What is a Special Assessment Fund?

A special assessment fund is used by a government to track the expenses associated with an activity or project. The funding for this fund comes from a special assessment levied against property holders. The related activity or project is usually for the benefit of those parties taxed via the special assessment.

Example of a Special Assessment Fund

A subdivision of the city of Nevermore is not hooked up to the city’s sewage system. The residents of the subdivision have had to maintain backyard septic systems instead, which are expensive to install and periodically maintain. The residents request that the city extend its sewage system into their area. This is an expensive proposition, and will only benefit the residents of that subdivision, so the city council agrees - as long as the subdivision pays for it.

The city’s planning commission estimates that the sewage system extension will cost $20,000 for each additional property connected, and there are 80 homes in the subdivision. Therefore, the total cost of the project will be $1.6 million. Based on this information, the city assesses each of the benefiting taxpayer households $20,000. These funds are then placed in a special assessment fund that was created for this specific project. As construction work proceeds, contractor billings are paid out of this fund. At the end of the work, the fund is closed.

Types of Special Assessment Funds

Special assessment funds can be used in a number of situations, including the following:

Special Assessment Funds for Infrastructure

Road improvement fund. Used for paving, repaving, or upgrading roads. It may also include the construction of curbs, gutters, and drainage systems.
Sidewalk fund. Allocated for new sidewalks or the repair and maintenance of existing sidewalks.
Street lighting fund. Focused on installing or maintaining streetlights in residential or commercial areas.
Stormwater management fund. Addresses improvements for drainage, retention basins, and erosion control systems.
Sewer and water improvement fund. Provides financing for the construction or expansion of public water and sewer systems.

Special Assessment Funds for Community Enhancements

Parks and recreation fund. Supports the development or maintenance of parks, trails, and recreational facilities.
Neighborhood beautification fund. Funds landscaping, tree planting, and other aesthetic enhancements to a community.
Historic preservation fund. Focused on restoring and maintaining historic buildings and landmarks.
Traffic and parking improvement fund. Addresses issues like traffic congestion and improve parking infrastructure.
Public transit development fund. Supports new transit routes, stations, or upgrades to existing services.

Special Assessment Funds for Safety and Security

Fire protection fund. Used to improve fire hydrants, purchase equipment, or build fire stations.
Crime prevention and security fund. Supports initiatives like installing neighborhood cameras, lighting, or hiring private security.

Environmental and Sustainability Funds

Green infrastructure fund. For projects such as rain gardens, green roofs, and permeable pavements.
Renewable energy assessment fund. Encourages solar, wind, or geothermal energy installations in local areas.
Flood control and prevention fund. Designed to build levees, floodwalls, or upgrade existing flood management systems.

Miscellaneous Special Assessment Funds

Business improvement district fund. Specific to commercial areas, used for marketing, cleaning, and area branding.
School district capital improvement fund. Levy for building or renovating school facilities.
Library expansion fund. Support for constructing or upgrading public library facilities.
Utility undergrounding fund. To move electrical or communication lines underground for safety and aesthetics.
Technology infrastructure fund. Focused on improving public access to broadband or updating technological systems.

Each of these funds typically comes with defined geographic boundaries, a public benefits plan, and a formalized cost-sharing mechanism.