A SPECIAL ASSESSMENT TAX is levied by a city council or a county board of supervisors, with the voters' approval, for the cost of specific local improvements such as streets, sewers, irrigation or drainage. It differs from property taxes in that property taxes finance the general functions of government, whereas a special assessment is levied once (usually) by the city, county or "improvement district" for a particular work or improvement.

The official body that levies a special assessment is called a SPECIAL ASSESSMENT DISTRICT BOARD. According to state law, any self-governing area, such as a city or county, may establish a special assessment district for the purpose of levying a special assessment.

As a rule, a district issues its own bonds to finance particular improvements such as water distribution systems, parking facilities, street lighting and many other types of developments. To repay the funds borrowed through the bonds issued, these districts have the power to assess all lands included in the district on an ad valorem basis. Such loans constitute liens on the land until paid. These liens can be foreclosed by sale similar to a tax sale and have priority over private property interests.

Special assessments are for improvements only. If you purchase a lot for $40,000 and assume a $1,200 assessment bond, your cost basis for income tax purposes would be $41,200.

The STREET IMPROVEMENT ACT OF 1911 finances street and highway improvements through an assessment to property owners based upon the frontage they enjoy facing the improved street. Also called the Bond Act of 1911, it allows San Diego real estate owners, through the issuance of municipal bonds, up to 30 years to pay off their portion of the improvement assessment.

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