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6. Legal and Regulatory Issues

Definititions:

A Special Assessment is NOT a Tax!

A “tax” is a compulsory payment required from “individuals, businesses or property to support and carry on the legitimate functions of the government.”

A tax can be levied "without reference to peculiar benefits to particular individuals or property." Indeed, "[n]othing is more familiar in taxation than the imposition of a tax upon a class or upon individuals who enjoy no direct benefit from its expenditure, and who are not responsible for the condition to be remedied.“ — U.S. Supreme Court, Carmichael v. Southern Coal Co. (1937)

A Special Assessment IS a Fee

A “fee” is also a compulsory payment required from individuals, businesses or property. Unlike a tax, a fee is compensation for particular services or facilities.

A special assessment is a type of fee levied against real property particularly and directly benefited by a local improvement in order to pay the cost of that improvement.

The rationale of special assessment is that the assessed property has received a special benefit over and above that received by the general public.

The general public should not be required to pay for special benefits for the few, and the few specially benefited should not be subsidized by the general public.

Ensuring Appropriate Legal Authority

States can levy special assessments and they can delegate this power to subordinate levels of government by statute.

Check The State’s Special Assessment Enabling Statute:

• Does it apply to your jurisdiction?
• What are the substantive requirements?
• What are the procedural requirements?

Key Legal Issues

Uniformity

• All people and property in the same situation are treated the same.
• Special assessments treat some properties differently than others.
  • OK if community establishes justification for different treatment.

Due Process

• Prior to having a mandatory fee imposed, affected property owners are provided with
  • Notice of the proposed project and associated fees
  • Opportunity to comment in support or opposition

Surviving Legal Challenges

• Jurisdictions proposing special assessments will document that:
  • Substantive and procedural requirements of the special assessment enabling legislation have been satisfied;
  • A methodology was selected to accurately and fairly ascertain which properties benefit and which ones don’t;
  • This methodology identified properties receiving special benefits and this justifies their liability for a special assessment fee;
  • A relationship exists between the benefits received and the fees imposed;
  • The method for apportioning costs among the properties receiving special benefits is fair; and
  • Fees collected will be applied to the services or facilities conferring the benefit and will not exceed actual costs.

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