Special Improvement Districts
The City of Billings has chosen to utilize the practice of Special Improvement Districts (SID) for the construction of certain public improvements. This practices ensures that tax dollars are spent on an equitable basis and keeps general taxes as reasonable as possible.
What is a Special Improvement District?
A Special Improvement District (commonly referred to as an SID) is a group of properties that become a legal entity in order to construct public improvements. Some improvements that can be constructed through an SID include curb and gutter, sewer main, storm drain, street paving, and water main. Improvement costs are carried by property owners within the SID boundaries.
For additional information regarding SIDs, please contact the City Engineer’s Office at 406-657-8231.
Initiation of a District
One or more interested property owners may request creation of a district. An informal petition may be obtained from the City engineer's office. Although the petition may be submitted bearing the signatures of any number of property owners, it is most helpful if at least 51% of the property owners within the proposed district boundary indicate an interest in having the improvements constructed.
Neighborhood meetings to inform property owners about the district may be set up. The City engineer's office, or a consulting engineer, will often attend meetings to provide information because property owners may have technical questions concerning boundaries, improvement design, or the method of assessment.
The City recognizes these issues can be influencing factors in the decision to create the district, so every effort is made to have City staff on hand to answer property owners' questions.
After the City receives a property owner petition, the City must follow specific guidelines established by State Law to create the district.
Step 1: Resolution of Intent to Create
After review by appropriate City departments, a report is forwarded to the City Council regarding:
- Assessment and bonding data
- Cost estimates
- District maps
The City Council bases their decision to adopt the Resolution of Intent to Create upon this information.
Step 2. Public Notices
After the City Council adopts the Resolution of Intent to Create, the City will publish a notice in a local newspaper and mail notices to all affected property owners within the proposed district. A public hearing date is also scheduled after the conclusion of the 15-day protest period.
Step 3: Right of Protest
State Law gives all property owners within a proposed district the right to protest. The 15-day protest period allows property owners to submit formal written protest to the City Clerk. A 50% protest (75% on sanitary sewer) from affected property owners can kill a district.
Design & Plan Review
The City Engineer's Office will authorize the design and plan review after the City Council passes the Resolution to Create the district. The time factor varies from one month to several months depending upon the complexity of the improvements.
The City Clerk advertises for construction bids when the design is complete. After bids are opened, the City Engineer's Office will recommend that the City Council award the construction contract to the bidder with the lowest qualified bid. The bid must be within the cost estimate included within the Special Improvement District (SID) creation documents.
The length of time for actual construction of the improvements varies with the type of improvements. The City Engineer's Office oversees the improvements to ensure they are constructed according to City standards and specifications and completed in a timely manner. A one-year warranty period is provided to ensure no future problems arise.
Funding comes from the sale of bonds. These bonds are sold through a public bid process similar to the construction bids. Bonds are usually sold to the bidder offering the lowest interest rate.
Because the City's general fund is not designed to subsidize the costs of special improvements, it is necessary that those receiving the benefit of the improvements bear the costs. The factors involved with costs and assessments to property owners include:
- Advertising and Notices
- Construction Costs
- Design Engineering
- Finance Administration
- Special Improvement District (SID) Administration
The district's overhead costs may be as much as 35% to 40% of the actual improvements construction costs.
Assessments are spread upon the affected properties as provided by State Law. The SID does have some flexibility in determining the method of assessment, so it is beneficial to property owners to be involved with the neighborhood committee and meetings before the SID is created.
Once bids are awarded, notices are mailed to property owners providing the option of paying the entire amount within 30 days from the date of the notice. If the SID is not paid on the due date, it is automatically placed on individual property tax rolls. The property owner will then pay off the SID over a period of years, generally 12 to 15 years.
Interest is determined by the bond sale and is charged against the unpaid principal.
After construction is complete, the final costs are tabulated. If they are lower than originally assessed, the City will adopt a resolution amending the cost and lower the costs of the properties. Any property that paid early will receive a refund and others will have future assessments lowered.