The Connecticut General Assembly
OFFICE OF LEGISLATIVE RESEARCH
August 26, 1994 94-R-0759
FROM: Saul Spigel, Chief Analyst
RE: Special Districts
You wanted to know the benefits and disadvantages to a property owner of establishing a special district. You also wanted to know what type of special act would be needed to establish a special district that crossed town lines and whether a two-town district would present any special issues.
The major benefit of living or owning property in a special district is the ability to receive services above and beyond those available elsewhere in the community or those not available at all. Of course, this requires residents and owners to pay higher taxes than people in areas not receiving the services. The level of services in a special district are determined only by its residents and property owners, so, theoretically, the district is more responsive to these people's wishes than town officials. But, since most districts are too small to have professional management, they are administered by a small group of owners or residents who, potentially, could form an unresponsive clique.
Districts can tax and borrow money, which permits them to provide the services they want. But expensive capital expenditures can be a burden on some taxpayers, and all district taxpayers must live with the district's decisions. Achieving consensus in districts with their smaller tax bases might be more important than in towns that have larger tax bases.
Districts are totally independent from town government. Thus they can avoid political complications and competition for town services. But they need to coordinate with town officials in some areas to assure that infrastructure (e.g., roads and sewers) are compatible.
Multitown districts have a special problem with taxes. They draw their tax lists from those of their respective towns, which may be based on differing assessment methods and different dates of last revaluation. If the district has a uniform tax rate, similar properties might have bear different tax burdens.
SPECIAL DISTRICT BENEFITS AND DISADVANTAGES
Although the statutes governing the creation of special districts (CGS §§ 7-324 to -329) do not differentiate among types of districts, those currently in existence can roughly be broken into four kinds: fire districts, utility districts (e.g., water and sewer), beach and lake associations, and improvement districts (condominiums and other residential developments). The first two types—fire and utility districts—generally provide public services for public purposes. That is, they provide typical governmental services in geographic areas that are available to the general public. The other two types—beach and lake and improvement districts—provide public services for essentially private purposes. Their services are provided in areas that are typically restricted to the general public. Although the advantages and disadvantages of all districts are probably similar, this report focuses on the latter type of districts.
The basic benefit of a special district is that it allows the district's residents to receive a higher level of services than the town normally provides or to receive services that the town does not provide at all. For example, a lake association might develop and maintain a beach area because the town will not, or it might contract for extra garbage removal services during times of high lake usage.
A corollary to receiving a higher level of service is that it is the district's residents alone who determine the services they want and how to provide them. They do not have to ask the town to provide the services, they do not have justify a higher level of service to their fellow town residents, and they do not have to compete with other town residents who may want different services.
A special district has the power to borrow money. It can sell bonds and notes like any other government. This allows residents to undertake capitol improvements that they could not afford individually and which the town might not elect to do.
Of course, it is the district's residents alone who must pay for this higher level of services through a property tax. But they can, in most instances, deduct their district property taxes from their federal income tax in the same manner that they can deduct their town property taxes. (The Internal Revenue Service has disallowed deductibility for some condominium improvement districts.)
Just as the basic advantage of a special district is that its size allows it to be more responsive to residents' service needs than the larger town government, its major disadvantage also lies in its size. Most districts are too small to have professional managers, which means that some residents must be willing to immerse themselves in the details of running the operation. This creates the potential for a small number of those residents to control the district's activities. This potential is magnified in districts with a large number of nonresident property owners who may be less able to attend district meetings or actively participate in district affairs.
A special district adds another, particularly focused, layer of government onto people lives, which can lead to increased restrictions on individual's actions or increased costs to them. For example, a district might impose parking bans or boat storage requirements, or it might require all residents to hook up to sewers whether or not they wanted sewers installed at all.
A special district also adds another layer of taxes. Expensive capital expenditures financed through bonds can require years of debt service plus annual operating expenses. The resulting higher taxes could discourage property sales.
Special districts are totally independent of the town in which they are located. They need not follow the town's competitive bidding rules or its road construction standards. This could lead to situations in which a town might not accept a district-built road that did not conform to town standards. In such instances the fire department might not be able or willing to use the road, and the town might not provide refuse removal services along it.
As a government body, a special district must adhere to certain state and federal laws that a private body might not have to, such as the Americans with Disabilities Act and the Freedom of Information Act.
Districts that cross town boundaries have a unique problem concerning taxes. District taxes are based on town tax rolls and, consequently, each property is taxed on the basis of its particular assessment. The Mystic Fire District, which spans Groton and Stonington, uses this method. But this leads to two potential problems: (1) each town's assessors may use different valuation methods and (2) the towns may revalue property at different times. This could lead to a situation in which similar properties are assessed at different values and owners have widely varied tax liabilities.
One way to mitigate these problems is to allow the district's assessors to equalize the assessments to adjust for the intertown differences. This method is used by the Farmington Woods District, which bridges Avon and Farmington. Its establishing act does not specify the method by which the equalization is accomplished.
A third approach to this situation would be to impose a flat tax, that is a specific amount per property. This type of tax is not contemplated in the statutes, but several districts operating under special act use it.
We have enclosed the special acts that established four multitown special districts. Those forming the Riverton (Barkhamsted and Hartland) and Mystic (Groton and Stonington) districts lay out in some detail the area the districts cover, their powers, their officers' duties, and their taxing power. The other two acts consolidate existing single-town districts into multitown districts (Farmington and Avon and Mystic and Stonington). It is interesting to note that both of these acts require the new districts to operate under the statutes governing special districts, with certain exceptions.