6.3 Special Assessments as a Collection Device

Special assessments are somewhat unique funding devices resulting from a blending of Florida case law, state statutes, and constitutional provisions regarding home rule. Special assessments are not new revenue sources; they have been in existence for decades in Florida. This extensive history means that case law discussing special assessments is well developed.

The courts define special assessments as "charges assessed against the property of some particular locality because that property derives some special benefit from the expenditure of the money." Special assessments are imposed on the owners of property in exchange for a special benefit rendered to the property. Special assessments are distinguished from taxes in that there is no requirement for taxes to show a specific benefit to the taxpayer, while a clear special benefit must flow from the assessing government to the payer of an assessment (the owner of the property). The terms "special assessment," "non-ad valorem assessment," and "assessment" all mean the same thing and are used interchangeably.

The Florida Supreme Court has expressly ruled that the authority to impose special assessments is embodied in home rule authority for both counties and cities. The courts have identified a two-part test for establishing a valid special assessment. The assessment must provide "special benefit" to the property assessed and it must be "fair and reasonably apportioned" among the benefited properties. These criteria must be embodied in the rate structure itself so that the calculation of the special assessment for any given property incorporates these concepts into each bill rendered.

Special assessments can only be used for the purposes for which they were imposed. To ensure that this requirement is met, funds from special assessments should be appropriated, deposited, and disbursed through a stormwater special revenue fund so that assessment dollars are used solely for appropriated purposes, and so that fund balances do not lapse into any other fund. Proceeds from a capital assessment may be deposited into a special revenue fund or directly into capital project funds. This ensures accountability because the funds must be matched to eligible stormwater programs and projects.

The courts recognize two types of assessments: service assessments and capital assessments. Service assessments are used solely to recover costs of rendering services of special benefit to a given property. The assessments are recurrent for as long as the County Commission or City Council/Commission wishes to use them to recover annual costs. Capital assessments are used to recover debt service (principal and interest) or the capital share of construction projects. Capital assessments are imposed for a time certain (usually the payback life of the debt instrument where debt is used), and typically cease once the project expenses are paid.

The legal distinctions between a fee and an assessment and the specific legal nature of each are thoroughly discussed in Chapter 2. Many aspects of utility creation are the same for assessments and fees. While certain legal distinctions between fees and assessments are important, the major distinctions between the two lie in how the revenues are collected.

6.3.1 Assessment Collection Options

A jurisdiction has three realistic options available to it for collecting a stormwater special assessment. These are:

1. The uniform collection method
2. The uniform collection method with an option to receive individual bills
3. The lien and foreclosure method with collection of delinquencies under the uniform collection method

A fourth method is also technically available -- the "pure" lien and foreclosure method where delinquency in payment of an assessment triggers tax foreclosure on the property. However, the use of this method is not advantageous to a jurisdiction for two main reasons. First, it requires an extraordinary exercise of political will to foreclose on any residential property; and second, the foreclosure process is frequently challenged, resulting in protracted litigation before payment. Furthermore, when the assessment is for recurring annual services, not capital infrastructure, the foreclosure process must be repeated for each year the special assessment is imposed and not paid. Finally, the lien and foreclosure method of enforcing special assessments does not lend itself to financing capital improvements because the collection rate is not as dependable or predictable as the rate under the uniform collection method.

Option 1 - The Uniform Collection Method

State statutes provide that special assessments that meet the special benefit, and fair and reasonable apportionment requirements may be collected on the annual ad valorem tax bill by a jurisdiction's tax collector. The stormwater special assessment would appear on the combined notice of ad valorem taxes and non-ad valorem assessments, which act as a lien imposed against the property. A jurisdiction may use this uniform collection method for collecting and enforcing the stormwater special assessments when it follows the procedure described in Section 197.3632, Florida Statutes.

