body]. Such protest shall be reviewed by the [body] in accordance with the procedures set forth in [jurisdiction] Code § _-____. Every decision filed by the [body] shall be maintained by the [body] and shall be made available for examination and photocopying at cost to any requestor.
(h) Special assessments levied by this act shall be collected at the same time and in the same manner as the _[jurisdiction]_ real property taxes are collected from time to time.
(i) Unpaid special assessments levied by this act shall give rise to a lien therefore, which shall attach to the real property in the same manner and with the same priority, and be collected under the same authority and remedies, including sale of the property, as with respect to _[jurisdiction]_ real property taxes, except that the lien of such unpaid special assessments shall be junior to the lien only of the unpaid real property taxes.
(j) The levy of special assessments by this act shall terminate on the date on which the Special Assessment Total Collection Amount has been received by the _[jurisdiction]_, as certified by the CFO to the Mayor pursuant to section 6.
Sec. 6. Application of assessment.
The CFO shall establish the ___BA Account within the General Fund for the deposit and application of special assessment revenues from the ___BA. Monies held or to be held in ___BA Account shall be used to pay the principal of and interest on the General Obligation Bonds or any other then-outstanding _[jurisdiction]_ general obligation bonds. When the total aggregate deposits into the ___BA Account are equal to the Special Assessment Total Collection Amount, the CFO shall so certify to the Mayor.
Sec. 7. Regulations.
The CFO may adopt any regulations it deems necessary to carry out the purpose and intended effect of this act.
Sec. 8. Fiscal impact statement.
The _[ legislative body ]_ adopts the fiscal impact statement in the committee report as the fiscal impact statement required by section ______of the _____ Act. {Not all jurisdictions require fiscal impact statements.}
Sec. 9. Effective date.
This act shall take effect following approval by the Mayor (or in the event of veto by the Mayor, override of the veto by the _[ legislative body]_), and publication in the _[jurisdiction]_ Register.
Section 7 (p. 27 or 36/68) provides examples of special assessments. Each of these examples has extensive footnotes that contain links to the project site and/or articles about them. A LID is a funding tool governed by State law, by which property owners pay to help fund the costs of public improvements that directly benefit their property. For the Waterfront LID, property owners will contribute to a portion of the improvement costs based on the “special benefit” they will receive from those improvements.
In January 2019, Council passed, and Mayor Durkan signed into law an ordinance officially forming the Waterfront LID. This ordinance commits the City not to exceed $160 million in LID funding, plus the amounts necessary to pay the costs of financing.
The LID is a key component of the Waterfront Seattle Program funding plan, along with City and State funding and private philanthropy. A LID was included in the Waterfront Strategic Plan and approved by Council in 2012. Below are major milestones:
GOVERNMENT OF THE DISTRICT OF COLUMBIA
DISTRICT DEPARTMENT OF TRANSPORTATION
Office of the Director
June 16, 2003
Frank Miles
Project Executive
General Services Administration
Property development Division
Room 2002 (WPC)
Washington, DC 20407
Dear Mr. Miles:
The Deputy Mayor for Planning and Economic Development has requested that I write you about the District’s position regarding payments for the construction, operation and maintenance of new streets in the vicinity of the new headquarters building for the Bureau of Alcohol Tobacco and Firearms. As you may already know, the District has no legal obligation to build new streets surrounding your development on square 710, nor has it budgeted any funds for doing so.
It is our position that if GSA funds the design and construction of streets surrounding its property in accordance with standards and specifications accepted by the District Department of Transportation (DDOT), DDOT will agree to operate and maintain these streets in perpetuity. The streets GSA would design and construct are 2nd Street, NE from Florida Avenue south to its intersection with N Street, NE and N Street, NE from 1st Street NE east to its intersection with 2nd Street, NE.
