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MRSC Inquiries

LIDs

    LIDs - Assessments


    1. What are the LID assessment alternatives?

      RCW 35.44.030 and 35.44.040 relate to the application of the zone and termini method of assessment. Attention should also be given to RCW 35.44.047, which provides that a city or town may use any other method or combination of methods to compute assessments which the city deems to be more fairly reflective of the special benefits to the properties being assessed. Some LID's have used a combination of assessments in the development of a funding program for their project. For example, one district used a method that consisted of three separate charges which were totaled to determine the total assessment.

      Sometimes, however, a municipality may determine that the assessments, which must be less than the benefits to the property, can be more uniformly assessed by dividing the total cost by the number of properties involved.

      Statutes specify that the assessment per parcel must not exceed the special benefit of the improvement to that parcel, which is defined as the difference between the fair market value of the property before and after the local improvement project. In addition, the assessments must be proportionate to one another. A corollary to these principles is that property not benefitted by the improvements may not be assessed. No matter what assessment method is used - per parcel, front foot, area, zone termini, traffic volumes, special benefit appraisal, etc. - the courts will be concerned only with these criteria. Even if a project lends itself very well to a front footage assessment (i.e., uniform lots, similar zoning) or is not large enough to warrant a full-blown special benefit analysis (see the LID Basics article), it is wise to check a few strategic parcels with a limited appraisal. This will prevent unpleasant surprises at the final assessment roll hearing.



    2. Are deferral options available for low income and senior citizens?

      Of legitimate concern are senior citizens and those who are economically disadvantaged. No councilperson wants to vote for a project that will put someone out of their home. Two deferrals are referenced in the statutes. RCW 84.38 provides for assessments to be deferred indefinitely for qualified senior citizens. RCW 35.43.250 and 35.54.100 provide for a deferral of up to four years for economically disadvantaged property owners, as defined in the formation ordinance. In both of these cases, the deferred assessment does not go away, but becomes a lien against the property.

      Deferrals and other options for relief should be publicized early in the process, with a concerted effort made to identify those who may need such relief. Elected officials also need to know these options so that they can advise citizens who may call them. Reference these options in the public hearings and enter any documentation available regarding your efforts to identify property owners eligible for deferrals.



    LIDs - Financing of LIDs


    1. Are LIDs only financing tools?

      Yes. The most important point to realize about LIDs is that the entire LID process is about financing infrastructure improvements, not constructing them. Nowhere in the LID statutes will you find information on technical feasibility, design, cost estimates, construction management expertise and project closeout requirements. It is assumed that a city will do a superb job of design, estimates and construction management for the infrastructure improvement, just as for any other project not financed by an LID.

      LID processes lead, ultimately, to the sale of bonds to investors and the retirement of those bonds via annual payments by the property owners within a district. Goals of the LID process are twofold: to present a bond portfolio to investors that will entice them to invest at as low a rate of return as possible; and to assess property owners as fairly as possible in relation to the special benefit received.

      LIDs take money to administer. Interim financing incurs interest costs. Bond sales involve bond counsel, underwriters and other expenses. All these expenditures must be added to the share of project costs that LID participants are expected to assume. Unless reminded at times through the process, LID participants may unfairly compare project costs from other, non-LID projects to the total cost to be assessed.



    LIDs - LID Procedures


    1. What is an LID?

      Local Improvement Districts (LIDs) are special assessment districts. These districts are formed as a means of assisting benefitting properties in the financing of and payment for needed capital improvements. These special assessment districts are formed to permit the improvements to be financed and paid for over a period of time through assessments on the benefitting properties.



    2. How are these special assessment districts formed?

      • The Resolution of Intention method which allows the legislative body of a municipality to initiate an LID, and the
      • Petition method which allows property owners to petition their city to initiate an LID.



    3. What are the general procedures to form an LID by the Resolution method?

      LID's are most often formed by the Resolution of Intention method. The municipality is made aware that a capital improvement project is desired through letters, telephone conversations, public testimony, regulatory requirements, etc. The municipality should evaluate the potential project and its need and estimated costs. Then the general steps leading towards formation by the Resolution of Intention method would be:

      1. Determination of the extent of property owner support through a postcard survey or informal petition.
      2. If support exists, a general informational meeting is held to present the extent of the project, the estimated total cost, and the estimated assessment upon each benefitted property.
      3. An environmental checklist should be prepared to determine the effect of the project on the environment.
      4. A preliminary assessment map and preliminary assessment roll is prepared.
      5. A resolution is prepared declaring the intention of the legislative body to order the improvement, and setting a date for a formation hearing of the proposed LID.
      6. RCW 35.43.140 requires that notice be given by mail at least 15 days prior to the date fixed for the hearing to all benefitted (or assessed) property owners. A period of three to four weeks is normally provided.
      7. The resolution is published for two consecutive weeks in the official newspaper, with the first publication at least 15 days prior to the hearing date.
      8. An ordinance forming the LID is prepared and reviewed by the city attorney and bond counsel.
      9. Usually the formation ordinance is submitted to the legislative body in sufficient time to permit their final action on the formation ordinance at the formation hearing, should they choose to proceed with the project.



    4. How is an LID formed by the Petition method?

      The Petition method permits property owners to initiate the formation of an LID. The steps are essentially the same, except that:

      1. An informal petition of at least 10 percent of the benefitting properties is submitted to the legislative body for its review and approval.
      2. If found to be needed, the city usually prepares a formal petition for circulation by those submitting the initial petition.
      3. The formal petition, when executed by a majority of the assessed property owners in the proposed assessment district, is submitted to the legislative body.
      4. The next procedures are similar to those in item Nos. 3 through 9 under the Resolution of Intention method.
      5. What percentage of property owners may stop an LID formation?

      After passing the ordinance creating the LID, there is provided a 30 day protest period, during which written protests may be submitted by the assessed properties. If the owners of the property within the proposed district who are subject to 60 percent of the dollar amount assessed file written protests, the project may not proceed. (RCW 35.43.180).



    5. What is the criteria for formation of an LID?

      There is no specific criteria required for the formation of an LID. The general nature of an LID is dependent upon the benefitting properties and the estimated cost of the planned improvement. Cities have wide discretion in establishing boundaries for an LID. Our legal consultants have previously responded to inquiries on this subjec, by stating that they are not aware of any reason why an LID could not be formed even if it was only for one parcel of property. Because an LID is to include all benefitted properties, it is possible that only one parcel of property could be benefitted by a specific improvement.

      However, in general, the city should evaluate the cost of the proposed improvement and the estimated charge per benefitted parcel of property. The state statutes specify that the cost per parcel may not exceed the benefit of the improvement to that parcel. If an appraiser estimates that a proposed improvement, such as a sanitary sewer system, would only increase a property's value by $1,500, then an assessment greater than $1,500 on that property should not be considered in evaluating the LID formation.



    LIDs - Utility LIDs


    1. What is a ULID?

      The difference between ULIDs and LIDs is that, in addition to the assessments on the benefitting properties, utility revenues are also pledged to the repayment of the ULID debt.

      Statutes provide that a LID can be converted to a ULID after formation; the reverse is not possible.