Municipal Service District FAQ

Frequently asked questions about Municipal Service Districts


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What is a Municipal Service District? Why would we create a Municipal Service District? What services are offered? Who pays for a Municipal Service District? How is a Municipal Service District created? How many Municipal Service Districts are in Raleigh, and what do they cost?

What is a Municipal Service District?

A Municipal Service District is a defined area within a municipality or county where an additional property tax is charged. The additional property tax is charged in order to provide extra services. These extra services could include maintenance, revitalization, environmental improvements, and more. 

Why would we create a Municipal Service District?

The majority of services offered by local governments are funded by property taxes. The municipal tax rate is not always enough to cover the costs of additional services needed in some, but not all, areas. For example, Municipal Service Districts are most commonly created to support downtown revitalization. Downtown businesses and residents may agree to pay slightly more in property taxes for improvements specific to the district.  

What services are offered?

Each Municipal Service District provides its own set of services. According to North Carolina law, districts can be set up for: 

  • Beach erosion control and flood and hurricane protection works 
  • Downtown revitalization projects 
  • Urban revitalization projects 
  • Transit-oriented development projects 
  • Drainage projects 
  • Sewage collection and disposal systems 
  • Off-street parking facilities 
  • Watershed improvement, drainage, and water resources development projects  

The most common reason for a municipal service district is downtown revitalization. 

Who pays for a Municipal Service District?

A Municipal Service District is funded through property taxes. Property taxes are paid by any property owner – commercial (business owner) or residential (homeowner) – in the district’s boundaries. Properties that are exempt from property taxes (such as religious or charitable institutions) do not contribute to the Municipal Service District.  

How is a Municipal Service District created?

In Raleigh, City Council votes to approve or deny the district. The process follows these steps: 

  1. Prepare a report to show a map of the proposed district. It includes information on why the district is requested, and a plan for the additional services that the district would provide. The report is usually created by City staff following Council’s direction. 
  2. Hold a public hearing  at least four weeks after releasing the report.  
    1. This gives the public time to review the report, which is available in a public location.  
    2. Public notice must be given at least one week before the date of the hearing. 
    3. A notice must be sent to all property owners in the proposed district at least four weeks before the date of the hearing.  
  3. Vote to approve or deny. City Council votes to either approve or deny the establishment of the Municipal Service District.

How many Municipal Service Districts are in Raleigh, and what do they cost?

In Raleigh, there are currently two Municipal Service Districts. The Raleigh Municipal District (Downtown) tax rate is .0786 cents per $100 of property value. The Hillsborough Street Municipal District tax rate is .15 cents. 

By state law, the City Council can alter the district tax rate each year. City Council may also choose not to levy the tax in a particular fiscal year without actually abolishing the district. 

If you want to learn more about the ins-and-outs of Municipal Service Districts, check out this Municipal Service District resource from UNC

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