It is DDOT practice to get private interests to pay for improvements to public rights of way where these improvements are necessitated by and serve the interests of private development. Last year, DDOT refused to give approval for the development of the Field School along Foxhall Road unless the school paid for the creation of a turn lane and turn signal. DDOT also negotiated to get the Washington Hospital Center to pay for new traffic signals and turning lanes associated with traffic that will be generated by their expansion plan.
Below is information from DDOT engineers about estimated costs for street design and construction.
New Construction of Streets Surrounding Square 710:
Assuming that N Street between 1st & 2nd Streets, NE is equivalent to two blocks in length, then the approximate cost of design and construction of this street and an extension of 2nd Street from Florida Avenue, NE to N Street, NE would be about $750,000.
Thank you for your considering our views. Please feel free to contact my assistant, Rick Rybeck, Deputy Administrator for Transportation Policy and Planning if you have any questions. Mr. Rybeck can be reached at 671-2325.
Sincerely,
Dan Tangherlini
DT:rr,cc
cc Eric Price
Andrew Altman
Michelle Pourciau
Ken Laden
Private Developer to Build $20 Million Va. Metro Station
Public-Private Partnership is Lauded
Passenger Transport: The Weekly Newspaper of the Transit Industry
Volume 53, Number 47
November 27, 1995
By Joe Dougherty, Senior Editor
Alexandria, VA — In what officials cite has a classic example of a transit public-private partnership, the Washington Metropolitan Area Transit Authority and the RF&P Corporation on November 16 agreed on a plan in which the commercial real estate company will design and build a new $20 million station along WMATA’s Metrorail line.
The agreement, signed on the Potomac Yard property where the new station will be built, marks the first time ever that a private corporation has underwritten the design and construction of a transit rail station. It is also the first time a station has been added to an existing transit system between currently operating stations, officials said.
“This is a historic day for WMATA and for transportation in the United States,” said general manager Lawrence Reuter, who joined the members of the Arlington, Alexandria, and Fairfax, Virginia, Washington, and Virginia governments at the signing. “This is where good business and good public policy benefits everyone.”
Virginia Lieutenant Governor Donald Beyer, speaking above the rumble of a passing Metrorail train, applauded the agreement, saying “It will have a ripple effect. The station will serve families and companies, and it will lead to more growth.”
The new station will be built between the National Airport and Braddock Road stations along Metrorail’s Blue and Yellow lines on the grounds of Potomac Yard, formerly one of the nation’s largest railway freight yards. Real yard operations ceased there in 1994. Under the contract, RF&P will pay for the station design and construction costs, estimated at $20 million, and WMATA will operate and maintain it.
Richmond-based RF&P, which owns the 342-acre site that spans Arlington County and the city of Alexandria, plans to build a 16-million-square-foot, mixed-use development that will include more than 5,000 housing units along with office and retail uses.
The new station will serve as one of the northern Virginia’s biggest transportation hubs, as Metro’s Yellow and Blue lines will join with Amtrak, Virginia Railway Express commuter rail, Metrobus, taxi, and pedestrian and bicycle paths. Nearly 15,000 commuters are expected to use the station each day when it is fully operational.
WMATA is expected to see increases in off-peak direction ridership and off-peak hour, weekend, and holiday ridership as commuters use the station to go to neighboring Crystal City and downtown Washington.
“The Potomac Yard Metro Station will benefit our nearby neighbors, the larger surrounding communities, the environment, the Metro authority, and RF&P,” said Denton Kent, RF&P’s president and chief executive officer. “The station allows the integration of mass transit in the development in a rational and efficient fashion.”
U.S. Deputy Transportation Secretary Mort Downey said the Metrorail system has been a critical element in shaping the Washington region. “This is the latest step in the process,” he said. “It’s a destination that will be served by a variety of efficient and environmentally friendly transportation alternatives. It sets a new benchmark for transportation.”
Reuter said that, in today’s budget environment, transit general managers realize funding is tight, but that ridership is nonetheless expected to grow. “Partnerships like this one today accomplish both those goals.”
