Chapter 3
Special
Assessments
The effects of
Proposition 218 will be felt nowhere more intensely than in the
area of special assessments. The initiative reverses many
long-standing procedures and court interpretations relating to the
use and levying of special assessments. By design, Proposition 218
restricts the uses to which assessments may be put, limits the
property owners who may be charged assessments, increases local
agency accountability, and prohibits assessments that lack the
support of local property owners. Perhaps unwittingly, Proposition
218 may also increase the cost to local agencies of financing
bonded indebtedness through assessments and impose upon local
agencies substantial new administrative costs. As noted before,
Proposition 218 is not written as clearly as it might have been.
Given that clarification will only come through legislation and
litigation, its full impact will not be known for some time.
Because it is a
Constitutional amendment, Proposition 218 supersedes all
conflicting statutory laws. It applies to charter cities as well
as counties, general law cities, and special districts. The
assessment acts discussed in this chapter will have many
provisions, particularly dealing with formation procedures and the
scope of assessment power, which are no longer valid. We will note
in the discussions of the individual assessment acts where, as of
this writing, the acts appear to conflict with the provisions of
Proposition 218.
Proposition
218
Proposition 218
establishes a strict definition of "special benefit."
For the purposes of all assessment acts, special benefit means
"a particular and distinct benefit over and above general
benefits conferred on real property located in the district or the
public at large. General enhancement of property value does not
constitute 'special benefit.'" In a reversal of previous law,
a local agency is prohibited by Proposition 218 from including the
cost of any general benefit in the assessment apportioned to
individual properties. Assessments are limited to those necessary
to recover the cost of the special benefit provided the property.
From a practical point of view, this will make open space and park
assessments difficult to levy. It also complicates the process of
setting assessments intended to finance public services, such as
police, ambulance, and fire, and public buildings, such as
libraries. The Chief Administrative Office of the County of Los
Angeles, for example, has opined that Proposition 218 will require
the county to rescind its library assessment and carefully
reexamine the legality of its fire assessment.
In addition,
assessments levied on individual parcels are limited to the
"reasonable cost of the proportional special benefit
conferred on that parcel."
Previously,
assessments were seldom if ever levied on public property.
Proposition 218 specifically requires assessments to be levied on
public parcels within an assessment district, unless the agency
which owns the parcel can "demonstrate by clear and
convincing evidence" that its parcel will receive no special
benefit.
Assessment
District Formation Procedure
Proposition 218
establishes a common formation and ratification procedure for all
special assessment districts as defined by Section 4, Article XIII
D of the California Constitution. These requirements apply to all
special assessments, to the exclusion of any conflicting laws. At
this writing, the various assessment district acts have not been
amended to remove these conflicts and to clarify ambiguities in
the application of Proposition 218. The Legislature is expected to
begin considering bills for this purpose in 1997.
All assessments
must be supported by a detailed engineer's report prepared by a
registered professional engineer. The report must contain: the
total amount of money chargeable to the assessment district, the
amount chargeable to each parcel in the district, the duration of
the payments, the reason for the assessment, and the basis upon
which the proposed assessment was calculated (Section 4(c),
Article XIII D, California Constitution). Although not explicitly
mandated by Proposition 218, the report should also include a
description of the improvements or services to be financed through
the special assessment, the proposed district boundaries, and a
description of the special benefit which each parcel receives as a
result of the assessment.
Prior to
creating an assessment district, the city, county, or special
district must hold a public hearing and receive approval from a
majority of the affected property owners casting a ballot. All
owners of property within the assessment district must be mailed a
detailed notice of public hearing and a ballot with which to voice
their approval or disapproval of the proposed district at least 45
days prior to the hearing (Section 4(e), Article XIII D,
California Constitution). The notice must contain: the total
amount of money chargeable to the assessment district, the amount
chargeable to each parcel in the district, the duration of the
payments, the reason for the assessment, the basis upon which the
proposed assessment was calculated, and a summary of the ballot
procedure, as well as the date, time, and location of the public
hearing. The notice must also disclose that a majority protest
will result in the assessment not being imposed.
