Community Improvement Districts as a Method for Financing Infrastructure

Community Improvement Districts as a Method for Financing Infrastructure

It is more common for private businesses to be expected to bear the financial burden of implementing infrastructure upgrades necessitated by the relocation of existing operations or the actual development of the real estate. Those businesses which want money may get a loan from this site

When taking on new projects that require the construction of roads that connect to each other as well as sidewalks, curbing utility lines, street lighting, and other improvements, developers and businesses have been required to fulfill this obligation for a very long time. After completing these improvements, they must then make them accessible to the general public. In addition, there has been a recent push to require local governments and counties to collect impact fees from developers. These fees are meant to reflect the additional costs for infrastructure needs that arise as a direct result of a project, such as an increase in road width or traffic signalization, buffer parks, or highway ramps. The Georgia General Assembly passed comprehensive laws regarding impact fees in the year 1990. It is anticipated that this legislation would lead to an increase in the amount and frequency of these taxes.

Both of these approaches are examples of public policy that seeks to shift the financial burden of paying for public works projects onto private businesses, particularly those that need and profit from such changes. However, in the majority of instances, the cost of financing these public works will be paid by a conventional loan with a high-interest rate. Nevertheless, local governments are able to fund public works via the sale of tax-exempt bonds, which have much lower interest rates.

When private enterprises are required to create infrastructure and finance it at tax-deductible rates, the interest “subsidy” that was previously available to local governments is no longer available. In the past, before the passage of laws such as the Tax Reform Act of 1986, it was primarily up to the states to decide the categories of projects that qualified for funding through tax-exempt small-issue industrial development bonds. This was the case even after the passage of laws such as the Tax Reform Act of 1986. In addition, the state of Georgia permitted the use of bonds as a source of funding for a variety of projects, including office buildings, warehouses, industrial parks, private medical facilities, and office complexes. The issuing of small-issue bonds might provide some smaller ventures with the funding necessary to cover all of their development expenditures as well as the necessary infrastructure. However, only manufacturing facilities are eligible to receive these bonds, and the permission to do so will terminate on the 31st of December, 1991, unless and until it is renewed.

However, the use of tax-exempt bonds by private parties as a means of contributing to the financing of improvements in public infrastructure is an alternative that is mostly overlooked. On the other hand, this shifts the responsibility for paying back the loan to the private parties that stand to benefit from the improvement. Funds in this manner are referred to as special assessment funding. Communities Improvement Districts in Georgia are able to issue tax-exempt special assessment bonds for the purpose of financing infrastructure that is vital to the state. This includes the extension of municipal systems for water curbing, street paving, parks, sidewalks, parking and recreation areas as well as streetlights, public transportation, and sewer and stormwater disposal facilities.

Enhancement of the Community


The General Assembly of Georgia is given the power to sanction the formation of community improvement districts (also known as CIDs) for any city, county, or combination of cities and counties via the use of local law, as stipulated by the Georgia Constitution. A community improvement district is a kind of local government that is delegated the responsibility of delivering a full range of public services and maintaining public buildings.

The “Platinum Triangle,” located in Cobb County and including the Galleria shopping and entertainment complex, is the most well-known example of a CID in the state of Georgia.

In order for the CID to be able to support its facilities, it may be possible for the CID to borrow money without holding a referendum vote. The debt owed by the Community Improvement District is not a promise to the state or any county or city; rather, it is financed by the district’s capacity to levy taxes.

In order to generate revenue for the purpose of paying for the services above or facilities or for the repayment of debts made by the CID in order to support the aforementioned objectives, Taxes, fees, and assessments may be levied on industrial or commercial real estate that is located within the limits of each CID, and the administrative body makes these decisions of the CID. Annual fees, taxes, or assessments are normally capped at 2.5 percent of the total value of the real property that is assessed within the district. This cap applies to residential land, agricultural land, and forest property, as well as personal and intangible property. These taxes, fees, or assessments have to be equally dispersed across the district in line with the necessity for public services and facilities that are created by the development density on each individual piece of land. 

An agreement should be negotiated between the administration board of the community improvement district and the authorities that govern the city or county where the district of community improvement is situated in order to make the facilities and services that are provided to the residents of the neighborhood improvement district available. This agreement should make the facilities and services available to the residents of the neighborhood improvement district. The power of either the city or the county to provide services inside the community improvement districts will not be limited as a result of the agreement, and neither the city nor the county will be responsible for the facilities that are situated within the community improvement district. 

The authorities of the General Assembly need to pass a local law that outlines the steps that need to be taken in order to activate the community improvement district before it can be activated in any given area. Additionally, in order to activate a community improvement district, the authorities need to pass a law that outlines the steps that need to be taken before the district can be activated. The activation process begins with the adoption of an ordinance by the authorities of the city and county, as well as the permission of specific property owners. ” The responsible authority for the city or county where the CID is situated, or both the county and city if it will be situated within the unincorporated areas of the county as well as a city, is required to adopt a resolution that approves the creation of the community improvement district. This is required regardless of whether the CID will be located within the city limits or within the unincorporated areas of the county. The majority of owners of real estate that are subject to assessment within the district of community improvement are required to sign a written agreement to the establishment of the district, as are owners of real property that account for more than 75 percent in value of all real estate that is subject to assessment within the CID. CIDs have only been permitted by local law in a select number of jurisdictions up to this point; however, it is possible that legislation might legalize them for any jurisdiction.

