Michigan's Special Assessment Processes

Michigan Property Consultants L.L.C., provides information on special assessment processes and rules on both this website and via articles published in property tax administration magazines. Links to articles published for property tax administrators follow. First are links to two published articles. One distinguishes between the "ad valorem" special assessment and the traditional land based assessment. The other cites a number of rules applicable to the special assessment process including the steps to be followed and the apportionment methodology. The links are followed by an article written for you as a reader of this web page.

• For information on distinguishing the ad valorem property tax from the special assessment click here click here
• For important rules regarding the formation and apportionment of special assessments click here

We now begin: "Basics for the levying of a special assessment and to evaluate its fairness"

      Regulations governing the adminstration of special assessment taxes come from many sources. In addition, there are several groups of persons and agencies administering special assessment levies within Michigan. The practical impact of that circumstance is confusion ... resulting in special assessment administrators becoming frustrated; and in many cases, taxpayers getting angry ... believing they not being treated fairly.

     The purpose of the brief information which follows is to provide the reader with a generalized background for the levying of a special assessment. Remember, books have been written about just one of these laws. The information which follows is a guideline, to be used in connection with a close examination of the specific statute which authorizes the special assessment levy and in consultation with experts such as tax assessors, attorneys and those with special knowlege of appropriate facts.

Certain elements of a special assessment levy are concisely spelled out in this language from a routine court case:

A special assessment is not a tax. Rather, a special assessment is a specific levy designed to recover the costs of improvements that confer local and peculiar benefits upon property within a defined area. Kadzban v City of Grandville, 442 Mich 495, 502; 502 NW2d 299 (1993). Special assessments are sustained upon the theory that the value of property in the special assessment district is enhanced by the improvement for which the assessment is made. Knott v City of Flint, 363 Mich 483, 499; 109 NW2d 908 (1961). Municipal decisions regarding special assessments are generally presumed to be valid. In re Petition of Macomb Co Drain Commr, 369 Mich 641, 649; 120 NW2d 789 (1968). A special assessment will be declared invalid only when a party challenging the assessment demonstrates that there is a substantial or unreasonable disproportionality between the amount assessed and the value which accrues to the land as a result of the improvements. Kadzban, supra at 502, quoting Crampton v Royal Oak, 362 Mich 503, 514-516; 108 NW2d 16 (1961). The party challenging the special assessment also has the burden of establishing the True Cash Value (TCV) of the property being assessed. MCL 205.737 The TCV is equivalent to fair market value, CAF Investment Co v State Tax Comm, 392 Mich 442, 450; 221 NW2d 588 (1974), and is defined as the usual selling price at the place where the property to which the term is applied is at the time of the assessment, being the price that could be obtained for the property at private sale ... MCL 211.27"

Rema Village Mobile Home Park v Ontwa Twp, Michigan Court of Appeals case No. 256395 unpublished.

     Here are the fundamental elements of any special assessment levy:

• If a special assessment process is to be used, the special assessment levy cannot be made unless it is preceded by of a series of public notices and hearings which strictly comply with the authorizing statute including the acquisition of signatures to petitions
• There must be a "finding" (a legally proper determination) that a project to be specially assessed is "necessary" as defined by the appropriate law
• Once the necessity is declared and proper initiation procedures have begun, a series of actions based upon "facts" must be completed. The term "facts" has a specific legal meaning and must be complied with.
• Costs that legally may be assessed are to be determined and revealed to the public at the appropriate meeting(s)
• In Michigan, once properly determined, costs eligible to be recovered through a special assessment levy are to be apportioned (shared between those required to pay)
• The apportionment is made in two general ways: costs assessed to a government unit (or units) at-large, and to each property which has received a special "benefit"
• The term "Benefit" takes three historically identified forms in the special assessment process: relief from a burden, a special adaptability of the land or an increase in market value.
• Michigan's Supreme Court ruled in 1986, and then later affirmed in subsequent rulings, that the only justification for a special assessment levy is an increase in a property's market value
• It is illegal to levy a special assessment on personal property; only real estate can be forced to carry the burden of a special assessment
• The apportionment of eligible costs is made in two distinct geographic areas: A SERVICE DISTRICT and a SPECIAL ASSESSMENT DISTRICT
• The Service District is area from which any At-large special assessments are to be recovered
• The Special Assessment District (S.A.D.) is the geographic area in which individual properties can be assigned a financial burden termed a special assessment
• The entire amount of costs to be recovered can be levied without any "at-large" levy --- if real estate located within a special assessment district has its total market value increased in an amount equal, or "reasonably proportionate" to, the costs to be levied
• A Service District is defined as the geographic area which is connected to the public improvement project; the connection is established through an analysis predicated upon legal, economic and scientific "facts"
• The Special Assessment District (S.A.D.) is the geographic area in which parcels of real estate can be shown to have had an increase in their individual market values arising specifically, uniquely and directly as a result of the public improvement for which the special assessment is to be made
• The unique, specific and direct increase in value each property receives is legally termed a "benefit" under Michigan's laws and court decisions.
• The apportionments to benefitting properties may be made using any of a number of methodologies. Whichever methodology is employed must follow legal, legislative and state agency guidelines and must meet certain tests if challenged.
• Within the special assessment process, there are two distinctive hearings regarding the potential apportionment: a hearing on which properties are to be included within the special assessment district; and a hearing for the apportionment of taxes on properties (including eligible costs to be assessed)
• Appeals from either hearing are made in a manner directed by the authorizing statute.
• As a general rule, there are two "superior" forums for appeals: (1) to the Michigan Tax Tribunal and (2) to the circuit court
• As a general rule, appeals involving the police powers of the state are appealed to a court of law; special assessments not involving police powers are appealed to the Michigan Tax Tribunal
• The window of opportunity for an appeal is very narrow: between 10 and 30 days
• As a general rule, the actions of the government unit are protected by a legal concept known as a presumption of validity --- this presumption can be difficult to overcome
• However, once the presumption of validity is overcome, the burden of proving the appropriateness, reasonableness and any other test required by law falls upon the unit of government
• There are two general forms of special assessment: (1) a levy in which the benefit is to the land and is levied in full or increments as a fixed dollar amount; (2) an "ad valorem special assessment" in which the levy is based upon a property's Taxable Value and a specific millage rate
• Real estate may be lost to government for non-payment of a special assessment in the same way real estate may be seized for non-payment of ad valorem taxes
• Except for ad valorem special assessments which utilize the value of the land plus improvements to determine the special assessment burden, the test for the amount of "benefit" is a change in the land value from a public improvement

Michigan Property Consultants expresses the information stated above, and in all other parts of the company's web site, based upon the company's many years of experience with property taxation and special assessment issues. The reader is cautioned that Michigan Property Consultants L.L.C. does not practice law and is not competent to offer legal advice. The reader is cautioned to seek appropriate legal advice and the advice of all other appropriate professional (for example, engineers and accountants) before making a decision influenced by the text recited above. The statements are made for informational purposes and do not constitute (nor are they intended to constitute) professional advice involving any reader's specific situation.

     Michigan Property Consultants is a small firm, proud of its mid-western work ethic and service. We want to provide our clients with the benefits of professional, personal service founded on years of experience in matters of property taxation. We don?t sell real estate, we don?t appraise real estate, we are not lawyers and we don?t do income taxes. We do focus on matters of real property taxation and special assessment administration within the state of Michigan ... to such an extent that our CEO has been selected for many years to Chair a property tax appeal board, to teach assessment classes and to serve on various advisory committees. His written work has been published in many forums and has been honored by his peers

For fee based assistance with your problem call us at 989 793-7373.