At the hearing,
the governing body of the agency must consider all protests to
formation of the district. Assessment district proceedings must be
abandoned if a majority of the ballots received by the conclusion
of the hearing protest creation of the district. Ballots are to be
weighted according to the proportional financial obligation of the
affected property - the larger the financial obligation, the
greater the weight that must be assigned to that property. Unlike
previous law under many of the assessment district acts, the
governing body cannot overrule the property owner vote. No other
form of election is required. Once an assessment is created, it
may be repealed or reduced by popular initiative.
A key practical
question about the ballot process under Proposition 218 is who
votes when a property is held in multiple ownership (or there are
multiple renters who are directly liable for payment of the
assessment) or when the property is owned by a public agency? This
is not answered in the initiative and is expected to be the
subject of legislation, litigation, or both in the coming year.
Agencies are
going to have to work harder than ever to levy a new assessment or
increase an existing one. They must clearly identify the special
benefit being conferred to the parcels being assessed, excluding
any identified general benefit. They must apportion the assessment
on an individual basis to parcels within the district. Where an
assessment is challenged in court, Proposition 218 specifies that
the agency carries the burden of proof in showing that the
property is receiving a special benefit and that the amount
assessed is proportional to, and no greater than, the special
benefits conferred. Most importantly, agencies will have to
educate property owners about the advantages of the prospective
assessment. The ballot process established by Proposition 218
favors those property owners who oppose the assessment (since they
are generally the most motivated to return a ballot). Refer to the
League of California Cities' "Proposition 218 Implementation
Guide" for a discussion of the limits on public agencies'
communications in elections.
Effective
Date and Grandfathering
All of the above
requirements took effect on November 6, 1996, so they apply to any
new or increased assessments proposed after that date. The intent
of the sponsors of the initiative is that existing assessments
cease by July 1, 1997 unless ratified by the assessed property
owners.
As of December
1996, a number of jurisdictions had already indicated that they
will hold ratification elections for and, where necessary to limit
assessments to special benefits, redraw the boundaries of existing
assessment districts. For example, the City of San Mateo will
revisit its downtown assessment for parking and street cleaning,
Sacramento County will bring its Landscaping and Lighting
Districts to a vote, and the City of San Diego will place 33
Landscaping and Lighting and 14 Business Improvement Districts on
the ballot for ratification. Some jurisdictions have chosen to
convert existing assessments to special taxes in order to avoid
any challenge that they do not meet the definition of special
benefit. These require the approval of 2/3 of the jurisdiction's
voters.
There are
exceptions to the application of Proposition 218. These apply to
many of the assessments already in place as of November 5, 1996.
The following existing assessments are not required to comply with
Proposition 218 (although increases after November 6, 1996 may):
"(a) Any
assessment imposed exclusively to finance the capital costs or
maintenance and operation expenses for sidewalks, streets, sewers,
water, flood control, drainage systems, and vector control...
"(b) Any
assessment imposed pursuant to a petition signed by the persons
owning all of the parcels subject to the assessment at the time
the assessment is initially imposed.
"(c) Any
assessment the proceeds of which are exclusively used to repay
bonded indebtedness of which the failure to pay would violate the
Contract Impairment Clause of the Constitution of the United
States.
"(d) Any
assessment which previously received majority voter approval from
the voters voting in an election on the issue of the
assessment." (Section 5, Article XIII D, California
Constitution)
Although they
are usually sent out with the property tax bill, special
assessments are not property taxes. Unlike taxes (including
special taxes), the sum of a special assessment cannot exceed the
cost of the improvement or service it is financing. Furthermore,
special assessments cannot be levied against those properties
which do not directly benefit from the improvements being
financed. Property that is outside the area receiving the specific
improvements being financed cannot be charged a special
assessment.
Ad valorem
property taxes on the other hand, are levied on eligible real
property based upon that property's assessed valuation, unrelated
to the proportional benefits being received by that property. So
called "special taxes" are levied for a specific
purpose, but are similarly unrelated to the proportional benefit
being received from the improvements being financed.
California
statutes give local governments the authority to levy a number of
special assessments for specific public improvements such as
streets, storm drains, sewers, street lights, curbs and gutters,
and landscaping. The legislative body of a city, county, or in
some cases a special district (flood control district, fire
protection district, etc.), may, by invoking the proper statute in
the proper manner, create a special assessment district that
defines both the area to benefit from the improvements and the
properties that will pay for those improvements. Thereafter, each
property within the district will be assessed a share of the cost
of improvements that is proportional to the direct benefit it
receives from those improvements.
