Special Districts: Local Control or Special Interest Control?

According to Melissa Maynard of Stateline, many financially stressed state and local governments are turning towards creating special districts in order to provide services. Indeed 885 special districts have been created since 2007.

Today there are 38266 special districts across the nation and represents more than 40 percent of all local government.  The problem is that this is a concept that is not well known beyond policy wonk circles.  After a frustrating experience with the sanitation district, Kentucky State Auditor Adam Edelen decided to dig further into this realm of government. His team released a 2012 report entitled “Ghost Government” and found that in Kentucky, special districts spent 2.7 billion each year and maintained about 1.38 billion in reserves. Based on that report the Kentucky legislature decided to provide more training to special district managers as well as put in place tighter audits and financial reports.

According to Larita Killian of the Center for Business and Economic Research, “The first special districts were created during the New Deal, as a way to quickly pump money into the economy without having to go through multiple layers of state and local government.” Today, these districts have proliferated for a myriad of reasons, including “creating more efficient service territories” or “circumventing state rules on borrowing and taxing” or “the state is just not able to fund the service anymore.” One of the best features of a special district is that in many instances they are able to get their revenue directly from only the users of that service. It is also supposed to represent more accountable local control. Said Hasina Squires of the Special Districts Association of Oregon, “We fund one service, we do it well, and people are either happy with it or unhappy with it."

However not everyone is loving these special districts. After finding out that her sanitary district number 2 was charging double the rate for her constituents than nearby similarly sized neighborhoods, Laura Mallay tried to take on the special district. Her referendum was defeated. According to Laura, “The problem with special districts is they tout local control when they’re really about is special interest control…No one actually votes. They are able to fly under the radar.”