Introduction to Non-Ad Valorem Assessments

Commercial property owners often focus on their ad valorem property taxes—the ones based on property value—but there is another part of the tax bill that can easily be overlooked: non-ad valorem assessments. Also known as direct or special assessments, these charges are not based on your property’s value [Gov]

Instead, they are flat or formula-based fees for specific services or benefits tied to the property— for example, trash collection, sewer service, or lighting districts. These line items are added on top of your regular property taxes [Gov]. Understanding these charges is important because they can significantly affect a commercial property’s expenses. Even more compelling, owners may discover refunds if errors or overcharges are identified.

Defining Non-Ad Valorem (Direct) Assessments

What They Are

Non-ad valorem assessments are fees for services or improvements benefiting the property, rather than a percentage tax on its market value. In Los Angeles County, for example: “A Direct Assessment is a non-ad valorem amount charged on a per parcel basis, which may encompass annual charges for services, improvement district charges, community facilities district charges (Mello-Roos), and special taxes and fees.” [Gov].

Practical Examples

These assessments typically fund services like trash collection, sewer treatment, landscaping, or local infrastructure bond repayments. They are set by local agencies or special districts, not by the county assessor’s valuation process. Unlike the 1% base property tax (limited by California’s Prop 13)— which is calculated on your assessed value—these direct assessments have their own basis. They might be a flat fee per parcel, a rate per square foot, or be based on usage metrics (such as water consumption). As a result, one small apartment building and a nearby large hotel could both pay the same flat lighting district fee, or a sewer charge might reflect actual water usage.

Key Difference: Value-Based vs. Benefit-Based

Ad valorem taxes are tied to market value—if your property is worth more, your taxes increase. In contrast, non-ad valorem assessments are benefit-based. You pay for the specific services or improvements your parcel receives, regardless of your building’s market value. [Gov]. This distinction matters because any errors in those usage or benefit metrics can lead directly to overcharging—and potentially large refunds when corrected.

Why Non-Ad Valorem Assessments Matter to Commercial Owners

Substantial Costs

For owners, brokers, asset managers, and tax professionals, direct assessments can mean major expenses. On some commercial tax bills, the total of these special assessments can reach tens or even hundreds of thousands of dollars annually. For instance, sewer fees alone for a large hotel or shopping center can exceed $100,000 per year^*.

Potential for Overcharges

These fees often go unchecked because they can be buried in the tax bill details. Busy owners might assume all charges are automatically correct. However, since direct assessments are not capped by standard valuation limits, they can grow or go unnoticed over time. Typical valuation appeals do not address errors in direct assessments, so any correction must be pursued separately.

Hidden Savings

Your total tax bill usually consists of the 1% ad valorem tax, voter-approved debt, and direct assessments. If that last category is never audited, substantial refunds may be missed. Owners who proactively monitor these line items often uncover significant refunds without affecting their property's assessed value. By ensuring the service-based charges are accurate, you pay only your fair share and can sometimes recover large sums from past overcharges. [Gov].

Closing Thoughts

Non-ad valorem assessments have a direct impact on your bottom line. Understanding and verifying them can reveal opportunities for savings you might otherwise overlook. As further articles in this series will show, many owners have successfully claimed substantial refunds by identifying errors in direct assessments—without affecting their property’s assessed value.

Stay tuned for deeper dives into where these charges come from, how errors happen, and what steps to take if you suspect an overcharge.

* Our internal data analysis on California sewer fees (data not published).