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to Special Improvement Taxes!  You probably won’t see the fact that a subdivision has special improvement taxes advertised by a Developer or Real Estate Company. You might see it in the fine print. It is a subject that you should have an understanding of prior to purchasing property. Just what is a special improvement tax? When a piece of property is developed utilities, streets, etc are called improvements. When a Developer pays for these improvements on the front end there are no special improvement taxes. The other option is for the Developer to create a Special Improvement District for the Subdivision. This district will have a bond issue. The money from those bonds is used to pay for some or all of the improvements. Also, the developer is allowed to pocket a significant percentage of the money from the bonds as profit. The bonds are then repayed by property owners through additional taxes on their yearly property taxes. As the purchaser of a piece of property, you should consider the effect that these have on the ultimate price of the property. Lets say that the annual special improvement taxes on a lot are $500 per year. The bonds should be paid off in twenty years. That is $10,000 dollars in taxes that you should add to the lot cost. On a $30,000 lot that would equal a $40,000 total cost. Now consider a subdivision that does not have SI taxes. This developer charges $35,000 per lot. In essence, the $30,000 lots seem like the better deal until the SI taxes are added in to the cost. What if the developer offers to pay the yearly taxes? Consider a recent case in Maumelle, Arkansas. Just before the property tax deadline homeowners received notices that they owed the SI taxes or they would be considered delinquent. The developer claimed that there was no more money in the accounts left to pay the taxes and he was not responsible for them. The homeowners were forced to pay the remaining taxes in order to keep their homes. Perhaps we are old fashioned. Perhaps we are leaving money on the table. We pay for all of our subdivision improvements on the front end. When you purchase a lot, the price on the contract is the true sales price. We are proud of this fact. We don’t believe that you should be burdened with additional property taxes or have to sort through fine print trying to figure out how much you are actually paying for a piece of property. This up front honesty is one reason we have been successfully developing neighborhoods in Saline County for over twenty years. |
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