Seat Pleasant, Maryland, might have a pleasant name, but three businesses located there aren’t feeling very welcome. According to The Washington Post, the town is seeking to impose a special property tax assessment on only three properties, such that the businesses located there could see their taxes increase 800 percent. In response, the businesses claim the tax increase is an effort to drive them out of town. The case presents an interesting insight into the procedure for imposing special tax assessments.
Under Maryland law, towns and counties are authorized to impose a special assessment on a limited group of property owners to fund improvements which would benefit those properties. The amount of the assessment is supposed to reflect the enhanced value of the property resulting from the improvements made, and the assessment may not exceed the estimated value of the conferred benefit. The special assessment functions as lien upon the affected properties. These limitations mirror those in other states. In Virginia, special assessments can only be imposed on properties abutting planned improvements and cannot be higher than the benefits provided to the abutting properties. Arkansas has similar limitations but a very different method of imposing them — special assessment districts must be approved by a majority of property owners in the locality affected.
Seat Pleasant’s town charter allows for special assessments upon property in a specific area for “special benefits conferred upon the property” through the construction of water mains, sewers, sidewalks, and the like. The amount cannot exceed the value of the benefits, and the amount cannot exceed 25 percent of the assessed value of the property, including the future effect of the improvements. Before imposing the assessment through an ordinance, the town council must hold a public hearing after notice has been sent to the affected property owners. The notice should include the nature and extent of the proposed project along with its cost, and though the city clerk must demonstrate that notice was mailed, the failure of any owner to receive the notice does not invalidate the hearing. The assessment can be appealed to the Circuit Court for the county within ten days after it is approved by the council.
In this instance, the property owners claim they never received any notices about the hearing, which was held a week after the council proposed the ordinance on May 8. As for the benefit which motivated the assessment, the mayor of Seat Pleasant has said that the funds raised will “benefit the whole city,” according to the Post. The properties, a discount market, a liquor store, and a Chinese takeout restaurant, are all located close to the same intersection.
The property owners have filed suit, claiming that the imposition of the assessment violated the town charter and also their 14th Amendment rights by being deprived of property without due process of law. The property owners are also claiming that the selection of which business to assess was done in violation of their rights to equal protection. According to the owners, the town is predominantly African-American, but two of the business owners are Chinese-American and another is Jewish, and the owners believe that was the reason they were singled out for the assessment as the Post reports.
A pretrial hearing in the case is scheduled for April 2. The case is Franco v. City of Seat Pleasant Maryland, Docket No. CAL1731330, in the Circuit Court for Prince George’s County.
Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: What limitations, if any, should be placed on a local authority’s ability to impose special assessments?
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