Pursuant to
California case law, a special assessment district is not
considered a separate legal entity like a special district (Dawson
v. Town of Los Altos Hills (1976) 16 Cal.3d 676). Most special
assessment districts have no officers or governing board and are
strictly financing mechanisms.
History
Special
assessments have a long history of use. Nationwide, special
assessments can be traced back to a 1691 levy for street and drain
construction in New York City. In California, several of the major
assessment acts date from the early part of the 20th Century.
Until the Great Depression of the 1930's, special assessments were
a major municipal financing tool. Economic conditions during the
depression caused numerous landowner defaults on assessments
which, in turn, made it difficult to pay off the bonds backed by
the assessments, and public credit suffered. From that time until
the passage of Proposition 13, special assessments were used
sparingly as local governments came to rely largely upon property
taxes for their income.
When Proposition
13 first took effect, it reduced local property tax revenues by
over 50%. Special assessments gained immediate notice as a
"new" source of funding. A quick comparison of the use
of special assessments before and after Proposition 13 illustrates
how assessments have grown in popularity. In the 1960's and
mid-70's the volume of assessments is estimated to have been from
$20-50 million per year. By 1985, the estimated annual volume of
special assessments had climbed to more than $700 million.
There were
several reasons for the popularity of special assessments. First,
the California courts have held they are not ad valorem property
taxes. As a result, special assessments are exempt from the
taxation limits imposed by Proposition 13 (Fresno County v.
Malmstrom (1979) 94 Cal.App.3d 974; Solvang Municipal Improvement
District v. Board of Supervisors (1980) 112 Cal.App.3d 545; County
of Placer v. Corin (1980) 113 Cal.App.3d 443). Second, they are
not "special taxes" requiring two-thirds vote of the
electorate prior to being imposed. In fact, prior to Proposition
218, special assessment districts were established by the city
council or county board of supervisors and usually not subject to
public vote. Third, the proceeds of a special assessment are not
"proceeds of taxes" for purposes of the Gann Act (City
Council v. South (1983) 146 Cal.App.3d 320). Accordingly, funds
received from special assessments do not apply toward a
jurisdiction's Gann Act spending limit.
Most of the
special assessment acts also provide for the issuance of bonds.
Bonds are, in effect, money that the local government is borrowing
for the purpose of constructing the improvements authorized by the
assessment district. These bonds are generally secured by the
property within the district and the bonded indebtedness is repaid
with the money generated by the assessments. Assessments are
subject to reduction or repeal by popular initiative (Section 3,
Article XIII C, California Constitution). Agencies securing bonded
indebtedness with assessments created or increased after November
6, 1996 should disclose this fact to potential investors. Although
the contract clause of the U.S. Constitution would likely preclude
an initiative from eliminating an assessment securing bonded
indebtedness, the loss of other potential sources of funding
through initiative (which would affect the overall financial
health of the agency) may be a concern.
Landowners are
given the opportunity to pay off the assessment immediately,
otherwise, the assessments become liens against the property and
landowners pay them off in installments. Typically, assessment
bonds are sold to provide the capital needed to pay for immediate
construction of the project and are secured by property liens.
Several of the
most common types of special assessments are summarized in the
following paragraphs. These summaries are general discussions of
complex financing acts. Please refer to the statutes themselves
for detailed information, particularly on the subject of district
formation and hearing requirements. Note that several of these
acts are only available for use by cities.
The
Assessment Acts
Improvement Act
of 1911
(Streets and Highways Code section 5000 et seq.)
The 1911 Act may
be used by cities, counties, and "all corporations organized
and existing for municipal purposes." Assessments under this
Act may be used to fund a long list of improvements including:
transportation
systems (including acquisition, construction, maintenance, and
operation costs related thereto);
- street paving
and grading;
- sidewalks;
- parks;
- parkways;
recreation
areas (including necessary structures);
- sanitary
sewers;
- drainage
systems;
- street
lighting;
- fire
protection systems;
- flood
protection;
- geologic
hazard abatement or prevention;
- water supply
systems;
- gas supply
systems;
- retaining
walls;
- ornamental
vegetation;
- navigational
facilities;
- land
stabilization; and,
other
"necessary improvements" to the local agency's
streets, property, and easements.
