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What Are Special Districts?

Getting everyone in a neighborhood to agree to form a special district and tax themselves in order to raise funding is truly next level.

[Updated: Feb 04, 2021] Sep 03, 2020 by Lena Katz
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When the citizens of a neighborhood come together and decide they want more of a certain service or economic offering than a county/municipal government can provide, and they're willing to fund and oversee it, then you have the makings of a special district.

Special districts are special units of government, hyper-local and purpose-defined from their inception. And they're not well understood -- perhaps because they often seem to be run like a strange hybrid of a community group and a city task force. Also, they're ephemeral. Some dissolve and some are formed every year.

Judged by their location or naming, special districts often seem to be under county or city jurisdiction, but in truth they're not part of local government. They are authorized under state law, but they are governed by a board of directors and answerable to the people of the district. Usually, though, this is only for one specific purpose -- hence the other popular name, "special-purpose districts."

Overview of special districts

The Census Bureau defines special districts as "independent government units created for a limited, specific purpose." They are very different from county, town, and municipal governments, which are general-purpose. Special districts are created to provide or improve a specific service, and they generally have a much briefer lifespan than county and city governments. They exist in small, specially defined areas within larger municipalities. Special districts are created basically to raise money for whatever service they're supporting, whether through taxes or borrowing money through bonds.

Special districts also encompass multifunction districts, which are a fast-growing subcategory that are formed to fund and support multiple services.

While it may be more difficult to identify special districts than it is to identify towns and cities, there are actually more special districts by far -- more than 51,000 counted in the census, compared with nearly 39,000 general-purpose governments.

Dependent vs. independent special districts

If a special district is dependent, that means that they are under the power of the city or county. An independent special district is governed by its own elected, independent board of directors, which oversees funding and functions. According to the Institute for Local Government, only about a third of special districts are dependent. Many more are independent.

Common types of special districts

Probably the most common type of special district is fire protection, followed by water supply. Somewhat surprisingly, industrial development districts and health districts are much less common.

A list of single-function special districts ranked by number of active districts according to the U.S. Census 2017 includes:

  • Fire Protection
  • Water Supply
  • Housing and Community Development
  • Drainage and Flood Control
  • Soil and Water Conservation
  • Sewerage
  • Cemeteries
  • Libraries
  • Other Natural Resources
  • Parks and Recreation
  • Highways
  • Health
  • Hospitals
  • Air Transportation
  • Solid Waste Management
  • Industrial Development and Mortgage Credit
  • Education
  • Other Transportation
  • Welfare

Multiple-function districts

It stands to reason that multiple-function, or "multifunction," districts have seen an increase in popularity over the past few years, given that most neighborhoods need for more than just one thing to improve/increase. For example, several districts lump the services for sewerage and water supply together. This makes sense because both are water services.

Special district classifications

Several classifications differentiate special districts, but many of these descriptors don't have a unique purview or definition beyond name assignation. The list includes:

  1. Municipal corporation
  2. Quasi-municipal corporation
  3. Public body corporate and politic
  4. Units of local government

Potential benefits of buying property in a special district

If it's important to you to live or have your business in an area that's very strong in one category, whether that be parks, libraries, or healthcare facilities, then you will find a concentration of that category if you buy in a special district that supports your priority. The perks are even better if you want to develop property in that category yourself and can take advantage of incentives that are special to the district.

Questions and answers about special districts

Is there an increase in special districts?

Yes, the 2017 census recorded an increase in special districts. This corresponds in many cases with increased development in areas that hadn't been developed and populated in the past. In other cases, special districts are being created because residents expect an improvement to the specific service or offering that has been provided historically.

One thing that's important to note is, although the number of special districts is increasing, it's not a straight line up, because for every hundred new special districts that are created, nearly as many dissolve, having fulfilled their purpose -- or at the very least, collected and paid back the money they were formed to raise.

What states have the most special districts?

Illinois, California, and Texas top the list of states with the most special districts with around 4,000 each, give or take. Pennsylvania, Colorado, and Missouri each have more than 2,000.

How is a new special district created?

Created first via public referendum, special districts often gain interest via petitions, then progress to hearings and a resident vote. If you are tracking a special-purpose district's path to execution, you may want to review district-submitted reports before deciding whether to throw your lot in with the localized government.

Who believes in special districts?

Truthfully, it is weird to think of a little-understood independent governmental body that isn't governed by a city or county, but by its people. But because there're so many of them, any holdouts who don't believe in special districts are certainly welcome to visit and see for themselves. The power this designation has to get a specific kind of action accomplished can be truly great.

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