What Is a Special Assessment District?
A special assessment district (SAD) is a designated area where property owners pay for specific public improvements through additional property taxes. These additional property taxes are called special assessment taxes.
Special assessment districts may include any property that benefits from specific public improvements, including residential homes, rental properties, and commercial buildings.
Local governments create these districts to fund projects like road repairs, sewer installations, or sidewalks. Unlike general property taxes, which apply to the whole community, these assessments apply only to owners in the special assessment district.
How Special Assessment Districts Work
Local governments form special assessment districts through ordinances, petitions, or community votes. Once established, property owners in the district pay for the improvements. These costs appear as annual assessments on property tax bills. Property owners should receive a letter explaining the project, cost, and payment schedule.
Payments can be a one-time charge or spread over several years. If an owner doesn’t pay, the local government may place a lien on their property. This can lead to penalties, interest, or foreclosure.
Common Examples of Special Assessment Districts
Special assessment districts fund many types of improvements that directly benefit property owners.
Road improvement districts: Property owners share the cost of repaving streets, fixing potholes, and adding curbs and speed bumps.
Sewer and water service districts: Owners pay to install or upgrade sewer lines, water mains, and drainage systems.
Sidewalk and streetscape enhancement districts: Homeowners contribute to sidewalk construction, streetlights, and landscaping.
Business improvement districts (BIDs): Commercial property owners fund projects like decorative lighting, street furniture, and security to attract customers.
How Are Special Assessment Taxes Calculated
Special assessment taxes are usually calculated using one of two methods:
Equal share method: This method divides the total project cost equally among all affected properties, regardless of size or frontage. It’s straightforward and works best when all properties benefit from the improvement.
Frontage-based method: This method distributes the cost based on how much a property borders the improvement area. Properties with more street frontage pay more because they benefit more from the project.
A district repaves streets for $500,000, split among 100 properties:
Equal share method: Each owner pays $5,000. If spread over five years, that’s $1,000 per year.
Frontage-based method: If the cost is $100 per foot and a property has 200 feet of frontage, 200 feet × $100 per foot = $20,000
How Special Assessment Districts Affect Property Owners
Improvements funded by special assessment taxes can raise property values, but they also bring extra costs. Many governments offer payment plans to help ease the financial burden.
Property owners can appeal if they believe their special assessment tax is unfair. Common reasons for appeals include:
Errors in cost calculations
Incorrect property measurements
Outdated property data
If you think your special assessment tax is too high, you’ll need to gather evidence and file your appeal before the deadline.
Ownwell Can Help You Save
Are you facing a special assessment? Ownwell can review your assessment, find possible savings, and help you appeal unfair charges. Since 2021, we’ve won over 240,000 appeals.