The uniform collection method offers great advantages to a jurisdiction. When the uniform collection method is used to collect special assessments, local governments benefit from an exceedingly high collection rate. In fact, a jurisdiction could anticipate that its rate of collection on special assessments would be the same as its rate of collection of ad valorem taxes. Under such statutory procedure, the ad valorem taxes cannot be paid separately. Both ad valorem taxes and non-ad valorem assessments are required to be paid to satisfy the statutory lien. For most jurisdictions, this collection rate typically exceeds 95%. If however, a property owner fails to pay the special assessment, under the uniform collection method, a jurisdiction has the right to sell a tax certificate, which ensures that a jurisdiction will be paid the amount of the special assessment that is owed. This tax certificate process also provides the property owner two years within which it may pay its delinquent taxes and special assessments without the issuance of a tax deed becoming a reality. The tax certificate process is discussed in more detail at the end of this chapter.

Thus, the uniform collection method offers a jurisdiction the greatest assurances of collecting all of its billed stormwater special assessment revenue, while at the same time offering the fairness of two years for any delinquent property owners to pay the assessment and avoid the issuance of a tax deed.

Option 2 - Uniform Collection Method with Option to Receive Periodic Individual Bills

A second option that is available to a jurisdiction involves a modification to the full-scale uniform collection method. A jurisdiction can prepare a non-ad valorem assessment roll, just as with the uniform collection method, but offer property owners the option to receive individual, periodic stormwater bills (for example, monthly or quarterly), instead of the assessment appearing on the property tax bill.

While election of this option by the property owner allows a property owner to pay its stormwater special assessment over the course of a year in several installments, this option presents enforcement problems similar to those encountered with the lien and foreclosure method. To avoid these collection problems, a jurisdiction could, in the event of any such delinquencies, collect the charges as non-ad valorem assessments on the next year's non-ad valorem assessment roll (pre-empting the owner's option for periodic billing for any delinquent parcels). This delinquency would appear on the property owner's annual tax bill, assuring that a jurisdiction has all the mechanisms available to effect collection of delinquencies under the uniform collection method.

Option 3 - Lien and Foreclosure Method, Collecting Delinquencies under the Uniform Collection Method

Finally, a jurisdiction could choose to collect the stormwater special assessments, that meet the special benefit and fair and reasonable apportionment requirements, by sending out a separate bill for the special assessment to each subject property. This method is sometimes called the "traditional method" since it was the predominate method for imposing assessments for decades until passage of the Uniform Collections Act in 1989. Payment of the bill may be enforced in one of two ways, either through a lien and foreclosure against the property, or under the uniform collection method in the subsequent year. As described earlier, the lien and foreclosure method is politically difficult and practically disadvantageous. The combination of a separate bill with the option to enforce non-payment through the uniform collection method helps to cure some of the practical disadvantages with lien and foreclosure enforcement mechanisms.

Experience indicates that, of the available assessment methodologies, the use of the Uniform Collection Method to collect and enforce the stormwater special assessments offers the greatest administrative ease and the greatest predictability of collection rate.

6.3.2 The Mechanics of the Uniform Method of Collection

State statutes specifically detail the steps required for using the Uniform Method of collecting the stormwater special assessment on the same bill as ad valorem taxes. To use the tax bill collection process, a jurisdiction must carefully follow the strict procedures provided in the Uniform Method. These procedures and their required deadlines (see Table 6-3) are discussed in the following paragraphs of this section.

Table 6-3

Requirements of the Uniform Method of Collection

Notice of Intent

A jurisdiction must initiate the process almost a year before it intends to begin using the Uniform Method to collect the assessments. The process begins by passing a resolution of intent (called the "Notice of Intent") prior to January 1 or, if the property appraiser, tax collector, and local government agree, March 1.

A jurisdiction must publish notice of its intent to consider a resolution to use the Uniform Method weekly for four consecutive weeks prior to a public hearing on the matter. If the resolution is adopted, a jurisdiction's council or commission must send a copy of it to the property appraiser, the tax collector, and the Florida Department of Revenue by January 10 or, if the property appraiser, tax collector, and county all agree, March 10.

The adoption of a resolution of intent does not obligate a jurisdiction to use the method or to impose a special assessment, but is a prerequisite to using the Uniform Method.

