Compensating Local Governments for Loss of Tax Base Due to State Ownership of Land
Service Charges in the City of Rochester
The City of Rochester has been a system of service charges since the early 1900s. Under this program, special assessments are levied on all properties that benefit from a specific services, regardless of their status for ad valorem tax purposes. Such assessments are authorized through provisions in the city charter that authorize ordinances for "local improvements," expenses of which can be assessed in whole or in part upon the property deemed benefited.25
Article 13 of the charter contains the procedure for imposition of these charges for "local improvements," defined as "any public improvement or work, the expense of which ... is directed by the Council to be assessed in whole or in part upon property deemed benefited..." (this is in contrast to municipal improvements, the expense of which is charged to the city at large). Except for purposes of street paving, maintenance, or repair, local improvement ordinances may be adopted by an affirmative vote of the majority of the City Council. The Council may accept petitions from property owners for the purpose of proposing improvements or work that would benefit their properties and others nearby. The petitions must include a description of the improvement or work requested, the boundaries of the proposed assessment district, and a proposed method for allocating cost among properties in the district. Public hearings are held on all ordinances requiring local improvements at the next regular meeting of the council following the ordinance's introduction. Notice of such hearings must be published at least three days prior to the hearing date.
Every local improvement ordinance must contain:
- A description of the proposed work or improvement;
- The limits of the benefit district;
- A designation of the amount of the cost to be borne by the district;
- A statement of the amount, if any, of the cost chargeable to the city at large and of the fund from which it is to be paid;
- A statement of the specific method to be used for distributing the assessable portion of the cost on the property within the assessment district, to reflect the relative benefit to each (emphasis added);
- For capital improvements, the number of installments for which the assessment is payable, as well as the interest rate to be charged. The final installment cannot be due more than 15 years following the completion of the improvements;
- Whether assessments will be levied after completion of work based on actual cost, or before the completion of work based on estimated cost; and
- The procedure to be used in billing the local assessments to property owners within the assessment district, whether on the tax bill or by separate bill.
At the time the City Council is voting on adopting a benefit assessment ordinance, it will have available from the Director of Finance a roll of all local assessments required for levying charges for each service to be provided. The roll must state the amount of the assessment for each parcel of property within the proposed assessment district. The Council will make changes or corrections to the roll before confirming the benefit district.
Payments made on all local benefit assessments are placed by the city treasurer in a local improvement fund or funds, used exclusively in providing the district improvement for which they were assessed. Any deficit or surplus remaining after completion of work for which assessments were levied for ongoing services is carried over in the fund for the next fiscal year, and is included in the amount to be levied as assessments in that period.
At the present time, local improvement ordinances are provided for the following services throughout the city: street and lot cleaning; sidewalk repair, street snow removal; sidewalk snow removal; and refuse removal. Except for refuse removal, charges are assessed for these services in direct proportion to each parcel's footage abutting the street or sidewalk. The front footage is listed on the roll for each property benefiting from the service.26 Refuse removal service is chargeable on a residential unit basis, up to three family units, with a single family residence counting as one unit, a two-family residence as two units, etc. Non-residential parcels are serviced either by private refuse collection services or by the municipal service, with municipal charges similar to those of the private companies.
In addition to services provided throughout the municipality, Rochester has established several improvement districts in specialized areas. The largest single group is for grassed medians on certain streets. Owners of property abutting the street containing the median are assessed charges for beautification, lawn mowing, and litter removal, based on front footage of property abutting the street containing the median. Another charge is for operation and maintenance of ornamental street lights in certain areas, assessed also on the amount of parcel footage abutting streets illuminated by these lights. Other districts exist for restriping and repair of certain parking facilities, primarily in and surrounding the Central Business District as well as for special improvement zones in this area. These districts are funded by charges that are based on a formula that includes the ad valorem assessments of the properties that benefit from the service in question.
Rochester's Central Business District contains at least two improvement districts that include multiple special services, such as landscaping, special lighting, and walk- ways. Assessments in these districts are based on a number of factors including ad valorem tax assessments, proximity to improvements, and gross area, as weighted by parking facilities. There is even a special benefit charge assessed on owners of property in a portion of the Central Business District in order to defray costs of hiring pedestrian tour guides during certain months of the year.
A total of $8.4 million of benefit charges and assessments was levied in the 1994 fiscal year (excludes refuse collection charges, amount unknown). The largest share of this revenue came from snow removal charges ($4.9 million), and significant charges also resulted from street cleaning services ($2.3 million). With more than $8.4 million of the City's income from service charges, the revenues generated were thus more than one--fifth as large as its total property tax levy of $43.3 million.
To date there has been no judicial review of these local ordinances. The most likely reason for the lack of court challenges is that the special assessments adopted by Rochester appear demonstrate a logical and understandable relationship between the amount of the charge levied and the amount of the benefit received. This contrasts markedly with the Service Charge Law which exempted many privately owned exempt properties that clearly benefited from services provided, while charging state-owned properties such as highways and bridges that actually generated benefits.
At the present time, Rochester does not impose its benefit assessments on state property. According to an official, a decision was made in the past to exclude the state properties because, given the State Comptroller's requirement for special written notification of any assessments (under Section 19 of the Public Lands Law), it was not worthwhile to collect them. Even if the claims were submitted, there is some doubt as to whether the state would pay the charges related to snow removal because of a legal opinion of the Attorney General.27
Rochester's decision to exclude state properties from charges must be viewed in relation to this City's exempt property roll. Only three percent of the exempt value in Rochester -- a municipality with reliable, up-to-date assessments -- consists of state-owned property, with the remaining exempt property owned primarily by local government entities and community service organizations. Given this relative unimportance of state-owned property, it is perhaps not surprising that Rochester decided to forgo assessments on it in order to control administrative costs.
Local officials in Rochester are generally satisfied with their system of service charges and they have indicated that the public has raised little objection to itemization of costs and the budgeting of services separately from the general budget. In fact, they believe that separate itemization makes citizens more aware of the costs of providing local services and more likely to demand that they be provided efficiently and competitively.