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House Research Department February 2004 Special Assessments Page 9 • other miscellaneous funds and sources. As with special assessments, the revenue collected may be used to pay for the improvement directly or to repay the bonds issued to pay the costs of the improvements. How Are Special Assessments Different from Property Taxes? Special assessments are a form of taxation and may be paid using the same mechanism and at the same time as property taxes. However, there are a number of differences between them: • the basis for determining the amount charged • what real property is subject to the charge • whether personal property may be charged • whether there are any statutory limits • deductibility for income tax purposes Market value v. benefit. Property taxes are based on the market value of the property—ad valorem taxes. Special assessments, on the other hand, are determined without regard to cash valuation. They are based on the benefit to the property. The formula used by a local government to determine how much of a project or service will be paid for by special 0 assessments will typically use factors such as per foot of frontage amount after finding that the improvement provides substantially the same benefit on that basis to adjacent properties. Whatever factors are used, the formula used must approximate a market analysis for the specific local improvement's For example, two houses located in the same taxing jurisdictions, one with an estimated market value of$200,000 and one with estimated market value of$500,000, pay significantly different property taxes. But if each home had 150 feet of frontage on the street, and the city was installing curb and gutter to that street,both homes would pay the same amount for the assessment for the improvements since the assessment charge is based on footage and not on the market value of the property. Taxable property v. all real property. Property taxes can be levied only on taxable property, but special assessments are imposed on nearly all real property that is benefited. The state constitution does not exempt any property from special assessments for local improvements. Any exemption must be statutory and there are few exceptions.' 25 Bisbee v. City of Fairmont, 593 N.W.2d 714,719(Minn.App. 1999)(special assessment was invalid on its face because front-footage method calculation based on average costs of projects from prior years did not approximate a market analysis and was unrelated to particular costs). 26 State v. Roselawn Cemetery Assn.,259 Minn.479,481, 108 N.W.2d 305(1961)(tax-exempt property subject to special assessment unless statutorily exempted as is cemetery property under specified circumstances 111 under Minn. Stat. §§ 306.14,307.09);but note that federal property is exempt,Op. Atty. Gen.408-C(Sept.21, 1953). Several statutes specify that one governmental unit must pay special assessments imposed by another. See, e.g., Minn. Stat. §473.448 (the Metropolitan Council's transit operations or special transportation services are exempt from all taxation,licenses,or fees imposed by the state or by any political subdivision but are subject to