By Jones Osborn II

If you invest in real property, sooner or later you'll probably receive notice that an improvement district is being formed which will result in a special assessment against your property.

Special assessment districts are normally formed to pay for such things as roads, sewers, sidewalks, water service, street lights, and other municipal improvements. According to the law, however, these things can be paid for by special assessments only if the particular improvement is of "special benefit" to the properties in the district. If the improvement is of "general benefit" to the residents of the city, it should be paid for by general taxes, not a special levy on those within the district.

An example of an improvement that is properly paid for by a special assessment is lighting along a residential street. The lighting is clearly of primary benefit to those who own property in the area, and the cost of the improvement can be legally assessed against those property owners.

An example of an improvement that is not properly financed through an improvement district is a sewer plant that serves the entire city. Since it benefits the residents of the city in general, it is not proper to charge its cost to any particular group of property owners.

Some improvements furnish both a general and a local benefit--for example, the opening of a major roadway, which serves the needs of both adjoining property owners and those passing through to other destinations. In this case, the law requires the city to apportion the cost between the local property owners and the population at large, based on the amount of benefit received by each. It is the policy of the City of Phoenix, for example, to allocate at least 50% of the cost of any street to the general fund on the theory that all streets benefit both the local property owners and the city at large.

Special assessments can be levied in a lump sum, but are more frequently payable over a longer period, usually ten years. The assessment is not the personal obligation of the property owner--it is simply a lien against the property, meaning that if it is not paid, the city can sell the property to pay the assessment. Nevertheless, the assessments are usually only a small fraction of the value of the property, and since they are prior to consensual liens, such as mortgages, the effect is that the property owner is forced to pay the assessment.

Before an assessment can be levied, the law requires the city to publish notices in a local newspaper and to post notices at 300 foot intervals along the line of the proposed improvement. If you see such a notice in the vicinity of your property, it is important to read it closely in order to determine whether you wish to oppose the assessment.

How To Fight A Special Assessment. When you receive notice that a special assessment is about to be levied upon your property, you have five possible avenues of attack if you want to oppose it:

1. You may file an objection to the amount of property included within the district. In most cases you would either object to the inclusion of your property within the district, or argue that more property should be included along with your property in order to spread the assessment among more owners. The objection must be filed with the city clerk within fifteen days of the last publication or posting of notice of the formation of the district. The objection, if proper, will be heard and ruled upon by the city council. You should appear at the council meeting and present your case. It is also proper to contact your council representative prior to the meeting to explain your concerns.

2. If you can gather the support of the owners of a majority of the frontage of the property within the district, you can file a protest against the proposed improvement. The protest is a legal document which must be done properly so that it meets all statutory requirements, and it must be filed within fifteen days of the last publication or posting. However, if properly and timely filed, the protest will automatically terminate the formation of the district for a period of six months, after which the city or interested property owners may try again if they choose. However, having been stopped once, it is unlikely that the proponents will try again until they are sure they have sufficient supporters to be able to proceed.

3. You can challenge the assessment in court, by claiming that the particular improvement is of city-wide benefit and is not properly chargeable to a local district. Although these challenges have succeeded, the courts are reluctant to upset the city's determination if there is any reasonable justification for the city's position. In other words, it is possible to prevail with this sort of challenge, but only if the case is clear.

4. You can challenge the way the assessment was allocated among the various property owners in the district. This also requires a court action. The law requires the assessments to be allocated among the property owners in accordance with the benefit they receive from the improvements. In the case of local street improvements, the assessments are generally allocated in accordance with street frontage, and this is very difficult to challenge. In the case of sewer or other projects, cities have come up with a number of other methods of allocating assessments, nearly all of which have been upheld if there is any basis for the allocation. Among the factors that have been considered are size, street frontage, number of permissible residential units, and zoning. So although this is a possible method of attack, it is one that should be undertaken cautiously because it is also one on which it is very difficult to succeed.

5. You can challenge the legality of the whole procedure if you can discover some way in which the city failed to follow the statutory procedures--for example, by failing to give proper notice of the formation of the district. Unfortunately, in most cases this will only result in the city starting over again in order to do it properly, so it is probably not a permanent solution.

How To Form A District. In some cases, a property owner doesn't want to fight the formation of a district--he wants to see one formed in order to provide for the installation of improvements that will increase the value or utility of his property. There is no procedure set forth in the law allowing a property owner or a group of property owners to form a special assessment district on their own. However, property owners interested in forming a district should contact the city staff, who will generally start the procedure to form the district, but oftentimes only if the interested property owners first gather petitions favoring the district from the owners of more than half of the frontage owners, so that the city knows it will not be facing a valid protest. In the case of the City of Phoenix, owners of at least 60% of the frontage must sign a preliminary petition before the city will proceed. Other municipalities have other policies.

Conclusion. The assessment district statutes provide a useful and workable means to finance improvements of benefit to local property owners, often with the city paying a portion of the cost. In some cases, however, a property owner may oppose the particular improvement for any of a number of reasons. If that is the case, the most successful avenue of attack is generally to collect protests from the owners of more than 50% of the frontage. However, in the case of major assessments, particularly if they involve improvements which will benefit the community in general more than the local property owners, it may be possible to use litigation or the threat of litigation to force the city to reallocate a larger share (or all) of the costs to the city's general fund and away from the local property owners.