Have you ever noticed a confusing line item on your property bill paying for neighborhood sidewalks or the local fire department? It might not be a regular property tax. Right now, Michigan’s municipal finance system is broken. In fact, Michigan places more restrictions on how local governments can raise revenue than nearly any other state. To survive and continue providing essential services, many local communities are turning to an alternative funding tool called a special assessment.
What is a Special Assessment?
Put simply, a special assessment is a charge placed on a property to fund a specific service or improvement that benefits the property owners in that designated area. You’ll generally see two forms: A traditional special assessment divides the full cost of a public improvement project among the properties within the specific district. An ad valorem special assessment is generally charged to everyone within a local government’s boundaries to fund broader services like fire and public safety.
Why Do They Matter?
Local governments mainly fund themselves through general property taxes and state revenue sharing. However, state revenue sharing has significantly declined over the years. At the same time, state constitutional rules strictly limit property taxes. For example, the Headlee Amendment of 1978 prevents local taxes from increasing without direct voter approval. Because special assessments are technically not standard taxes, they bypass many of these strict rules and offer a lifeline for struggling local governments.
How Do They Affect You?
Whether you own a home or lease an apartment, special assessments likely impact your wallet:If you are a property owner, you will directly bear the financial burden of paying this charge. Renters are affected too, because landlords typically pass these extra costs on to tenants through higher rent. One major downside is that special assessments do not require voter approval, which can make them unpopular in the community.
Standard property tax exemptions do not apply to special assessments, making them harder to avoid. If you feel you were assessed unfairly, your main recourse is to appeal to the Michigan Tax Tribunal. Despite their unpopularity, they do have some distinct advantages: The costs for a service or improvement are paid by those who directly benefit from it. They are less restricted than standard property taxes, and they can be used alongside other funding sources to finance a community project.
Policy Implications and the Future
Local government reliance on these assessments is skyrocketing. Between 2010 and 2023, revenue from special assessments by Michigan local governments grew by 70%. Townships are the heaviest users, collecting $118 million from special assessments in fiscal year 2023 alone. Research shows that when local governments lack robust revenue from property taxes, state revenue sharing, and user fees, they are much more likely to implement a special assessment. To begin to fix this broken financial system and reduce the sudden financial burden on citizens, two policy changes should be implemented:
1) Local governments should share service costs, such as a smaller township contracting fire services from a neighboring city. Eliminating the need to levy a special assessment to cover the service cost.
2) The state should amend the Michigan Constitution to raise the minimum amount of state revenue sharing available to local governments. A constitutional amendment would be less sensitive to legislative budget cuts, ultimately making local governments less reliant on assessing special charges to their residents.
Disclaimer: This article is adapted from research originally conducted in 2025 for my Master of Public Policy project at Michigan State University.