Wednesday, May 11, 2016

Ducey vetoes bill that would allow developers to levy taxes on homeowners

Ducey vetoes bill that would allow developers to levy taxes on homeowners

"The governor rejected House Bill 2568, a priority of House Speaker David Gowan, citing concerns the legislation could harm taxpayers. The bill would have changed financing rules for community facilities districts, which are special taxing districts created to pay for infrastructure such as roads, sewers and water lines. Gowan, backed by a coalition of developers and investors, argued the bill would allow development to proceed more rapidly, primarily because it would have loosened some control local governments have over formation of the districts. For example, it would have mandated a district be formed upon request by landowners, and it would have given developers more control of the district's financing. Local governments pushed back, complaining the bill would minimize the oversight cities and towns provide on the tax rate needed to pay for infrastructure. Local government, controlled by elected officials, is more accountable than a board controlled by unelected developers or their designees, they said."

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These special districts are being used increasingly in Florida, Colorado, California, and other states. They give developers total control over public--not private--government entities that can issue muni bonds to pay for building infrastructure. Guess who pays back the bondholders, through property taxes? Right--the eventual home owners. And these districts are usually set up to be so undemocratic that they make HOAs look like Rousseau's peasants regulating the affairs of state under an oak tree (Jean-Jacques Rousseau, The Social Contract, Book IV, Ch. 1, if you are interested). Interestingly, most of the people who think HOAs are undemocratic and illiberal have zero to say about special districts.

2 comments:

IC_deLight said...

IC_deLight here:

I'm not one of those people that complains about HOAs yet has nothing to say about these special districts. Add Texas to your list of states where these special districts are increasingly being used.

In some cases existing local government pushes them to foist off duties to yet another layer of government while failing to provide the services property owners are paying taxes for. Emergency services and hospital districts are examples. Lately landowners approach a friendly state representative seeking to have a tailor made 'special district' imposed over the developer's property. The developer will have a single resident living in an RV on the property whose sole job is to be the resident within the proposed district who will vote in support of the district. The district will become effective. Although it is a political subdivision of the state, the official will not be elected. Instead the positions will be controlled by the developer with a few straggler positions for a nearby city rep or county rep. The contracts the district enters into will not be required to be competitive. Guess who the developer-controlled district is going to engage to build the infrastructure within the district? To add insult to injury, the developer will ALSO impose an HOA over the property. Homeowners have little idea what they are buying into. They cannot see the legal entanglement - they only see a house. They have no idea what that house is actually going to cost them.

Deborah Goonan said...

Very good point. Special districts are even more mysterious to the taxpaying, homebuying consumer than HOAs. The question is, why is ANY public governing entity led by non-elected officials? And why isn't there a reasonable minimum criteria for creating a special district to begin with? There needs to be a bonafide public purpose with corresponding oversight. I would venture a guess that the majority of these special districts are unnecessary,

It has taken me more than three years to figure out what a special district is, and how developers use them to their advantage. That includes not only development districts, but also water management districts, conservation districts, park and recreation districts, and so on. That's because only academics, some real estate attorneys, and some politicians have been well-educated on the subject. Very little information is available to the general public.