Alexandria Mayor Patricia Ticer said the “public sector private sector and the community will benefit” from the new agreement. “This project, in the shadow of the nation’s capital, is the best example of the ability of the public and private interest cooperate for the benefit of the public good.”
Plans call for the project to advance in three phases, with Phase I providing for environmental assessments and general planned development, beginning in January 1996. Phase II, which is scheduled to begin in January 1997, includes design work, while Phase III will include construction. Officials said the station is scheduled to open in March 2000.
Assessed Value: The dollar value assigned to a property for the purposes of measuring applicable taxes. There are three primary methods for determining assessed value:
Assessed value multiplied by a tax rate determines the tax liability for a property. Determination of the assessed value of a property is an administrative function. Setting tax rates is a political function.
Authorizing/Enabling Legislation: State-level legislation that authorizes/enables a subordinate jurisdiction (county, parish, township, city, etc.) to levy a special assessment. This legislation will provide substantive and procedural requirements for establishing special assessments.
Benefit (general): The typical level of benefit that accrues to properties throughout a jurisdiction from a particular public facility or service. For example, a new highway might reduce traffic congestion, speed up freight deliveries, and reduce the price of goods throughout a jurisdiction.
Benefit (special): A specific and direct benefit that accrues to some properties as a result of their proximity (in distance or time) to a particular public facility or service. For example, while a new highway might benefit all properties generally, those properties closest to highway interchanges obtain even more value from the highway (due to easier access), and this would be reflected in higher property values as a result.
Bond: A certificate that acknowledges the indebtedness of the bond issuer to the holder. The holder of the bond is the lender (creditor), and the issuer of the bond is the borrower (debtor).
Excise Tax: This is a tax levied against the quantity of a good purchased or sold. A per gallon tax on motor fuel, for example, depends solely on the amount of fuel sold. Fluctuations in the price of motor fuel do not lead to changes in revenue as long as the amount sold remains constant. (This is in contrast to a sales tax, which is levied against the price of the good sold.)
Fee: This is a charge for a good or service. It is similar to a “price,” in that the consumer is either paying for a direct benefit received from the government or compensating the government for an expense incurred because of or on behalf of the person or entity paying the fee. Fees are distinguished from “taxes” because there is no direct relationship between the payment of a tax and the receipt of benefits (or compensation for costs incurred). Most people pay for water with a per-gallon fee for the operation of a municipal water purification plant. The more water you use, the more you pay. Many people also pay property taxes, some of which might be used to fund capital expenses for the water authority. This is a tax and not a fee because payment is unrelated to the utilization of municipal water. However, the land value portion of the property tax is more like a fee, because access to municipal water (and other infrastructure amenities) enhances the value of land. So the part of the property tax applied to land values is more like a fee and the part applied to building values is more like a tax.
Fee Rate: The means for determining the amount of a special assessment. A “fee rate” could be expressed as a “cost per front foot” or as a “rate (percentage) applied to property value.”
Fee Schedule: An adopted and published fixed-fee for defined public services such as water main and sewer main hookups, curb cut installation, or zoning changes requested by the property owner.
Front Foot: A measure of distance along the side of a property that faces a street. Distance is one of the primary cost variables in many types of infrastructure projects (sidewalks, streets, utility lines, etc.) The length of an infrastructure facility segment constructed along one or more sides of a property is expressed in “front feet.”
Implementing Ordinance: Legislation that establishes a special assessment to fund a particular infrastructure project. This legislation must satisfy the substantive and procedural requirements provided in the applicable State’s authorizing legislation.
Land Value Uplift: The increase in land value caused by the creation or improvement in nearby infrastructure. As mentioned in the report, even the expectation of infrastructure improvement has led to land value uplift prior to the commencement of improvement activities.
Site Value: Land value. This term emphasizes that land value is related to the location of the site and not merely to the value of dirt.
Special Assessment: A fee imposed on properties that receive a special (specific and direct) benefit from a particular public facility or service.
