Mississippi’s murky attempt at combining HOAs and Community Improvement Districts

By Deborah Goonan, Independent American Communities

 

Residents of many planned communities developed 25-50 years ago find that infrastructure, amenities, and streetscapes of their neighborhoods are in need of a facelift, major repair, or wholesale replacement. However, the vast majority of HOAs lack reserve funding to make needed or desired improvements. And local governments are equally cash-strapped, with strong political pressure to avoid raising taxes. 

What’s the solution?

In response to reader concerns and curiosity about various special tax districts, IAC will be exploring the pros and cons of shifting costs from private homeowners’ associations (HOAs) to public or quasi-public funding and taxing entities.

 

Today’s post explores the demise of MS Senate Bill 3045, for the fourth year in a row.

You can read MS SB3045 here:

https://legiscan.com/MS/bill/SB3045/2018

http://billstatus.ls.state.ms.us/documents/2018/html/SB/3000-3099/SB3045IN.htm

Why did SB3045 fail in the Mississippi Legislature?

In short, the feature that makes SB3045 controversial, is its proposal to empower HOAs to decide how to spend tax dollars raised by the City of Jackson, by way of its creation of a Community Improvement District (CID).

In most states, CIDs are created and administered by local governments — either at the municipal or county level — after a majority or supermajority of property owners in the proposed district petition elected officials to consider establishing neighborhood improvement zones.

Before the local government can make a resolution to create a CID, there must be a public hearing, for the purposes of setting the boundaries of the district and providing public notice, and an opportunity for consituents to voice their opposition.

In this excerpt, MS SB3045 states, in general, how a CID is to be established: (emphasis added)

SECTION 2. (1) (a) The governing authorities of the municipality are authorized to establish one or more special local improvement assessment districts and to levy and collect an annual special assessment not to exceed six (6) mills against only that taxable real property that is included within each such district, provided that such a special assessment shall not be levied or collected unless the governing authority (i) shall have adopted a resolution designating an area a special local improvement assessment district and specifying the maximum millage to be levied on taxable real property in the district under this section, and (ii) has received a petition in favor of the levy of such assessment signed by the owners of at least sixty percent (60%) of the taxable real property in the proposed district. For purposes of this subsection, “owners” means those persons possessing a majority of the ownership interest in a piece of taxable real property.
(b) Such special assessment shall be excluded from the limitations imposed under Section 27-39-321, Mississippi Code of 1972. Before adopting such resolution, the governing authority shall hold a public hearing with respect thereto after public notice by publication at least twice, once a week for two (2) consecutive weeks in a newspaper of general circulation in the municipality, with the first publication being not less than fourteen (14) calendar days before the date specified for such hearing, such notice to include the date, time and place of such hearing, the proposed boundaries of such special local improvement assessment district and the maximum special assessment to be levied on property in such district under this section.

Notice that only property owners decide whether or not to create a CID, not all registered voters. That’s because CID assessments are collected as property tax. Rates are often based on the assessed value of real property, but, in some cases, each property owner is assessed a fixed charge annually.

Keep in mind that a CID is a majority rule proposition. Even if you vote against a CID, if you’re in the minority, once the district is approved by the local government, you will be legally obligated to pay CID assessments to the city or county, just as any other tax.

Of course, the same can be said of any government tax — individuals don’t normally decide to increase taxes on themselves, their elected officials make that decision, and deal with the political fallout.

Proponents of CIDs and other tax districts claim that, unlike regular property taxes for essential services, property owners at least have an opportunity to weigh in on whether or not to pay for additional improvements.

Once approved, the local government usually manages a CID, and has the authority to raise funds by issuing bonds, setting property assessments, collecting from property owners, and disbursing funds for improvement projects. As a public entity, the CID is subject to the same constraints as city or county government: meetings and financial records must be open to the public, contracts are determined by a competitive bidding process, and conflicts of interests and self-dealing by elected official are prohibited by law.

Here’s how a CID would work under SB3045, without an HOA involved. (my emphasis added)

SECTION 3. (1) (a) Upon the adoption of a resolution establishing a special local improvement assessment district as set forth under Section 2(1) of this act, the governing authorities of the municipality shall be authorized to exercise the following powers within any special local improvement assessment district:
(i) To provide for the planning and design of local improvements and the coordination of landscape design on different parcels of property, including the preparation of working drawings for the construction, acquisition and installation of local improvements;
(ii) To purchase, acquire, install and construct local improvements;
(iii) To purchase and acquire easements, air rights, scenic rights-of-way and other interests in land on which local improvements can be placed and which are necessary or desirable in connection with any local improvements;
(iv) To provide for the management of local improvements, including, but not limited to, providing maintenance and services within the district; and
(v) To contract with a nonprofit local association duly incorporated under the laws of the State of Mississippi to undertake all or a portion of the activities within the special local improvement assessment district.

