Final answer:
Special districts are funded mainly by grants and transfers from other government levels, with property tax being the second largest source of income.
Step-by-step explanation:
Special districts are primarily funded through grants and transfers from other levels of government, with the second largest source of income coming from property tax collections. Special districts, such as local school districts, rely on these funding sources to provide specific services that may be beyond the scope of county or city governments, especially in densely populated areas. While the specific sources of tax revenue can vary widely across different state and local governments, property taxes and grants from federal and state sources are common means of financing the operations of these special-purpose entities.