The Initial Rate Resolution

Imposition of a stormwater assessment is typically effected through the adoption of two resolutions, the Initial Rate Resolution and the Final Rate Resolution. After the adoption of an enabling ordinance (which simply authorizes the jurisdiction to impose an assessment should it so elect, usually through home rule powers), a jurisdiction will decide whether to adopt an initial assessment resolution. The Initial Rate Resolution is not required, but is used to "benchmark" and "spread on the record" on decisions that are critical to the imposition of the assessment.

This Initial Resolution initiates the implementation process. It describes in great detail the stormwater special assessment program and the method of apportionment. It sets a public hearing date for final consideration; and it directs and authorizes the mailing of notices to the property owners included on the initial assessment roll, and the publishing of a notice of public hearing in a local newspaper. Among other things, the notice advises each property owner of:

• The pending assessment and what it is for
• The date, time, and place of the hearing to consider imposition of the assessment
• The fact that failure to pay may lead to foreclosure
• The number of billing units on the parcel, the proposed rate per billing unit, and the estimated amount to be assessed to that parcel should the rate be adopted

Upon adoption of the initial assessment resolution, a jurisdiction will have made the tentative decision to move forward with the imposition of special assessments to fund the stormwater budget.

Although the decision to move forward is not binding at this point, statutory time frames for notification and certification, and the logistics of implementation, leave a jurisdiction few alternatives after the subsequently required public hearing but to go forward with the assessments or choose to fund the stormwater budget through other revenue streams available to the jurisdiction.

The Assessment Roll

After adopting the necessary implementing documentation, a jurisdiction must develop a computerized, non-ad valorem assessment roll that contains the basis and rate of the assessment and applies them to each parcel subject to the assessment. From a practical standpoint, the non-ad valorem assessment roll should utilize the parcel identification number and property use code classifications maintained by the property appraiser; it must be compatible with the ad valorem tax roll. A critical task in the successful implementation of a non-ad valorem assessment program is verifying the integrity of the property use database utilized to develop the assessment rate structure and, ultimately, developing the non-ad valorem assessment roll on an annual basis.

The jurisdiction, not the property appraiser, must develop the non-ad valorem assessment roll. County property appraisers are charged with the responsibility of determining the value of all property within their county and maintaining certain records connected therewith, specifically preparing the ad valorem tax roll. The ad valorem tax roll is designed solely to provide the data required by property appraisers to determine property values. Under Section 197.3632, Florida Statutes, property appraisers must annually provide certain information to local governments by June 1 to assist a jurisdiction in the preparation of special assessment rolls to be collected under the Uniform Method. The information must conform to that contained on the ad valorem tax roll, but the property appraiser need not submit information that is not on the ad valorem tax roll. If a jurisdiction determines that the information supplied by the property appraiser is insufficient to develop its non-ad valorem assessment roll, a jurisdiction must obtain information from other sources. Obviously, the degree of cooperation received from the office of the property appraiser in including, updating, and consistently maintaining data relevant to property uses will have a direct effect on the quality and efficiency of the special assessment or non-ad valorem roll.

Accordingly, successful special assessment programs are those programs that employ, to the maximum extent possible, the information maintained by the property appraiser on the ad valorem tax roll. In addition, a special assessment program should be designed to maximize the local government's ability to electronically replicate and analyze the database on an annual basis, which in turn minimizes the amount of manual manipulation required of the special assessment roll.

The Final Rate Resolution and Certified Roll

Where the Uniform Method is employed, statutory requirements provide that a service assessment roll must be adopted at a public hearing between June 1 and September 15 (so the tax collector can merge it with the ad valorem tax roll, and mail a single bill for the combined collection of assessments and ad valorem taxes), and capital assessments may be imposed at any time. Capital assessments levied outside the tax roll billing timeframe must wait for collection until the annual tax bill is printed and mailed by the Tax Collector. Where the Uniform Method is not used, the jurisdiction may impose the assessment at any time.

