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Special Districts Q&A

 

What are Independent Special Districts?

Special districts are a form of local government created by a local community to meet a specific need. Inadequate tax bases and competing demands for existing taxes make it hard for cities and counties to provide all the services their citizens desire. When residents or landowners want new services or higher levels of existing services, they can form a district to pay for and administer them.

WHAT DO THEY DO?

Nearly 85% of California's special districts perform a single function such as sewage, water, fire protection, pest abatement or cemetery management. Multi-function districts, like community services districts, provide two or more services.

Types of special districts include:

Airport District
Cemetery District
Community Services District
Drainage District
Flood Control, Water Conservation
Fire Protection District
Healthcare/Hospital District
Harbor/Ports District
Improvement District
Irrigation District
Library District
Mosquito Abatement/Vector Control District
Police Protection
Reclamation District
Recreation & Park/Open Space District
Resource Conservation District
Sanitation/Sewer District
Transit District
Utility District
Water District
Waste Management Agency/Authority

HOW DO THEY OPERATE?

There are approximately 2,300 independent special districts in California, meaning they are governed by an independent board of directors elected by the districts' voters or appointed to a fixed term of office by either the city council or board of supervisors. Dependent districts are governed by other existing legislative bodies like a city council, or board of supervisors. Larger independent districts have a professional manager, similar to a city manager or county administrator, to assist the governing officials. The governing boards adopt policies that the general managers carry out.

HOW ARE THEY FUNDED?

Just over a quarter of California's independent special districts are enterprise districts. Enterprise districts operate more like a business enterprise, charging customers for their services. For example, a hospital district charges room fees just to their patients, not the district's other residents. Water districts charge water rates to their customers. Virtually all water, waste and hospital districts are enterprise districts. Non-enterprise districts provide services that don't lend themselves to fees because they benefit the entire community, not just certain residents. These districts provide services like parks, police and fire protection, pest abatement, libraries, and cemeteries and rely overwhelmingly on property taxes to fund their operating budgets. Although some non-enterprise districts like parks and libraries may charge fees for some services, these fees generate very little revenue. Additionally, both enterprise and non-enterprise districts can issue either general obligation or revenue bonds to help pay for capital improvements.

ACCOUNTABILITY

Special districts are primarily accountable to the voters who elect their boards of directors and the customers who use their services. However, although they are not functions of the state, the state also provides critical oversight to special district operations. Special districts must submit annual financial reports to the State Controller and must also follow state laws pertaining to public meetings, bonded debt, record keeping and elections.

Commonly Asked Questions:

  1. What's the difference between independent and dependent districts?
  2. What's the difference between enterprise and non-enterprise districts?
  3. What's LAFCo?
  4. Can special districts tax without consent?
  5. How does a special district get formed?

What's the difference between independent and dependent districts? (back)

Independent districts have their own separate boards of directors elected by the districts' own voters. Independent districts also include districts where the appointed boards of directors serve for fixed terms. The cemetery districts are independent districts with this governance structure. Special districts' governing boards can vary with the size and nature of the district. Most districts have five-member governing boards. Other governing boards vary from three to 11 members. The Metropolitan Water District of Southern California, which has 37 board members, is unique.

Dependent districts are governed by other, existing legislative bodies (either a city council or a county board of supervisors). All County Service Areas, for example, are dependent districts because their county boards of supervisors govern them.

What's the difference between enterprise and non-enterprise districts? (back)

Enterprise districts render services that are run like a business enterprise; they provide services that are used by individual customers. For example, hospital districts charge room fees paid by patients, not other residents of the district. Virtually all water, waste, and hospital districts are enterprise districts.

Non-enterprise districts provide services that don't lend themselves to fees. Activities such as fire protection and mosquito abatement benefit the entire community, not just individual citizens. No direct cost/benefit relationship exists in the services provided by non-enterprise district. Consequently, non-enterprise districts generally cannot charge user fees for their services. Non-enterprise districts rely overwhelmingly on property taxes for their operational expenses. Services usually provided by non-enterprise districts include fire protection, cemeteries, libraries, and police protection. Though non-enterprise districts rely primarily on non-fee revenue, certain services, such as a park district's pool, can generate a small amount of revenue.

What's LAFCo? (back)

Local Agency Formation Commissions (LAFCo) are responsible for coordinating logical and timely changes in local governmental boundaries, conducting special studies that review ways to reorganize, simplify and streamline governmental structure and preparing a Sphere of Influence for each city and special district within each county. The Commission's efforts are directed to seeing that services are provided efficiently and economically while agricultural and open-space lands are protected.

Can special districts tax without consent? (back)

No. 

Prop. 13 (1978) limited property taxes to 1 percent of property value. Many special districts get a share of these revenues. If a special district wants additional taxes, Prop. 13 and state law require 2/3 voter approval for "special taxes." A general obligation bond that raises property taxes also requires 2/3 voter approval. ("What's So Special About Special Districts?"; Senate Local Government Committee, Third Edition, February 2002, Page 12.)

How does a special district get formed? (back)

There are typically five steps in the formation of a special district:

  1. Apply - Registered voters in the proposed district apply to the Local Agency Formation Commission (LAFCo). The application must detail the proposed district's boundaries and services, any environmental effects, and financing options.
  2. Review & approval - The LAFCo's staff studies the application and schedules a public hearing. The LAFCo can approve or deny the proposal. If the LAFCo approves, the next step is to measure protests.
  3. Protest hearing - The LAFCo holds a second public hearing, this time to measure formal protests from voters and property owners. A majority protest will stop the proposal. Otherwise, there's an election.
  4. Election - Only the voters inside the proposed district's boundaries are eligible to vote at this election which usually requires a majority voter approval. If the proposal involves new special taxes, the measure needs 2/3 voter approval.
  5. Normal filing - If the voters approve the proposed district, the LAFCo and other officials file the formal documents to start the new district.