Forming Special Districts for Local Empowerment

Though it's often used by special interest groups for commercial ends, special districts are an established mechanism neighborhood groups could use to assert more control over their local communities.

| September/October 1981

  • 071 special districts - Ogerepus - Fotolia
    Special districts are one way neighborhood groups can assert more control over commerce in their area.

  • 071 special districts - Ogerepus - Fotolia

Can the people of an urban neighborhood form their own government? The answer to that question is absolutely, through a little-known legal mechanism called special districts. Such legislature created structures are real, functioning governments, and their inherently small size makes them well-suited for control by neighborhood/citizen organizations.

Special districts are hardly a recent phenomenon. In fact, there are already close to 24,000 of the miniature legal systems in the U.S. Furthermore, many of these organizations supply goods and services—running everything from airports, cable TV stations, and baseball teams to hospitals, libraries, and theaters—so there is no reason why more grassroots neighborhood groups can't make use of special districts to control their own productive enterprises.

Unfortunately, though, that's not often the case. More commonly, the governing structures are used to help special interest groups of one stripe or another get private credit subsidies. For example, California real estate developers have, for decades, reduced their capital expenses by organizing special housing districts to float tax-free general obligation bonds that finance those costs. Many of the groups (some no larger than a single subdivision of new housing) were formed with little more than the votes of the developers and some of their business cronies, friends, and relatives ...but the debts incurred by such districts become binding on anyone who later buys into the housing projects. Land promoters and developers are thus able to get much of the risk capital for their enterprises without having to draw on their own credit lines.

Over the years, there have been many variations on this private interest government scheme, including water districts that primarily serve agricultural interests at public expense and road districts that—by means of similar funding maneuvers—make mining possible in formerly inaccessible areas. Under different circumstances, though, the governments can be remarkably progressive tools.

As a hypothetical example of a locally controlled special district, let's consider a residential section of Baltimore that contains several dozen neighborhoods and one old shopping strip. In recent years, retailers in the area have been losing business to newer outlying shopping centers. The result has been that the available services have deteriorated as many of the local businesses failed and the unrented storefronts were allowed to run down.

One way to speed the renewal of this dying area would be to build a new combined retail shopping center and parking garage. Of course, that proposal raises questions about how the planned structure would be financed, and who would own, operate, and reap any profits from the facility.

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