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Transportation Funding & Financing

Special Assessment Districts

A special assessment district or dependent financing district is a traditional method of privately financing local improvements. Special assessments are authorized in all 50 states either under explicit enabling legislation or under state constitutional provisions. Virtually all special assessment districts require some type of landowner or voter approval of inclusion in the districts. The major limitation on special assessments is that they can be used only to finance facilities that provide local benefits. They cannot be used to finance facilities that provide general, community-wide benefits. This requirement makes the implementation of special assessments for specific purposes much more complex as well as more legally difficult to institute than general-purpose taxes. In recent years, there has been some liberalization of this policy, but in most areas, it has not been significant enough to make special assessments a viable alternative to fund major components of the highway system.

In general, the greatest problem in using special districts to finance roads is that, because the highway system is an open system, it is difficult to establish a district that includes all those who benefit from a road, while excluding those who do not benefit-except for small-scale local roads. As such problems do not exist with closed systems (like water and sewer systems), special districts are most successful in financing such facilities.

In many states, legislatures have passed new enabling legislation that allows special districts to be used to finance a broader range of facilities than in the past. These districts often go by such names as improvement districts, road districts, metropolitan districts, and building authorities. In most cases, the districts serve the same general purpose as the traditional special assessment district, but they often are not limited to the use of assessments on property, such as front footage charges or acreage fees.

Resources

Special Assessment Legislation

Case Study: New York Avenue-Florida Avenue-Galludet University Metro station - Washington DC
(PDF 118 KB)