THE PATH TO SPECIAL TAXING DISTRICTS BEGINS ON PRIVATE ROADS

By: Eugene E. Cederbaum

Those who live on private roads in Connecticut can take steps to reduce controversies which arise when money is needed for road maintenance or improvement and to assure that each property owner pays a fair and equitable portion of the cost.

State law permits those who reside on private ways in Connecticut to form special taxing districts and thus be imbued with the same power to levy and collect taxes for road maintenance and repair as enjoyed by municipalities. Moreover, if the requirements of the law are met, the board of selectmen or city council must grant requests to form taxing districts. Inexplicably, although the law has been on the books since at least 1801, relatively few districts have been formed.

If a petition is received by a board of selectmen or city council describing the geographic boundaries and purposes of the proposed district and is signed by at least 15 voters residing within the proposed district, the board or counsil must schedule a meeting to approve the petition within 30 days. At the scheduled meeting, there must be a minimum of 15 resident voters present and prepared to vote on the petition. Two-thirds or more must vote in favor formation. This is the only prerequisite for approval by a board of selectmen or city council.                 

Once formed, the district meets to elect officers, sets a date for an annual meeting, passes by-laws, adopts a budget and fixes the tax rate. Just like municipalities, it assesses taxes, which are due on July 1 of each year. The property tax for each home is determined by assessing to each property owner his or her proportionate share of the budget by reference to the district’s grand list (total amount of assessed value of property within the district).  It is just like the municipality determines taxes. 

Unlike road associations where “dues” or "assessments" are generally voluntary and may cause enforcement problems (if they are collectible at all), taxes laid on property by special taxing districts are immediate liens on the property. The lien may be extended for 15 years.  If necessary, the district can foreclose on the tax lien in the same manner as a municipality. Moreover, the clerk of a special taxing district has the same powers as a town tax collector to collect and enforce the payment of any tax. Usually, however, a delinquent district taxpayer will pay his or her tax at the time they sell or refinance their property.Interest on unpaid taxes accrues at the rate of 18% per annum or 1½% a month if not paid by Aug. 1 of each year.

Anyone who has experienced the frustration of attempting to focus neighbors on the need for road maintenance and repair or has pondered possible liability for injuries occurring on a private road in need of repair must certainly see the practical advantages of forming special taxing districts. Unanimity is not required to form a district, pass a budget or levy and collect taxes. Very effective procedures exist for the collection of unpaid taxes.

The issue of liability for injuries on a private road is particularly important. This writer recommends that each homeowner insure against such claims either by obtaining coverage under a homeowner’s policy or an umbrella policy or both. In addition, districts which this writer has formed have obtained liability insurance in the district’s name further insulating individual homeowners.

Lastly, almost as icing on the cake, since payments for road maintenance and repair constitute a tax, they are currently deductible as real property taxes on income tax returns, to the extent permitted by law. Even the costs of forming the district may be incorporated into the first district budget and paid from tax collections. It should be noted that the IRS periodically and critically reviews the tax deductibility of special district taxes.

There is no "downside" to the formation of special taxing districts apparent to this writer, who has worked with property owners to form district for many years. The state legislature has simply done a good deed for those living on private ways. The formation of a district usually can be accomplished within 90 days.

If you have any questions about this article, please contact me.

© 2001, 2008, Eugene E. Cederbaum

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