At least 20 days prior to the public hearing, a jurisdiction must publish notice of the hearing in a newspaper of general circulation within the government's boundaries and by individual first class United States mail to the owners of property subject to the assessment. After the public hearing is properly convened and public input provided for, the jurisdiction may adopt a Final Rate Resolution that affirms the mechanics of assessment detailed in the Initial Rate Resolution and sets the final rate. The rate set in this hearing cannot be increased for any parcel over that noticed to the owner without re-noticing the owner. The rate may be lowered to any level without re-notice or the resolution may be voted down.

If the assessment is adopted and imposed, a certified roll must be delivered to the Tax Collector. This typically is done in electronic format (compatible with Tax Collector requirements) with certification by the Mayor, the Commission Chairman, or a delegated official identified in the Final Rate Resolution. Uniform Collection requires that the roll be certified by September 15 of the year in which the assessment is adopted. Jurisdictions not using the Uniform Collection method may send bills at any time.

Annual Roll Maintenance

Collection of special assessments and ad valorem taxes begins in November. Failure to pay the assessments and taxes results in the issuance of a tax certificate and may result in the sale of a tax deed.

If the special assessment will be collected for a period of more than one year or will be amortized over a number of years, a jurisdiction must so specify in the published and mailed notices and therefore is not required to annually adopt the assessment roll. However, for assessments whose rates vary among different types of property, the property owners must be notified annually if their assessment increases beyond the noticed amount for the prior year. Essentially, a jurisdiction is faced with the annual adoption of an assessment roll. (This roll is typically termed the "annual rate resolution" and incorporates elements of the initial and final rate resolutions adopted in the first year of the assessment program.) Annual notification of all property owners is the most efficient and effective approach to deal with re-notification required by property use or classification changes. This notification may be accomplished through the TRIM notice if the mandatory elements are provided for on the TRIM notice.

The stormwater assessment program proposed for implementation by a jurisdiction utilizes the ad valorem collection process provided in the Uniform Method, which requires the use of data available on the ad valorem tax roll. The ad valorem tax roll is designed solely to provide the data required by property appraisers to determine property values for ad valorem taxation purposes. The ad valorem tax roll preparation and date of assessment for each individual property is dictated by strict statutory timeframes. Section 192.042(1), Florida Statutes, requires real property to be assessed according to its "just value" on January 1 of each year, and requires improvements that are not substantially completed on January 1 be assigned no value. A jurisdiction, and not the Property Appraiser, must initially develop and then annually update and maintain the stormwater assessment roll.

A jurisdiction's proposed stormwater assessment program typically imposes assessments upon "developed" property only (developed can include anything short of land in a natural state). As a consequence, the timeframe required to post information to the stormwater assessment roll diverges from the posting of the same information to the ad valorem tax roll and requires supplementary actions by a jurisdiction. Therein lies a significant challenge for any local government using the Uniform Method to collect special assessments, which by their nature, are not value-based but rather are premised upon the benefit the special assessment program provides to affected properties.

The stormwater special assessment is typically imposed against all "developed" property within the stormwater service area each fiscal year. Each year the assessment will be collected through the annual ad valorem tax bill as a non-ad valorem assessment. Due to a data lag between the improvement of property and the inclusion of the improvement on the ad valorem tax roll, some properties, improved between January 1 and September 30, will not be shown as improved on the ad valorem tax roll for the upcoming fiscal year. These properties will have received a certificate of occupancy before the implementation of the stormwater assessment program and, therefore, may circumvent an assessment upon their receipt of a certificate of occupancy. Clearly, these improved properties will benefit from the provision of stormwater services, and a jurisdiction may wish to act to subject these newly improved properties to a supplemental assessment based upon their proportionate share of the costs of stormwater services for the upcoming fiscal year.

This omission should occur in the initial year of imposition only. In subsequent years, all newly improved property can be made to pay its fair share by the imposition of an interim special assessment that is imposed when the certificate of occupancy is issued.

