Special Improvement District: A Tool for Targeting Investment

CDFS-1566
Date: 
06/15/2010
Gregory A. Davis, Extension Specialist, Community Development

A community, neighborhood, or business district that desires public improvements and services beyond the level currently provided may want to investigate a Special Improvement District (SID). Most states formalized legislation enabling the creation of such taxing districts—also known as Business Improvement Districts, Special Services Areas, or Community Improvement Districts—in the 1990s. While the concept originated in Canada in 1970, the authority to create a SID in Ohio was outlined in Ohio Revised Code (ORC) 1710.02 as of June 27, 2000.

What is a SID?

A SID is an area of land within which property owners pay an additional tax or fee designated for specific services or improvements within the district's boundaries. Property owned by government and churches is exempt unless representatives of these properties request in writing to be included. The SID can exist within a township, a municipal corporation, or any combination of contiguous townships and municipal corporations.

How is a SID created?

Owners of real property within the proposed SID or within an existing qualified nonprofit corporation must petition the legislative authority in order to create a SID. Creation is initiated in one of two ways: (1) owners of at least 60 percent of the front footage (excluding church or government property) petition the appropriate legislative authority, or (2) owners of at least 75 percent of the land area within the proposed SID petition the appropriate legislative authority. Note, however, SIDs created for the purpose of developing and implementing plans for special energy improvement projects require petitions signed by all property owners within the SID area. By resolution, the legislative authority approves or disapproves the petition and articles of incorporation within 60 days.

If a qualified nonprofit corporation does not already exist, one must be created. The corporation's articles of incorporation must be approved by resolution of each participating political subdivision. The owners of real property within the SID boundaries become members of the nonprofit corporation.

How does a SID work?

A board of trustees or directors directs the activities of the nonprofit corporation. In the case of a SID within a municipality, the mayor and an individual appointed by the legislative authority of the municipality serve as directors. Moreover, the SID membership elects at least three additional directors who own property within the SID.

The directors guide the implementation of a plan for public services and improvements that benefit the SID. The plan is typically submitted with the petition to create the SID. Per ORC, the plan may describe how the SID will

  • hire employees and professional services.
  • contract for insurance.
  • purchase or lease office space and office equipment.
  • carry out other necessary actions to initially form, operate, or organize the district and the nonprofit corporation to govern the district (ORC 1210.02).

The improvements and public services described in the plan may range from lighting, signage, and parking lots, to holiday lighting, landscaping, and snow removal. They are financed via a special assessment (above and beyond existing property taxes) collected by participating municipalities and townships. Every property owner in the SID (excluding government and churches, unless they request in writing to participate) is assessed whether they signed the petition or not. Assessments can be determined by overall square footage or by linear (front) footage. Per ORC, property owners cannot be assessed for more than ten years after the initial improvement plan is approved.

Conclusion

In situations where property owners desire public services or improvements beyond the level currently extended, ORC 1710.02 provides for the creation of a SID. The SID enables a community, neighborhood, or business district to tax itself for specific improvements and services. A SID can capture the energy of property owners motivated to make community improvements, and can provide benefits to the community-at-large with no additional financial burden to local government coffers.

References

Mitchell, J. (2008). Business Improvement Districts and the Shape of American Cities. Albany: State University of New York Press.

"Ohio Revised Code," codes.ohio.gov/orc (accessed June 11, 2010).

"Ohio Public Law Update, Special Improvement Districts" The Squire Sanders Legal Counsel Worldwide Network, www.ssd.com/publications/detail.aspx?pub=3289 (accessed June 11, 2010).

Program Area(s): 
Ohioline http://ohioline.osu.edu