What is a special assessment district?
A special assessment process is one way a township can assist taxpayers to fund the costs for certain types of public improvements under Michigan Public Act 188 of 1954 as amended. This act allows for the making of certain improvements to be paid by the issuance of bonds or the levying of taxes (or special assessments), assessed in whole or part against the property benefited. Furthermore, Public Improvements, Act 188 of 1954, as amended, MCL 41.721-738, Special Assessment defines "A special assessment is a charge against property for a public improvement that confers a special benefit to that property different from the benefit enjoyed by the general public.
Public improvements authorized by Public Act 188 of 1954, as amended (MCL 41.721). include:
• The construction, improvement, and maintenance of storm or sanitary systems, water systems, public roads, public parks, or private roads, sidewalk. bicycle paths, lighting systems.
• The collection and disposal of garbage and rubbish
• The eradication or control of aquatic weeds and plants
• The construction, improvement, and maintenance of a lake, pond, river, stream, lagoon, or other body of water or of an improvement to the body of water. This includes, but is not limited to, dredging.
Special Assessment District (SAD)
A SAD is a defined grouping of properties especially benefited by an improvement. While statute allows for a township to initiate a SAD, it is typically done by petition of the property owners in a designated area who wish to make an authorized improvement. The township then acts in an administrative capacity and establishes the district through a process of 3 public hearings:
1st hearing - to hear the request and/or objections for the SAD district/petitions/proposed improvement. If there is enough support to continue, the board adopts a resolution tentatively setting up the district. Those requesting the SAD need to provide cost estimates and detailed plans for the improvement no later than one week before the next hearing.
2nd hearing - to be held 30 days later - to establish the district, including a map to show which parcels are included; to instruct the assessor to calculate the tax roll with the dollar amounts for each parcel (based upon the provided cost estimates). Objections can be made at this hearing as well.
Objections can be made in writing (they should be delivered to the clerk 24 hours in advance of the hearing) or better yet, attend the meeting in person! It must be noted that if a property owner wishes to challenge the petitions, improvement, district and/or special assessment, they must have made an official protest at the appropriate public hearing outlined above.
3rd hearing - to be held 30 days later - to approve the roll as presented by the assessor.
All costs incurred by the township from the time of initial application through the duration of the special assessment and/or for as long as there remain any outstanding bonds issued to fund the improvement, are to be included in the final cost. Related costs include: administration (time and materials), engineering (design and inspection), construction (material and labor), consultation (financial, accounting and legal services).
There are several different methods commonly used to allocate or spread the costs for the improvement against those properties within the SAD, including: front foot, land area, site/lot, lot depth, value or a combination. The method used varies according to the nature of the improvement, the type and characteristics of the properties contained within the SAD. While front foot may be the simplest method, it may not be the most appropriate.
Paying the Special Assessment
Special assessments can be paid in full without interest at the time the assessment is first levied or may be paid in annual installments for a specified number of years, with the winter ad valor em property taxes, issued on December 1st.
Property exempt from taxation is frequently not exempt from special assessments. For example, property used for a charitable purpose may be tax-exempt, but property owners may still have to pay special assessments.
Assessments Can be Revised
If project costs exceed estimates, the law permits a township board to reassess the additional expenses, after notices and another public hearing. It is much easier to reduce estimates than increase them, so it is a good idea to estimate costs on the high side before the first public hearing. At the end of the SAD, if there is less than 5% surplus, the township may retain the surplus. If there is more than a 5 percent surplus (after all project costs are paid) property owners will be given a refund! However, before making a refund, all project costs must be carefully reviewed, and there may be future expenses related to the project in which case a fund balance should be retained to cover those costs.
Handling Billing and Payments
Except for police and fire special assessments, special assessments can be billed separately from the township’s tax bill, but for convenience and cost savings most townships bill special assessments with property taxes. Billing and collecting special assessments are statutory duties of the township treasurer. Some special assessments are imposed one year at a time, for the next year’s expenses. Each year, a new special assessment roll is prepared and reviewed by the township board at a public hearing. The special assessment is then billed on the December tax bill.
In ongoing SAD projects such as weed districts, lake associations often take the lead in finding the services needed for their lake. The lake association will either sign a contract directly with the service provider or sign a contract with the service provider and the township. If the lake association signs directly with a service provider, the lake association pays the service provider out of their own funds and then seeks reimbursement from the SAD. If the contract is brought to the township for approval and signature (and the the board approve it), payments may be made from the SAD account (held by the township) directly to the service provider. In both cases, payments follow the township board meetings and documentation of all transactions and treatments is required.
For a summary of Weed District/SAD process, click here
Aquatic Special Assessment Districts article by Attorney Clifford H. Bloom, click here.