 

However, SB3045, as drafted, creates and HOA ‘alternative’ for establishing CIDS, where HOA owners petition the city of Jackson for an improvment district within the boundaries of the assocation-governed community.

The HOA alternative would ultimately require the City of Jackson to hand over CID assessments it collects to HOAs, giving volunteer HOA boards the power to spend the money as they see fit.

Note the difference!

2) (a) Upon the adoption of a resolution establishing a
special local improvement assessment district as set forth under
Section 2(2) of this act, the homeowners’ association representing the property area in the district shall be authorized to exercise the following powers within the special local improvement assessment district:
(i) To provide for the planning and design of local improvements and the coordination of landscape design on different parcels of property, including the preparation of working drawings for the construction, acquisition and installation of local improvements;
(ii) To purchase, acquire, install and construct local improvements;
(iii) To purchase and acquire easements, air rights, scenic rights-of-way and other interests in land on which local improvements can be placed and which are necessary or desirable in connection with any local improvements;
(iv) To provide for the management of local improvements, including, but not limited to, providing maintenance and services within the district; and
(v) To contract with a nonprofit local association duly incorporated under the laws of the State of Mississippi to undertake all or a portion of the activities within the district.

 

The HOA-CID controversy was recently highlighted on local television news.

Pay particular attention to the Lieutenant Governor’s  statement below. The ‘un-elected representatives’ he refers to are HOA board members. (my emphasis added in the report below.)

Of course, Lt. Governor Tate Reeves appears to believe that most people who own property in an HOA are rich. Nothing could be further from the truth.

The truth is, owners of modest means, whose properties happen to be under the rule of HOA governance, might actually benefit from establishment of a CID.

But only if city council doesn’t merely serve as a tax collector for the HOA.

 

 

Jacksonians debate Community Improvement Districts 

WBRC FOX6 News – Birmingham, AL

Published: Tuesday, March 27th 2018, 3:49 pm EDT
Udated: Tuesday, March 27th 2018, 10:14 pm EDT
Posted by Marsha Thompson, News Anchor

JACKSON, MS (Mississippi News Now) –
Some view it as a tax, others the answer to serious challenges facing the city of Jackson.

They are called Community Improvement Districts.

Jackson’s business, community leaders and neighborhood associations stood behind passage of Community Improvement Districts as the answer to keep Jackson property values vibrant with neighborhood improvements.

Jackson business and community leader Leland Speed said Jackson is challenged.

“We need to use every technique and every source of funding we can get,” said Speed. “If we can get people to adopt their own neighborhoods, fix their own potholes, what’s to complain about?”

The CID allows Jacksonians to voluntarily assess themselves and businesses up to a six percent millage fee to improve and upgrade areas in their districts. Jackson Councilwoman Virgie Lindsay is a proponent of CID’s for neighborhood improvement and upkeep.

“The sticking point, I think, is it is viewed by some as a tax, and I understand that,” said Lindsay. “But if you are going to call it a tax, let’s acknowledge that it is a self- imposed tax.”

Speed blames the Lt. Governor for stonewalling a vote on Community Improvement Districts. It has failed the past four years.

The Lt. Governor’s office responded in a statement saying:

The Lieutenant Governor personally knows people who are living on a fixed income and can’t afford to pay six more mills because they already live in one of the highest-taxed jurisdictions in Mississippi. Some rich people may be fine paying more taxes, but they have the ability to voluntarily contribute to their homeowners’ association right now.

Most conservative Republicans in the Senate oppose raising people’s taxes and turning over tax dollars to un-elected representatives. He applauds those who contribute to homeowners’ associations to make their community a better place.

Also, the bill did not die in committee last year. It died on the calendar because no one from the Jackson delegation would come to the podium to defend it.

— Read (Video):

www.wbrc.com/story/37821386/jackson-community-improvement-districts-debate

More reports:

Neighborhoods press Tate Reeves for vote on community improvement
Sarah Fowler, Clarion Ledger Published 3:58 p.m. CT March 27, 2018 | Updated 8:37 a.m. CT March 28, 2018

Community improvement district supporters rally for legislation
Posted by: Jack Weatherly in Economic Development, Govt/Politics, Jackson, MBJ FEATURE, NEWS March 27, 2018