Considerations for Utilizing Special Assessments for Improvements

Special assessments are a commonly used tool to finance the construction of improvements in parts of the country. The basic idea is that the cost of improvements is assigned to the individual properties that benefit and in relation to how much benefit is received. In other words, when a new water pipeline is installed along a roadway, all of the properties that connect to the pipe are assigned a proportionate share of the cost of the installation as it relates to how they benefit from the new pipe itself. These benefits may include connection, size, number, or length, which the community determines best. Special assessments are often seen as the most equitable way to share in costs of improvement, as those who do not benefit directly (or even indirectly in some cases) from that improvement do not carry the associated costs.

While special assessments may be the most equitable way to spread costs to users, as opposed to general taxes or communitywide utility rates, that does not mean special assessments are the most affordable way to share costs. Special assessments do not generally take affordability into consideration when determining how users pay for the critical improvements. In some instances, users do not have the opportunity to contribute to the decision of whether the improvement should be constructed or not.  

As policy makers look for ways to improve affordability across their system, one area that will likely carry a larger focus is how special assessments are addressed. Using the newer approaches for gauging affordability can help policy makers understand the impact that the special assessments may have on neighborhoods. Some of these approaches include comparing rates to poverty levels, the number of low-income households, and the impact of increased bills within a proposed special assessment district.

If special assessments are determined to be too burdensome to a particular area, policy makers may need to consider other funding sources for critical infrastructure to improve the affordability of projects.

Reach out to Ryan Graf with questions on special assessments.