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Special Service Areas
A Special Service Area (SSA) is a taxing mechanism that can be used to fund a wide range of special or additional services and/or physical improvements in a defined geographic area within a municipality or jurisdiction. This type of district allows local governments to establish such areas without incurring debt or levying a tax on the entire municipality. In short, an SSA allows local governments to tax for and deliver services to limited geographic areas within their jurisdictions.
SSAs are a unique financing tool that can be used to support and implement a wide-array of physical improvements such as roads, water, sewer, storm water, curbs and gutters. Different developments within Yorkville have used Special Service Areas to issue bonds in order to pay for such infrastructure improvements. The bonds are not a general obligation of the City and neither the full faith and credit nor the general taxing power of the City is pledged to the payment of the bonds. Under Special Service Area Bonds, only the property owners that benefit from the improvements are assessed an additional tax that is used to pay debt service and administrative expenses on the bonds. The SSA tax is collected through the property tax system, and is calculated on the basis of benefit, but is NOT a part of the Illinois real property tax system.
- Developer "exchanges" costs of improvements funded with bonds for a lower sales price
- Lower down payment
- Total monthly payments similar to conventional mortgage where infrastructure is included in the price of the home
- Gives the homeowner the flexibility of assuming the long-term, tax exempt rate financing or paying it off.
The FAQs of SSAs
- How is the special tax spread among property owners?
The special tax will be a pre-determined amount for each class of property (i.e. single family, townhome, duplex, etc.). The amount will be based on the benefits derived by the property owner as determined by a consultant or engineer. The annual special tax can be structured to increase over the life of the bonds; however, the maximum annual tax is pre-determined for each year and will be disclosed by the builder using a purchase contract rider.
- Who will bill and collect the tax?
Kendall County bills and collects the tax in conjunction with the regular
semi-annual real estate bill.
- Is the Tax deductible for the homeowner?
Please consult with your tax advisor on this issue. Generally, because the special tax is a lien against the property, the interest portion of the special tax is deductible for federal income tax purposes.
- Who is responsible for the special tax?
The property owner of record is responsible for the payment of special tax from the time they take possession of the home. Be aware that the Special Service Area tax is NOT payable in arrears like general ad valorem taxes. For example, you are responsible for paying the 2002 tax levy in 2003 for the 2003 Special Service Area taxes; prorated for the year you lived in the home during 2003.
- How does the failure of one homeowner to pay his tax affect other homeowners?
Failure of the developer or any other property owner to pay the special tax has no impact on the maximum special tax for any other homeowner.
- Can I prepay my Special Service Area Tax?
Each homeowner can make the decision independently whether to pay the special tax semi-annually or prepay it and include it in their mortgage. Remember the special tax is pre-payable at any time, which will relieve the property of the lien. In order to determine the prepayment amount you can contact David Taussig & Associates, a Special Service Area Administrator, at 1-800-969-4382.
- How is the special tax disclosed to the purchaser?
Each homeowner will be required to sign a rider of which a rider may only be used by the builder explaining the special tax that also discloses their maximum tax. In addition, a lien will be filed with the County so that the special tax will show up on the title report.
- When is the Special Service Area Tax due and who will notify me?
The Special Service Area Tax is normally due in June and September along with general property taxes. It will appear as a separate line item on your tax bill from Kendall County. Your mortgage lender may be able to escrow amounts to pay the Special Service Area Tax.
- Aren't these public improvements included in the price of the home?
In communities that have not financed the public improvements with special service area bonds, the cost of the public improvements would be factored into the cost of the home. In communities with special service area bond financed public improvements, the price of the home should be reduced to account for the Special Service Area Tax.
- Does my regular real estate taxes pay for these Public improvements?
No. The regular real estate taxes are used to pay for City services.
- How much will my tax be?
The annual special tax is limited to the "Maximum Tax" as set forth in the establishing ordinance, and if you are the original home purchaser, in the rider to your sales contract. Taxpayers typically pay approximately 90% of the Maximum Tax. The Maximum Tax is subject to a 1.5% increase per year. However, please be advised, if your special service area is not taxed at the Maximum Rate, the increase from year to year may be greater than 1.5%. You can contact David
Taussig and Associates for additional information.
- Why would Special Service Area increases not be consistent over the life of my payment?
The amount required each year is equal to the interest and principal on the bonds are due plus administrative expenses less projected earnings. In addition, some homeowners have chosen to prepay the Special Service Area Tax, thereby reducing the total amount needed each year. However, the amount due will not exceed the maximum tax amount due for each area.
- What is the term of bonds?
Under the federal tax law, the term of the bonds cannot exceed 120% of the life of the improvements. Typically, the term of the bonds is 30 years, similar to the homeowner's mortgage.
- What is the security for the Bonds?
The bonds are secured from the special tax and all funds and accounts established under the Trust Indenture including a debt service reserve fund equal to 10% of the par amount of bonds.
For additional information on Special Service Areas please contact the United City of Yorkville at 630.553.4350 or David Taussig and Associates at 1.800.969.4382 for specific SSA questions. You can also click here to review the city's Special Tax Bond Policy.
Information supplied by William Blair and Company.