Sunday, 22 October 2017

What Are Special Improvement Districts, And How Do They Affect Homeowners?

Written by Posted On Friday, 03 February 2017 20:37
Hart Real Estate Solutions Hart Real Estate Solutions

There are a few aspects of real estate that may be somewhat complex, or not fully understood by the typical homeowner. Special Improvement Districts (SIDs) are one of those terms that you hear about in real estate and may have some questions about. This article will attempt to answer some of the main questions or concerns you may have about SIDs.

What Are Special Improvement Districts?

Special Improvement Districts are zones where property owners support funding for services that typically enhance the economy in that area. Special Districts were devised for a fair way to pay for public improvements. Rather than taxing the entire jurisdictional boundary of a city, Special Improvement Districts obtain funding by only the homeowners who benefit from the improvement projects.

SIDs are commonly used in downtown areas to support economic enhancement with improvements such as roadways, water and sewage pipes, lights, traffic control, and parking. The range of services authorized for SID funding varies among states. Montana, for example, does not authorize SIDs for funding civic buildings, schools, police and fire facilities, pedestrian malls, child care facilities, and a few other uses.

How Much Does The Homeowner Pay?

Taxes are levied on property owners within a SID zone on an annual basis. The amount you pay is determined by the combination of the front footage and assessed value of your property. Below is the typical calculation used to estimate an SID tax.  

Front Footage Calculation = (Your Front Footage / Total Front Footage of SID) X SID Budget

Property Value Calculation = (Your Property Value / Total Property Value of SID) X SID Budget

Total Estimated SID Tax = (25%*Front Footage Calculation) + (75%*Assessed Value Calculation)

What Are The Benefits of Special Improvement Districts?

Special Improvement Districts are claimed to be an effective and fair solution to certain public improvements. The National Association of Home Builders (NAHB) say that Special Districts have several advantages for homeowners, including:

1) Long Term Financing
—a typical term for a Special District may last from 20 to 40 years.

2) Additional Amenities—Projects may utilize Special Districts to enhance public trails, landscaping, and parks that may not otherwise been feasible. These enhancements also create value for the community, and value of the homeowner’s property.

3) Advanced Construction—With Special Districts providing financing that would otherwise not be available, developers can implement improvements and move forward with construction at a faster rate.

4) Reduced HOA dues—Special Districts may fund for operations and maintenance expenses, which would lower Homeowner’s Association dues. Operations and maintenance expenses are tax deductible, which is another economic benefit of Special Districts.

5) Return on Investment—Special Districts are designed for the improvements to pay for themselves, without burdening residents outside of the boundary.

Related Articles:

Valuable Lessons for First-Time Homebuyers

5 Steps Toward Buying A Home

5 Tips For A Winter Market


An Overview of Special Purpose Taxing Districts


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Tim Hart


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