Friday, February 18, 2011

Special Service Districts

As John’s post below shows, “Special taxing districts” are some of the fastest growing levy increases in recent years. Much of this is a response from local government to deal with increased demand for public services, deteriorated infrastructure, and plans for economic development, transportation, and safety. Much is also due to the ability for cities to utilize unique MN laws that allow for the creation of independent governmental units for defined areas “within the city where special services are rendered and the costs of the special services are paid from revenues collected from service charges imposed within that area.” (MN Statute 428(A)) These districts provide special services that are typically not provided by general-purpose governments (*note: these are different from special school district levies/taxes)

Local examples abound: the Metropolitan Mosquito Control District, Metropolitan Council (with 10% of its funding through property taxes), and recently examples of hyper-local Special Services District (SSDs) like the Minneapolis Downtown Improvement District (DID), which actually collects taxes and runs the district as a separate nonprofit organization - with its own private vendors, contractors, staff, and processes. See DID map at

In SSDs, a defined geographic area is assessed additional property taxes for services of their choosing – from entire neighborhoods to commercial corridors, to even specific street intersections. (the example below is the Riverview Theater intersection)

Minneapolis has 16 current districts in many neighborhoods. Many new areas (including Cedar Riverside) are looking to implement a variation of a SSD for capital improvements, safety zoning, marketing, and “clean and green” initiatives.

Next time you travel through the Hennepin-Lake-Lagoon Ave area of Uptown Mpls, or Downtown, look around – you’ll notice that there isn’t snow blocking sidewalks or parking meters, abundant bicycle parking loops and pedestrian benches are installed and clean, and there may be a nice string of lights through the trees, shrubs, and distinctive lights on the boulevard. These things were paid by property owners in the area as additional property tax, as these are all over-and-above what the city normally provides for a streetscape and maintenance.

Property owners in current SSDs generally favor the enhancements and additional services because they can see directly what their money pays for - although the business owner usually pays for the tax indirectly through the lease agreement. As budgets for local government services dwindle and increased public-private partnerships become necessary, could this model be used to provide common services (that government ordinarily would provide) through more tangible fee-for-service taxes?


  1. This post is fascinating. I know so much from it!

  2. Thanks for the post! I've always been wondering how special district works!

  3. SSD's (or Business Improvement Districts [BID] as they are also known) are very popular among community development professionals. The City of Duluth has used BIDs successfully and is seen as a model for these programs in MN (the downtown Mpls. example is also a good one).

    Part of the problem with implementing BIDs is that local property owners need to be convinced that they should be paying additional taxes. This is especially difficult in today's current economic reality. BIDs are sometimes implemented for a finite amount of time(5 years, etc.) which can make them more appetizing for local property owners. As stated in the blog, a need often exists to create a governing body to manage and administer the program. The way in which this is set up and paid for also needs to be considered. Nice blog!

  4. How are these approved? Is it a city council decision or do the property owners get to vote on them like a school levy would be voted on?

  5. Lyssa,

    Once the geography is set, 25% of property owners need to petition the city council for a SSD. Once approved, the council appoints a 4-5 member advisory board for the district to manage the budget, etc. At that point, 35% or more of property owners can void the deal.

    From the perspective of the business/property owners I've talked to (I'm doing research on this as part of my capstone) it turns out to be a pretty good deal for the cost, as long as the city contractors show up to perform the services!