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3. Establishment

Establishing a Special Assessment

1. Special Benefits?
   Enabling legislation?
2. Identifying properties
   Defining boundaries
3. Defining exclusions
4. Fee basis: Cost or Benefit?
   Schedule or rate ?
5. Termination date
6. Enact Legislation or Ordinance

1. DOES PROJECT CREATE A SPECIAL BENEFIT? IF SO, IS THERESTATE ENABLING LEGISLATION?

• Does a capital project create a special benefit for one or moreproperties that is not generally available to all properties in thejurisdiction?
• “Special assessments are authorized in all 50 States, the District ofColumbia and Puerto Rico, either under explicit enabling legislation orby State constitutional provisions.”
• However, are special assessments authorized for the level ofgovernment undertaking the project?

2 Identifying the properties receiving a special benefit;

New or improved infrastructure provides special benefits to nearby properties. Typically, access to transportation infrastructure creates higher land values.

• Typically, being close to a highway does not create a benefit. It’ access to the highway (via an interchange) that creates a benefit.
• Typically, the intensity of the benefit diminishes with distance from theinterchange.
• But some properties might not benefit, despite proximity.
  • Residences near an airport beneath the flight path
  • Industrial property near a municipal parking garage.

2. Defining a District Boundary

EXAMPLE: Route 17 Special Tax District

Figure source: A. Moruza, A Guide to Transportation Funding Options Available to Virginia Jurisdictions, 2019.

Real estate professionals can be helpful in determining the geographic extent of project benefits.

The Route 17 Special Tax District was created to pay the debt service for road improvements and to foster economic development in a portion of the City of Suffolk in Virginia. The special assessment rate was $0.25 per $100 of assessed value in FY16.

EXAMPLE: Homer, Alaska

Image source: City of Homer, AK

The City of Homer, Alaska, established a boundary for a new special assessment district for the extension of water and sewer lines. The district consists of properties serviced by the extensions.

3. Defining any exclusions of properties within the district

Separate Beneficiaries from Non-Beneficiaries

Example: Municipal Parking Facility

• Retail establishments within walking distance will get the mostbenefit from this facility.
• Residential and industrial land uses will likely receive no benefit.Therefore, these properties might be exempted from liability forthe special assessment, even if they are in close proximity to thefacility and within its geographic benefit zone or district.

4. Defining the basis for the fee; Establishing the fee as a schedule or rate

A. Fixed cost (fee schedule) for standard activity?

• Water & sewer hookups:

B. Variable cost for standard activity?

• Water & sewer extensions, sidewalk creation, newstreet construction:

C. Variable Benefit Based Upon:

• Relationship of Infrastructure & Land Use
• Distance from Infrastructure Defining

5. Establishing a termination date for the special assessment.

If a special assessment is established to fund a capital project, termination is typically determined to be the date when specified capital costs (such as payment of debt service on a bond) have been completed.

Alternatively, if the special assessment funds ongoing operating costs, there might be a sunset or termination date with an option for renewal.

6. NOTIFYING THE PUBLIC & ADOPTING AN ORDINANCE

Hearings are held to obtain input from the affected public. Interested persons are provided an opportunity to support, oppose or suggest changes to the proposed SAD legislation.

State enabling legislation will provide substantive and procedural requirements for local legislation to implement a SAD.

 

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