What is a Special Assessment Fund?

A special assessment fund is used by a government to track the expenses associated with an activity or project. The funding for this fund comes from a special assessment levied against property holders. The related activity or project is usually for the benefit of those parties taxed via the special assessment.

Example of a Special Assessment Fund

A subdivision of the city of Nevermore is not hooked up to the city’s sewage system. The residents of the subdivision have had to maintain backyard septic systems instead, which are expensive to install and periodically maintain. The residents request that the city extend its sewage system into their area. This is an expensive proposition, and will only benefit the residents of that subdivision, so the city council agrees - as long as the subdivision pays for it.

The city’s planning commission estimates that the sewage system extension will cost $20,000 for each additional property connected, and there are 80 homes in the subdivision. Therefore, the total cost of the project will be $1.6 million. Based on this information, the city assesses each of the benefiting taxpayer households $20,000. These funds are then placed in a special assessment fund that was created for this specific project. As construction work proceeds, contractor billings are paid out of this fund. At the end of the work, the fund is closed.