We don’t yet know much about the Manhattan City Commission’s direction on the complicated subject of special assessments. But we certainly appreciate their careful, inclusive approach.
As you might know, special assessments are taxes that the Manhattan city government puts on new houses. Those taxes pay back the city for the cost of building roads, water and sewer pipes, and other public infrastructure needed to serve newly developed areas.
That’s an unusual way to do things. In most communities, developers have to pay those costs up-front. Then they pass along those costs to the home buyer. Essentially, that means higher up-front costs of houses, but also no long-term obligation to pay special assessments.
In Manhattan, the city government carries those up-front costs. That adds to the city’s debt burden, and of course there’s the risk that the city might build roads and sewers for a new neighborhood only to see the developer go bust, and then get left holding the bag. The truth is that the default rate in Manhattan on special assessment debt is very, very low. But still, some developers leave special assessments unpaid for years before selling off their lots, and so the city has some cost there.
So it’s reasonable to explore ways to improve the situation. Simple steps include forbidding developers who have failed to pay special assessment taxes on unsold lots from developing new properties. More ambitious plans could involve getting the city out of these debt arrangements more quickly. Mayor John Matta and Commissioner Wynn Butler have certainly led the charge to cut city debt, and this seems one area in which it could be done thoughtfully and productively.
We were heartened to hear, during the commission’s annual planning session, that commissioners are interested in exploring this from a variety of viewpoints. If the city gets out of the business of fronting infrastructure costs and then collecting a tax to pay that back over many years, it will change the real estate business, the banking business, and the appraisal business. It affects taxes. And it could also create inequities between neighboring properties.
And, of course, it could drive up the up-front cost of housing. That is part of the reason the system of special assessments has been used here for so many years — it helped hold down housing costs, and encouraged local developers who might not have the resources big-city developers would have to front the costs of developments.
Tweaking or overhauling the system is not a bad idea. It just needs to be approached carefully and thoughtfully. And we appreciate the fact that this City Commission appears to be headed in that direction. It’s just one example of a commission that seems to be able to work together despite differences.