Tax: This is a charge owed to a government. However, payment of a tax bears no direct relationship to any particular benefit received or costs incurred. Instead, taxes represent a payment for general and possibly indirect benefits Most people pay for water with a per-gallon fee for the operation of a municipal water purification plant. The more water you use, the more you pay. Many people also pay property taxes, some of which might be used to fund capital expenses for the water authority. This is a tax and not a fee because payment is unrelated to the utilization of municipal water. However, the land value portion of the property tax is more like a fee, because access to municipal water (and other infrastructure amenities) enhances the value of land. So the part of the property tax applied to land values is more like a fee and the part applied to building values is more like a tax.
Tax Levy: The amount of taxes to be collected by a jurisdiction.
Tax Liability: The amount of taxes owed on a property.
Tax Rate: Percentage or fixed dollar amount which is used to determine how much tax is owed. Tax rate is expressed in terms of dollars per $100 or $1,000 of assessed value. For a property with an AV of $100,000 at a tax rate of $1.00 the following equation would be used: $100,000/$1,000 x $1.00 = $100 tax liability.
Tax Increment Financing (TIF): A technique for funding an infrastructure project without allocating existing revenues or raising new taxes. An assumption is made that “but for” an infrastructure project, tax revenues in a defined location would remain constant. Tax revenues are measured and benchmarked at this “pre-project” level. If TIF legislation is enacted, any future increase in tax revenues above the benchmarked level within the defined location is deposited into a special account dedicated to the funding of the infrastructure project. An important feature of most TIFs is that the public pays the same taxes regardless of whether a TIF exists or not. For this reason, the author refers to TIF as “revenue segregation” rather than as “value capture.”
Uniformity: The legal requirement that all taxpayers or taxable property in the same circumstances and conditions should be treated the same.
Value Capture: When infrastructure is well-designed and well-executed, it tends to increase the value of nearby property. “Value capture” describes several techniques that return a share of infrastructure-created value to the public sector that created it.
FHWA. “Special Assessments: An Introduction.” http://www.fhwa.dot.gov/ipd/fact_sheets/value_cap_special_assessments.aspx
FHWA. (2019). “Value Capture Implementation Manual.” Section 6.1. https://www.fhwa.dot.gov/ipd/value_capture/resources/value_capture_resources/value_capture_implementation_manual/ch_6.aspx#6_1
Lough, J.P. (2001). “Basics of Special Benefit Assessments.” https://www.cacities.org/Resources-Documents/Member-Engagement/Professional-Departments/City-Attorneys/Library/2002/2-2001-Cont-Ed;-Lough-Basics-of-Special-Benefit-As
National Academies of Sciences, Engineering, and Medicine. (2016). Guide to Value Capture Financing for Public Transportation Projects. TCRP Report 190, Washington, DC: The National Academies Press. https://doi.org/10.17226/23682.
Rybeck, R. (2018). “Financing Infrastructure With Value Capture: The Good, The Bad & The Ugly.” https://www.strongtowns.org/journal/2018/2/20/financing-infrastructure-with-value-capture-the-good-the-bad-the-ugly/
Rybeck, R. (2004). “Using Value Capture to Finance Infrastructure and Encourage Compact Development,” Public Works Management & Policy Journal, 8(4), pp. 249–260.
Vidali, S., et al. “Guidebook to Funding Transportation Through Land Value Return and Recycling.” NCHRP Report 873. http://www.trb.org/Main/Blurbs/177574.aspx
Zhao, Z., Iacono, M.J., Adeel, L., Levinson, D.M. (2012). “Value Capture for Transportation Finance.” University of Minnesota Digital Conservancy. http://hdl.handle.net/11299/180019
Thay Bishop
Senior Program Advisor
Center Innovative Finance Support
Office of Innovative Program Delivery
Federal Highway Administration
U.S. Department of Transportation
1200 New Jersey Avenue, S.E.
Washington, DC 20590
Tel: 404-562-3695
E-mail: thay.bishop@dot.gov
