Legal Requirements Associated With the Creation of Special Service Districts

Resource Government
September 6, 2012 — 1,159 views  
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Government officials concerned about the lack of certain services in specific geographical areas may consider working with residents in the area to create a special service district. However, legal concerns related to financing these projects need to be thoroughly understood prior to the creation of a special service district.

What Is a Special Service District?

A special service district is an organization created by people living in a particular geographical location for the purpose of creating and financing a public project. While these districts are defined geographically, special service districts are not cities or municipalities. Instead, they are organizations specifically geared toward providing a service for people that live in a city or municipality. Since city boundaries do not define the area that requires special services, the entire city does not need to be part of a special service district.

Reasons to Create a Special Service District

Special service districts are established when there is a need in the community for a service that is not being provided by the local government. For example, the residents living on a neighborhood block that is without streetlights may want to research how to form a special service district in order to gain funding for the installation of streetlights for safety purposes.

Common Legal Concerns Related to Special Service Districts

The financing for a special service district is typically collected as a service charge. Residents living in the district will be assessed this charge for the benefit of utilizing the service that is being provided. These fees are known as enterprise fees because money is directly being paid for the use of a good or service. For example, a resident that pays fees for water and sewer based on usage is being assessed an enterprise fee because the charge is directly related to the amount of these utilities that they are using.

Non-enterprise services are those that are funded through the use of a tax. Property tax is the most common method of financing for non-enterprise special services such as police protection.

Government officials working on creating a special service district should be aware that the residents in such a district must be informed of any raise in taxes or assessment of fees that would result from the creation of the district. Residents in the district may also be entitled to vote on whether or not they are willing to accept the assessment of fees or an increase in tax rates.

Resource Government