Zachary Suri, Contributing Photographer

New Haven’s Special Services Districts are empowered by ordinance and state statute to tax residents and businesses within their jurisdiction, and they have received millions of dollars in government funding over the past year.  

New Haven is home to four of the state’s fourteen SSDs, distinct governing authorities created by municipalities to offset disparities in tax revenue. These SSDs — Chapel West, Whalley Ave, Town Green and Grand Avenue — play a critical role in the distribution of state and city funds. They finance street redesign and maintenance, affordable housing projects and supporting city economic development efforts.

Three of New Haven’s four SSDs did not respond to multiple requests for comment. Chapel West SSD declined to comment for this story.

According to professor Conor Clarke of the Washington University in St. Louis School of Law, special taxing districts in the United States date back to the rural American West in the 19th century, when few municipal structures existed to provide basic services like fire protection to residents. In the 20th century, such districts proliferated as a way to redistribute tax burdens within municipalities and rural areas. 

“That probably makes them the most numerous form of government,” Clarke told the News.

As of 2022, Connecticut alone has a total of 433 special tax districts — of which SSDs are one category — nearly double the 221 in 1967, but slightly lower than the all-time high of 453 in 2007, according to census data compiled by tax attorney Dan Smolnik. 

While Clarke acknowledges that the extremely localized “monopoly” of special taxing districts makes them “pretty useful” in a number of contexts, he worries that they fail a basic “saliency” test, operating largely beyond the scrutiny of residents who struggle to understand their role. 

Special tax districts have shaped Connecticut’s tax code since its founding

Special taxing districts in Connecticut are rooted in the state’s colonial history, according to Smolnik, who serves on the Hamden Economic Development Commission and is a former Connecticut appointee to the IRS Advisory Council. Governance in colonial Connecticut was defined by municipal autonomy, a principle that continues to shape the state’s tax code. The Fundamental Orders of 1639, which merged Hartford, Windsor and Wethersfield, lack any reference to a central state authority.

1677 legislation requiring municipalities to raise funds for public education through taxation allowed municipalities to fund public education without direct taxation where feasible. The roots of today’s SSDs lie in this exception.

Connecticut today has two major forms of special taxing districts. The first is special taxing districts designated for general “improvement,” or specific services like fire response or sewage. The second is special services districts, which by statute are empowered with much of the same authority as an independent municipality. In theory, Smolnik said, SSDs could even hire their own police force. In reality, though, most SSDs focus on general commercial concerns like street sweeping and beautifying streets.

Special taxing districts enable redistributive policy at a municipal level, Smolnik told the News. Unlike federal or state governments, the average municipality cannot simply raise taxes to provide an additional service. They risk pushing wealthier residents with greater economic mobility outside city or town limits.

SSDs are designed to raise funds from businesses and residents who benefit directly from their services. They also serve to target state and city funds to the neighborhoods most in need. SSDs are often located near large untaxed entities — like Yale — whose property taxes would otherwise have helped fund city services.

Cities in Connecticut, unlike many large cities, do not tax residents’ income. Connecticut is one of the richest states in America, as well as one of the most economically unequal. Some have advocated implementing a municipal income tax to better fund services like public education.

New Haven SSDs received significant funding in 2023, but raise questions about inequality 

New Haven’s four SSDs are “state statute enabled, and then they’re codified in the city’s code of ordinances,” Carlos Eyzaguirre, deputy economic development administrator at the City of New Haven, told the News. According to the Chapel West SSD website, SSDs like Chapel West are run by a board of commissioners chosen by the business owners under its jurisdiction.

SSDs face more city oversight than other types of special tax districts.

Each SSD board of commissioners votes on a mill rate — a tax on the value of property within the district — every year, usually amounting to somewhere between 1 and 3 mills. A mill is defined as $1 of tax per $1000 of assessed value. New Haven collects the additional tax with property taxes and forwards the funds to the SSD in question. Each SSD’s budget is subject to the city’s budget approval process and must be voted on by the Board of Alders. New Haven will occasionally supplement SSDs with voluntary payments during the budgeting process.

According to Eyzaguirre, New Haven SSDs receive a mix of funding from federal, state and city sources. 

In fall 2023, New Haven Mayor Justin Elicker announced funding for SSDs from congressional American Rescue Plan Act money and the state Community Investment Fund. In recent years, Grand Ave SSD has also received funds from the city’s Neighborhood Equity and Opportunity Challenge to hire a new executive director, a program paid for by federal ARPA funds.

In November, Whalley Avenue SSD, the oldest SSD in Connecticut, received $7 million for street and pedestrian infrastructure from the State Bond Commission, as well as a new affordable housing project with the Glendower/St. Luke’s Development Corporation.

However, these funds are usually not allocated directly to SSDs. Instead, SSDs “will help lead the discussion” on these projects, Eyzaguirre told the News.

Chapel West SSD has been a major recipient of state PILOT funds in recent years, a program designed to support municipal services in cities with large non-profit or government property holders exempt from property tax. Chapel West’s proximity to Yale — one of the largest non-profit property holders in the state — makes it an ideal candidate for such funds. 

Both Clarke and Smolnik worry that special taxing districts can heighten inequality, limiting services to neighborhoods and business districts with enough money and political clout to form and operate them. Special taxing districts centered on the protection of a beach, for example, one of the most common forms in Connecticut, can enforce parking bans on non-resident vehicles and limit the color of paint used on local homes and businesses.

Nevertheless, SSDs continue to play a major role in New Haven’s economic development and neighborhood planning.

“They really are the eyes and ears on the ground,” Eyzaguirre said.

Grand Avenue SSD, the newest SSD in New Haven, was established in Fair Haven in 2009.