The Supplemental or Interim Year Assessment Roll

To address this issue, a jurisdiction may consider the inclusion of this group of newly improved properties on a supplemental assessment roll for the upcoming fiscal year using the authorization of its enabling ordinance. A jurisdiction would assess newly improved properties the stormwater assessment amount that is attributable to their new improvement. The newly improved parcels would then be added to the ad valorem tax roll for the following fiscal year by the property appraiser's normal procedures. Any unpaid assessments could be collected along with the subsequent year's special assessments on the tax bill.

This process could also be used in the event any improved parcels were omitted from the special assessment roll certified to the Tax Collector by September 15 of any given tax year.

The proposed stormwater special assessment is recurrent and intended to be imposed against all improved property in the stormwater service area each fiscal year. Each year the stormwater special assessment is to be collected through the annual ad valorem tax bill as a non-ad valorem special assessment. Those properties (both residential and non-residential) that are newly improved are not yet on the tax roll and, depending on their date of improvement, may not appear on the ad valorem tax roll for as many as 21 months from the time of improvement.

Using the authorization in its proposed ordinance, a jurisdiction should adopt procedures for collecting an assessment at the time of final inspection (e.g., certificate of occupancy). The assessment to be imposed would be formulated by a monthly base rate calculated at one-twelfth the annual assessment rate for each respective property category.

6.3.3 Failure to Pay the Assessment

For jurisdictions using the Uniform Collection Method, Florida law requires that all ad valorem taxes and the accompanying stormwater management assessments be paid at the same time. Like any assessment using this method, if an owner does not pay his or her property taxes and the stormwater management assessments, a lien will be placed against the property equal in rank and dignity with the liens of all state, county, and municipal taxes and special assessments. Delinquency triggers the tax certificate sale and, ultimately, tax foreclosure procedures stipulated by law. Under this law, payments of delinquencies of elderly persons are deferred until transfer of the elderly person's property where collection is made from proceeds of the sale.

For jurisdictions not using the Uniform Collection Method, payment is due as specified in the ordinance. Lien and foreclosure proceedings will be effected according to the local ordinance.

6.3.4 Homestead Exemptions and The Assessment

Often the question is raised whether those with a valid homestead exemption are subject to the assessment. Under Florida law, special assessments are different from property taxes; the stormwater management special assessment applies to all residential property uses regardless of homestead exemption. Only those properties clearly exempted by the special assessment ordinance and/or rate resolution do not have to pay the assessment.

6.3.5 Periodic Payments and Discounts

Many property owners pay monthly mortgage payments. Typically, the mortgage holder escrows the assessment amount, much like property taxes; the monthly mortgage payment will include payment of outstanding assessments as well as property taxes. Under the Uniform Method, all payment options available to ad valorem payments are available to the payment of assessments. Since quarterly payment of taxes is provided for by statutes governing payment of property taxes, the same quarterly provisions must be made available to payment of assessments where the uniform Collection Method is employed. This payment option is provided through the Tax Collector's office.

The same discounts and penalties applicable to ad valorem taxes also apply to special assessments collected on the tax bill. Statutes provide for a 4% discount for taxes and assessments paid in December, with the discount dropping one percentage point each month until March 31. Assessments not paid by April 30 are deemed delinquent.

6.3.6 Use Of Tax Certificates

Assessments levied using the property tax bill collection method are treated for collection purposes just as ad valorem (property) taxes. This means that, just like property taxes, property owners who do not pay their special assessments could lose title to their property either through foreclosure or tax deed sale. Prior to foreclosure, taxes and assessments due on delinquent properties are auctioned to creditors at a tax certificate sale. These creditors, typically local citizens and small, specialty investment companies, bid to pay the taxes due and hold a note from the property owner at the bid interest rate for the amount due.

The property owner has two years to satisfy the note at the bid interest rate. The jurisdiction gets the arrears revenues in a timely manner without the cost of foreclosure. The certificate holder has a note subordinate to none against the property, and receives certain title advantages should foreclosure ultimately be required. By using the tax bill collection method for the sale of tax certificates before properties can be foreclosed or sold at tax sale, the delinquent property owner will receive up to a two-year grace period and avoid costly traditional foreclosure proceedings.