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Assessment Districts the Financing of Public Infrastructure Through the Issuance Of Tax-Exempt Municipal Bonds


Formation Of A Special Assessment District

What Is An Assessment District?

An assessment district is a financing tool available to most existing legislative bodies (cities, counties, special districts), that allows that agency to construct desired and authorized public improvements, with the costs and expenses being apportioned and spread against the benefited properties within the boundaries of a designated area (assessment district), with said costs and expenses being directly proportioned in accordance with the special and direct benefits that each parcel receives from the works of improvement.

The assessment liens, then, are financed through the issuance of bonds payable over a period of years, thus providing the advantage to the property owners of a loan or deferred funding for the improvements.

What Improvements May Be Financed By Tax-Exempt Financing?

California assessment law authorizes financing of the following public improvements:

  • streets, curbs and gutters
  • water supply and distribution
  • gas, electric and telephone
  • sewers and drainage
  • Parking
  • other public improvements that afford a direct benefit to the public.

What Interest Rates And Terms Are Available If Tax-Exempt Financing is Used?

Interest rates are generally 2% to 3% less than conventional borrowing rates. Public improvement costs may be spread over a 10 to 20 year period.

How Much Paper Work And Red Tape Are Required To Use Tax-Exempt Financing?

Assessment district financing is a tried and true financing method that has a streamlined process. There is actually little involved in the process that needs to be completed by the developer. Most work in the process is completed by engineers, attorneys and investment bankers. Overall there is less paperwork involved in tax-exempt financing than in the planning approval process for a development.

Why Should A City Or County Form An Assessment District?

Most communities yearn for growth and development yet do not have the financial resources for capital improvements. Communities also realize that development leads to more jobs in the community and therefore more revenue. By working with those individuals and groups that wish to provide new housing and assisting them to gain access to tax-exempt financing, cities are performing a significant role in the community development function.

Who Are The People Involved In An Assessment District Project?

Generally there could be five roles to be filled in one form or another in order to have a successful project.

  • Design Engineer - prepares the required plans and specifications.
  • Assessment Engineer - responsible for apportioning the costs
  • Bond Counsel - prepares the resolutions, support documentation and issuing At completion, the approving legal opinion attesting to the validity of the proceedings and the enforceability of the assessment lien.
  • Financial Consultant - person specialized in obtaining proposals for bond sale.
  • Underwriter - person who purchases the bonds, and provides capital.

What Incidental Expenses Are Allowable To Be Included In The Proceedings?

All costs pertaining directly to the formation of the assessment district.


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