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 http://assets.ngin.com/attachments/document/0015/1407/Zone_8.5x11.pdf.

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?