According to the legislation that regulates the district, each community is required to establish an administrative board in order to be able to make changes that would benefit the district. At least one member of the board that monitors the district for community development must be appointed by the governing body of the city or county (or both) where the district is founded. This requirement ensures that the district is properly supervised. An election mechanism for additional posts within the administration board will be defined by the statute that regulates it. The people who own the bulk of the land in the region vote for the majority of the members of the administrative board. The legislation that regulates the district may also include any limits or prescriptive regulations limiting the services or facilities that are to be supplied or the debts that are to be incurred in the district.

Special Assessment

Funding Obtained Through the Use of Community Improvement Districts

A good number of real estate developers are aware of the tax-free private activity bond financing that is available for redevelopment projects, manufacturing structures, residential rental housing, certain transportation facilities, water, sewage, and solid waste facilities, and certain other types of facilities. Although the process is difficult, the end result is interest rates that are free from taxes and are quite appealing. These financings are subject to restrictions on the type and quantity of property that may be financed, the requirement for the allocation of a certain amount of bonds issued authorization (volume cap) that is available for the use of state funds, and the requirement to announce and hold an open public hearing, the restriction on the number of costs for issuance and the application of this alternative minimum tax on interest on bonds, as well as the tax disadvantages that are imposed. These restrictions and disadvantages include the requirement to allocate a certain amount of bonds issued authorization. In the case of specifically assessed bonds issued by a community improvement district for the purpose of constructing public-use infrastructure, it is possible that these constraints may not apply. A qualified bond counsel is able to design bonds in such a way that they qualify as “governmental bonds.” These bonds can then be issued without using any of the state’s allotment of the volume cap on bonds that are not subjected to an additional minimum tax. Furthermore, in certain circumstances and in small quantities, these bonds can be obtained by banks or other financial institutions.

Instead of paying for the public infrastructure associated with private developments through the payment of impact fees, developers and private businesses, as well as groups consisting of private companies and developers, may use community improvement districts in order to obtain tax-exempt financing for such infrastructure. In order to accomplish this goal, private parties will need to submit a petition to the governing body of the city or county in which the development is situated in order to propose the formation of a local improvement district. It’s possible for a district to be as small as a single plot of land, or it might cover an enormous amount of territory. In the event that the local law that governs the establishment of the CID allows the selection of a majority of the CID’s members CID executive body to the control of owners of the land, as it is in many cases, the landowners have the power to control the actions of the district’s community improvement and control the CID to establish a funding and enhancement program that meets the requirements of landowners. In addition, landowners have the ability to control the CID to establish a funding and enhancement program.

Regarding the facilities and services that the CID is able to offer, the district may be able to reach an understanding with the city or county that would allow it to enter into a cooperative agreement. For instance, the CID may build and install the curbs, public roadways, and traffic signals that are necessary for the upgrades, and the county would be responsible for maintaining these features. These enhancements may be financed by the CID by procuring its very own tax-exempt special assessment bonds, which serve as the obligation of this separate unit of governmental authority. The ability granted to the CID’s administrative board and CID executive board of directors to impose taxes, fines, and assessments on landowners who live inside the districts serve as collateral for the bonds. In the event that it is required and the bonds are formed in the appropriate manner, security from private sources might be offered to the bonds.

Because the bonds issued to fund these upgrades are returned via assessments or taxes levied on the property located within the district for the whole of the time that the financing is in place for the project. The outcome is precisely the same as it would be in the situation in which landowners had access to tax-exempt loans in order to fund the renovations. If this were not the case, developers would have to find their own means of financing and constructing the improvements before devoting them to the use of the general public. Alternatively, they could be required to pay the cost-of-impact fees to the local authorities in order for these improvements to be built.

Infrastructure that is sponsored through Community Improvement Districts (CIDs) and that is financed by tax-exempt bonds issued by the government must be used by the public. 29 For example, tax-exempt special assessment bonds cannot be used to finance the construction of utility lines or roads that, due to the nature of their design or placement, may only be used to serve the requirements of a particular landowner or subset of landowners. In most cases, tax-exempt bonds issued by a CID may be used to fund the construction of roadways and other public works projects.

Another advantage of the CID improvement over the impact fee is that developers generally have a greater amount of control or input over the specific improvements they construct, either through representation on the board of directors or through the processes used in the decision-making process of the board. These advantages come as a result of the fact that the CID improvement is based on a community improvement district. When compared to impact fees, one of the primary benefits of financing through special assessment districts is the fact that the assessments are paid off over the course of several years. Additionally, the responsibility to make the payments is typically passed on to the subsequent owners, who are typically the people who will ultimately use the property. Therefore, the cost of impact fees should not be included in the price that is initially set for the sale of a property that has been developed.


Community improvement districts have the potential to be flexible and efficient tools for the provision of services and facilities for commercial and industrial projects. Both the laws governing community improvement districts and the community improvement districts themselves are molded to fit the requirements of certain situations. A community improvement district allows for the potential of issuing tax-exempt special assessment bonds, which may then be used to pay for public infrastructure development projects. This is the principal advantage of having such a district. These bonds might be used as an alternative to impact fees or funding that is tax-deductible. When it comes to communities looking to reduce the cost of upgrading their infrastructure, developers, practitioners, and officials from the government should investigate the novel use of special assessment funding in an improvement district.

Daniel E. Murphy