The 1911 Act may
also be used to create a maintenance district to fund the
maintenance and operation of sewer facilities and lighting
systems.
Pursuant to this
act, improvements must be completed before their total cost is
assessed against the properties within the district. Contractors
are, in effect, reimbursed for their work from the proceeds of the
district. This aspect of the 1911 Act requires that sufficient
funds be available for the project before it is begun and is a
major drawback of the legislation. Total costs may include
acquisition, construction, and incidentals (including engineering
fees, attorney's fees, assessment and collection expenses, and
cost of relocating utilities). The uncertainty that results from
Proposition 218's voting requirements will probably discourage the
future use of the 1911 Act.
Individual
assessments constitute liens against specific parcels and are due
within 30 days of confirmation. If assessments are not paid in
full within this period, a bond in the amount due is issued to the
installer of the improvements and assessments are collected from
individual properties to pay off the bond. The property owner
receives a separate bill indicating the assessment due. Bonds may
also be issued under the Improvement Bond Act of 1915 even though
the assessment repaying the bonds has been levied under the 1911
Act. Alternatively, for assessments of less than $150, the
assessment may be collected on the tax roll upon which general
taxes are collected.
Since the parcel
being assessed is the only security for any bonds issued,
accurately estimating the value of the property is very important.
The feasibility of the project will hinge on the value of the
property involved.
As of this
writing, the public notice and assessment procedure under the Act
conflicts with the provisions of Proposition 218. Where
differences exist, the requirements of the initiative prevail.
Legislation is needed to reconcile these differences in the
statute.
Municipal
Improvement Act of 1913
(Streets and Highways Code section 10000 et seq.)
The 1913 Act may
be used by cities, counties, joint powers authorities, and certain
special districts which are empowered to make any of the
improvements authorized under the Act. It specifically authorizes
the construction and maintenance of all the facilities authorized
under the 1911 Act as well as the following:
works and
appliances for providing water service, electrical power, gas
service, and lighting; and
public
transit facilities serving an area smaller than 3 square miles
(including stations, structures, rolling stock, and land
acquisition related thereto).
In addition, a
municipality may enter into an agreement with a landowner to take
over the operation and other activities of a sewer or water system
owned by that landowner and create a 1913 Act assessment district
for the purpose of reimbursing the landowner. Such an assessment
district may also include other land that can be served by the
system, upon the written consent of the other affected landowners.
Unlike the 1911
Act, the total cost of improvements is assessed against the
benefited properties before the improvements are completed. An
assessment constitutes a lien against a specific parcel and is due
within 30 days of recording the notice of assessment. If the
landowner chooses not to pay the assessment in full at that time,
bonds in the amount of the unpaid assessment may be issued under
the 1911 Improvement Act or the 1915 Improvement Bond Act.
Landowners will then be assessed payments over time.
A number of
amendments to the Act enacted in 1992 have expanded its use to
include certain building repairs and upgrades that are necessary
to the public safety. For example, assessments may now finance
work or loans to bring public and private real property or
buildings into compliance with seismic safety and fire code
requirements (Chapters 1197 and 832, Statutes of 1992.) Work is
limited to that certified as necessary by local building
officials. Revenues must be dedicated to upgrades; they cannot be
used to construct new buildings nor dismantle an existing
building. In addition, no property or building may be included
within the boundaries of a 1913 Act district established for these
purposes without the consent of the property owner. Furthermore,
when work is financed on residential rental units, the owner must
offer a guarantee that the number of units in the building will
not be reduced and rents will not be increased beyond an
affordable level.
The 1913 Act can
also be used to finance repairs to those particular private and
public real properties or structures damaged by earthquake when
located within a disaster area (as declared by the Governor) or an
area where the Governor has proclaimed a state of emergency as a
result of earthquake damage (Chapter 1197, Statutes of 1992). The
kinds of work which may be financed include reconstruction,
repair, shoring up, and replacement. A jurisdiction has seven
years from the time a disaster area is declared or a state of
emergency is proclaimed to establish a district under this
statute.
