or special taxes for the construction costs associated with
<br /> new growth. However, depending on the financing mecha-
<br /> nism used to fund construction, homeowners may pay a
<br /> good portion of the construction costs in the form of annual
<br /> debt service on assessment district or community facilities
<br /> district bonds.
<br /> Over time, the majority of charges for operation and
<br /> maintenance are paid by the homeowners. Consequently,
<br /> developers' requests for city-assisted funding should be con-
<br /> sidered carefully to balance the financial burdens of present
<br /> and future homeowners.
<br /> Developers may also be charged fees through the map
<br /> acts used in each state to govern developer subdivisi6ns.
<br /> Map acts commonly establish areas of benefit to fund con-
<br /> struction of drainage and sewage facilities, major thorough-
<br /> fares and bridges. Local ordinances can be adopted that
<br /> would require fees to be paid as a condition of map approval
<br /> or building permit issuance for any parcel located within
<br /> the area benefited by the proposed project.
<br />
<br /> THE DISADVANTAGES
<br /> Developer impact fees and subdivision fees have two sig-
<br /> nificant disadvantages. First, fees are not due until develop-
<br /> ment occurs. As a result, cities cannot use the fees to con-
<br /> struct the capital improvements prior to or in conjunction
<br /> with the development.
<br /> Second, pre-existing development may not be charged,
<br /> and new development can only be charged for future impact
<br /> to infrastructure. Therefore, only a portion of a city's
<br /> improvements can be funded through the fee program.
<br /> It can be difficult to gauge when, or even if, the money
<br />will become available to construct a proposed facility with-
<br />in the time frame in which it wilt be needed.
<br /> Therefore, assessment districts and community facilities
<br />districts providing the capability for bonding are often used
<br />in conjunction with fee programs. This allows the city
<br />council to bond for the set amount of the developer impact
<br />fee and receive all funding up front for a proposed project
<br />-- even when all the developer fees have not yet been paid.
<br />
<br />SPECIAL ASSESSMENT DISTRICTS
<br />Special assessment districts, as provided through most
<br />states' enabling legislation, allow a public agency to con-
<br />struct and maintain improvements such as street landscap-
<br />ing, street lighting, traffic signals and parks and recreation.
<br />Project costs are assessed within the boundaries of the desig-
<br />nated benefit area of the county or city. Then, the overall
<br />cost of the project is weighed against the individual proper-
<br />ties within the benefit area to determine the benefit each
<br />area or parcel will receive from the public improvement.
<br /> With this traditional financing tool, a property owner
<br />can either pay the assessment amount in cash or allow a
<br />lien to be placed on his property in the amount of the bene-
<br />fit assessment. Then, he can submit payments over a prede-
<br />termined 10- to 20-year period to pay for the bonds issued
<br />to finance the improvement. Since these are municipal
<br />bonds and payable over a period of many years, financing
<br />the lien is usually an advantage for property owners.
<br />
<br /> Most states allow property owners to initiate these pro-
<br />ceedings via a petition within the boundaries of the pro-
<br />posed assessment district, or else the city council can begin
<br />the proceedings. Either way, districts are formed through a
<br />process that usually involves mailing notices to all affected
<br />property owners, holding public meetings and hearings con-
<br />ducted by the city council and considering the percentage
<br />of those in opposition to the district.
<br /> In addition to using assessment districts to fund capital
<br />improvement, cities have relied on this method to finance
<br />ongoing maintenance and operation of improvements
<br />through the annual tax of a benefit assessment amount. In
<br />some states, this assessment is paid at the same time and in
<br />the same fashion as property taxes. In others, the public
<br />agency that authorized the assessment bills it separately.
<br />
<br />COMMUNITY FACILITIES DISTRICTS
<br />Similarly, legislation on community facilities districts
<br />allows some states to form districts to finance various facili-
<br />ties through special taxes against the area where the pro-
<br />posed services or facilities are to be provided.
<br /> Community facilities districts cover a broader range of
<br />public improvements and facilities than do assessment,dis-
<br />tricts. Projects may include the purchase, construction,
<br />expansion or rehabilitation of governmental facilities the
<br />city is authorized to construct, own or operate. Community
<br />facilities districts can even be used to fund private improve-
<br />ments in some cases, such as when seismic, fire safety or
<br />hazardous waste standards must be met.
<br /> Also, funds can be used for police and fire protection,
<br />ambulances, recreation, library services, parkways mainte-
<br /> nance, flood control and storm drain
<br /> maintenance.
<br /> Usually, formation of a community
<br /> facilities district requires a public
<br /> hearing and a favorable two-thirds
<br /> vote of registered voters who live
<br /> within the proposed district. Howev-
<br /> er, these districts are most often used
<br /> by developers who are single owners
<br /> of large sites that require a substantial
<br /> investment in infrastructure. After the
<br /> district is formed, the city council typ-
<br /> ically is required to hold an annual
<br /> public hearing to authorize the special
<br /> tax to be levied on the properties.
<br /> This type of hearing is not required for
<br /> assessment districts.
<br />
<br /> TAX INCP~EMENT
<br /> FINANCING
<br /> On another level, if a city has a
<br />built-out area in need of reconstruc-
<br />tion, it can use tax increment financ-
<br />ing (either by itself or in conjunction
<br />with a private partnership), often
<br />through a redevelopment agency
<br />process.
<br /> With this approach, the redevelop.
<br />ment agency can collect the tax incre-
<br />
<br />
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