Suburban growth leads to proliferation of 'special districts'

Suburban growth leads to
proliferation of 'special districts'
Special districts account for $1.3 billion (24%) of all town revenues

More than one third of all special districts from across New York are in Erie, Monroe and Onondaga counties. According to a press release issued by New York State Comptroller Thomas DiNapoli, special improvement districts in towns in New York have proliferated over the last 50 years in large part to address increased residential needs resulting from suburban growth.

The revenue raised from the 6,927 town special districts statewide accounted for $1.3 billion, or nearly a quarter, of all town revenues in 2004, according to a report on town special districts. The report noted that special districts can add hundreds of dollars to property owners' tax bills.

"As towns respond to increasing demands and property tax pressures, they need to evaluate the methods they use to deliver services. At the same time, state leaders should examine ways to help towns deliver services more efficiently," DiNapoli stated in his release. "While special districts have given towns the flexibility they needed to provide critical services to residents, they don't always operate as efficiently and equitably for all taxpayers.

The information contained in the report is important for state and local policy makers as they engage in public discussions on "right-sizing" of local government structure.

Several state and local initiatives are underway to analyze ways to consolidate New York's multiple layers of local government, including Governor Spitzer's recently announced Commission on Local Government Efficiency.

Major findings of the report include:

Geographic concentration of special districts. Thirty-four percent of all special districts are located in three counties - Erie (939), Onondaga (867) and Monroe (551). Seven of the nine counties in the New York City metropolitan area reported having more than 100 special districts each.
How special districts are funded. Most special district revenues are collected through property taxes and assessments, and in some cases, from user fees paid by taxpayers within the district. In 2004, $862 million or 67 percent of special district revenue came from property taxes and assessments, while user fees for water, sewer and garbage collection accounted for $259 million (20 percent). Another $173 million (13 percent) was collected through other user fees and taxes.
Who collects the most revenues? Nassau, Suffolk counties are responsible for half of the state's special district revenues and when combined with Erie and Westchester, these four counties are responsible for two-thirds of all special district revenues collected.
Percentage of town revenues. In three counties, special district revenue accounted for a third to more than half of all town revenues, including Nassau (52 percent), Niagara (41 percent) and Erie (32 percent). In 2004, special districts accounted for the majority of all real property taxes and assessments collected by towns in Niagara County (77 percent), Nassau County (65 percent) and Warren County (52 percent).
Who pays the most? On average, taxpayers pay $257 per household for special districts in New York state. Taxpayers in Nassau ($946), Hamilton ($772), Niagara ($687), Warren ($609) and Erie ($585) counties pay the most, while those in Tioga ($49), Cortland ($49), Herkimer ($69), Lewis ($78 and Cattaraugus ($83) counties pay the least for special district services.

Special districts were created to allow towns to provide residents within a specific geographic area services such as lighting, water, sewer, fire protection, snow removal and ambulance services. The concept of special districts has proven to be so flexible that it has been used to meet some unusual needs, including public docks, beach erosion control and harbor improvement for seaside properties. State law provides the framework for how special districts can be established, financed and operated.

The report analyzes the growth in special districts, details how special districts are structured, and compares the geographic concentration of these districts. The report also contains a county-by-county breakdown of the total number of special districts, the total amount of revenue raised and the impact on taxpayers.

Among the report's other findings:

Garbage, Water and Sewer generate most revenue.
Lighting Districts are most common but generate least revenue.
Other less common districts have been created for ambulance services, incinerators, sidewalks and snow removal. These district account for seven percent of all special districts.

The report recommends several policy considerations for state and local leaders including:

Unit Cost Analysis. Unit cost studies could be conducted to shed light on possible inequities and inefficiencies in the current delivery of services.
Thresholds. State legislation could compel towns to undertake a consolidation study if certain prescribed thresholds or triggers are met. Thresholds should be based on the percentage of population living in an area served by multiple special districts with the same purpose.
Expansion of the Shared Municipal Services Incentive (SMSI) Program. The state currently offers grants to local governments looking at consolidation opportunities, which could be expanded to include special districts, as the governor has proposed.

Visit http://www.osc.state.ny.us/localgov/pubs/research/townspecialdistricts.pdf. for a copy of the report.