S.S.A.

What is a Special Service Area (SSA)? Is it a tax? Is it a Special Assessment? Is it tax deductible? The answers to all the above is, NO!

Or is it just “disguised debt”.

If you have lived in McHenry County for several years, or if you live in an older neighborhood you may not have ever experienced an SSA. SSA's have become quite popular in recent years, as developers have begun to develop large tracts of land. It costs a developer $15,000 to $20,000 per acre to build the infrastructure on a tract of land before he can begin building and selling homes. A 400-acre farm, for example could cost 6-8 million dollars in infrastructure costs that the developers would have to borrow in the early stages of the project. These dollars wouldn't be paid back until several homes were actually built and sold. This is in addition to the amount that the developer actually paid the farmer to purchase the land.

This, you can see is a financial burden to the developers. Several million dollars of “up-front” costs could impede or slow down the rapid growth of our county. Well something had to be done about this. The developer needed to get someone else to pay these millions of dollars of “up-front” infrastructure costs……. Enter new legislation authorizing a concept called the Special Service Area, the SSA. The developer goes to the local municipality with his annexation request and asks that municipality to sell low interest municipal bonds to raise the money to build this new infrastructure. The money is given to the developer and he puts in the roads, sewer and water, sidewalks, etc, etc, etc. These municipal bonds now need to be paid back. The municipality records a lien on each lot in the new subdivision and the new homeowners get a 20 to 30 year debt payment of $1500 to $3000 per year until the bonds are paid off. The County Clerk adds this debt to the annual property tax bill each year. To make sure the debt is paid.

The developer has now solved a major problem and financial burden. He doesn't have to borrow the 6-8 million dollars to build the road, sewers etc.; and best of all, he doesn't even have to pay it back.

The new homeowner, on the other hand has a ‘disguised debt” for the next 20-30 years in addition to his mortgage. To make matters worse, the homeowner may have to reduce the selling price of his house should he ever have to move. This can be troubling if the home across the street is comparable is every other way except that it is not in the SSA, and it is also for sale. A potential buyer is certainly not going to pay the same price for your home if it comes with the remainder of a $40,000 debt.

In my opinion, SSA's are nothing more than a clever way of disguising debt and increasing the profit margin of developers. I can see no benefit either to the municipality or the homeowner. In fact, by floating these bonds, the municipality is using up limited bonding authority, which it may need for other capital projects. Also, the County Clerk is forced to incur heavy costs of administering the collection of the homeowner debt, and the poor homeowner is being forced to pay for municipal infrastructure costs over the next 20 to 30 years.

I hope this has been helpful. Now as you may read about SSA Bonds in the paper you'll know a little more about them, or at least how I feel about them.

John