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Special Development Districts – A sound tool to
address Massachusetts’s infrastructure needs
by Senator Richard T. Moore July 26, 2007...Our State and municipal budgets are under tremendous financial strain. As the recently released Transportation Finance Commission report demonstrates, Massachusetts has a back log of between $15 billion and $20 billion in transportation infrastructure improvements. This is not to mention the needs of aging water and sewer systems across the state, and other crucial municipal expenses like schools and employee health care. With these financial realties and our anemic revenue picture, it is clear that Massachusetts needs to think creatively about funding options for infrastructure improvements, particularly when it is these improvements that are going to allow our cities and towns to grow their tax bases. Two proposals currently before the Legislature, S. 146 and H. 159, would help cities and towns address these infrastructure funding problems. They would create a process through which municipalities can approve the creation of "special development districts" for financing things such as roads, parks, water and sewer facilities in a specific area. While this legislation does not represent a silver bullet for municipal finance, it does provide a creative alternative to help the Commonwealth address its harrowing infrastructure-financing challenges. The “special development districts” allowed under S. 146 and H. 159 are limited purpose political subdivisions similar to watershed districts, fire districts, regional waste disposal districts, and water and sewer districts that, according the 2002 census, number over 400 in the Commonwealth. They would allow land owners to self-finance bonds for a specific infrastructure improvement within the district’s boundary. This type of funding is particularly appealing to cities and towns because they would have no financial liability for bonds and the bonds would not impact a city or town's proposition 2 ˝ tax levy limit. The property owners within the district would seek this authority and then pay the bonds back over 35 years rather than the 20 years allowed under current law. $15 billion in such bonds are issued throughout the United States. However, without this legislation, Massachusetts has not had consistent access to this funding. Of course, due diligence is important when granting even very specific powers to political subdivisions. To this end, some have raised concerns that these special development districts would sidestep Massachusetts’s proud democratic process, create powerful un-elected “neighborhood” or “developer-run” governments, and would sidestep the valuable tax-limiting provisions in Proposition 2 ˝. These are important concerns to consider and are clearly addressed in the proposals currently before the Legislature. First, special development districts must begin with the support of at least 80% of the property owners that the project would impact. These property owners would submit a detailed improvement plan to the city council or board of selectmen. This plan would include 1) the types of improvements to be undertaken, 2) the boundaries of the district, and 3) the amount and duration of the assessment on property in the district. The legislation then requires strict local oversight of the district. The municipality’s governing body would hold a public hearing on the plan, solicit comments, and, if it sees fit, approve the proposal. After the districts have been established, the municipality appoints the district’s prudential committee and can remove members of the committee with just cause. The districts would be subject to all other local and state zoning and permitting laws relative to their infrastructure project. The legislation also expressly limits a district's powers to bonding for the improvements in the plan, contracting with construction companies to carry out the improvements, and assessing betterments on the property-owners in the district. In carrying out improvements, districts must adhere to the Uniform Procurement act, and all fair wage and competitive biding laws. Finally, special development districts are not a way for cities and towns to get around proposition 2 ˝. If anything, it would reduce the current strain on local property tax rates. Only those land-owners in the district who are directly benefiting from a new road, sidewalk, or sewer system would pay for it. Furthermore, the city or town would benefit from any added value these improvements by increased property assessments. This means that the city or town's tax payers living outside of a district would not shoulder the tax burden of an improvement from which they do not directly benefit and the town would be able to reap any additional revenue generated from the special development’s infrastructure project. Special development districts are the product of local property owners coming together to finance a project that will mutually benefit them and the tax base of the city or town. They are subject to approval and strict oversight from municipal governments and only have powers to carry out the project spelled out in the improvement plan approved by the city or town. In the face of billions of dollars of infrastructure re-development needs, and with the specific protections provided for in these proposals, moving S. 146 and H. 159 through the Legislature is the right thing to do. Timothy Hoppe contributed to this editorial |
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