As of this
writing, the public notice and assessment procedure under the Act
conflicts with the provisions of Proposition 218. Where
differences exist, the requirements of the initiative must be
followed. Legislation is needed to reconcile the Act with
Proposition 218.
Improvement Bond
Act of 1915
(Streets and Highways Code section 8500 et seq.)
This legislation
does not authorize assessments. Instead, it provides a vehicle for
issuing assessment bonds (including variable interest bonds) for
assessments levied under the 1911 and 1913 Acts as well as a
number of other benefit assessment statutes. Under this
legislation, the local legislative body may also issue "bond
anticipation notes" prior to actual bond sale - in effect
borrowing money against the assessment bonds being proposed for
sale. The 1915 Act is available to cities, counties, public
districts, and public agencies.
After
assessments have been levied and property owners given the
opportunity to pay them off in cash, the local government will
issue bonds for the total amount of unpaid assessments.
Assessments collected to pay off 1915 Act bonds appear on the
regular tax bill and are collected in the same manner as property
taxes.
Park and
Playground Act of 1909
(Government Code section 38000 et seq.)
The Park and
Playground Act is a method for cities to finance public park,
urban open-space land, playground, and library facilities.
Pursuant to a 1974 revision, the act incorporates the procedures
and powers of the Improvement Act of 1911, the Municipal
Improvement Act of 1913, and the Improvement Act of 1915 to
finance improvements. In addition to the power to levy assessments
and issue bonds, the act provides that the city council may
condemn land for improvements.
Tree Planting
Act of 1931
(Streets and Highways Code section 22000 et seq.)
Pursuant to this
act, cities may levy assessments to fund the planting, maintenance
or removal of trees and shrubs along city streets and to pay
employees to accomplish this work. Assessments for maintenance are
limited to a period of 5 years.
These
assessments are apportioned on the basis of street frontage. Work
is to be administered by the city parks department or other agency
as appointed by the city council.
As of this
writing, the public notice and assessment procedure under the Act
conflicts with the provisions of Proposition 218. Where
differences exist, the requirements of the initiative prevail.
Legislation is needed to reconcile the Act with Proposition 218. A
city contemplating the use of the Act should document that street
frontage is a valid measure of "special benefit." If
frontage is not a directly indicator of benefit, use of this Act
may be difficult to defend.
Landscaping and
Lighting Act of 1972
(Streets and Highways Code section 22500 et seq.)
This Act may be
used by cities, counties, and special districts (including school
districts). Alleged abuse of the Landscaping and Lighting Act by
cities and school districts was one of the motivating forces
behind Proposition 218. The initiative targeted the allegedly
tenuous link between parks and recreation facilities and the
benefit they provided to properties in the area. Prior to
Proposition 218, the successful argument in favor of the
Landscaping and Lighting Act was that parks, open space, and
recreation facilities benefited properties by increasing their
value. As a result of the strict definition of special benefit
created by Proposition 218 ("General enhancement of property
value does not constitute 'special benefit.'"), that
justification no longer exists and this Act will be much harder to
use.
The 1972 Act
enables assessments to be imposed in order to finance:
acquisition
of land for parks, recreation, and open space;
installation
or construction of planting and landscaping, street lighting
facilities, ornamental structures, and park and recreational
improvements (including playground equipment, restrooms and
lighting); and,
maintenance
and servicing of any of the above.
Amendments to
the Act, effective January 1, 1993, exclude from the authorized
improvements any community center, municipal auditorium or hall,
or similar public facility, unless approved by the property owners
owning 50 percent of the area of assessable lands within the
proposed district. The election shall be conducted following the
adoption of an ordinance or resolution at a regular meeting of the
legislative body of the local agency and is in lieu of any public
notice or hearing otherwise required by this part.
As of this
writing, the public notice and assessment procedure under the Act
conflicts with the provisions of Proposition 218. Where
differences exist, the requirements of the initiative prevail.
Legislation is needed to reconcile the Act with Proposition 218.
Benefit
Assessment Act of 1982
(Government Code section 54703 et seq.)
This statute
provides a uniform procedure for the enactment of benefit
assessments to finance the maintenance and operation costs of
drainage, flood control, and street light services and the cost of
installation and improvement of drainage or flood control
facilities. Under legislation approved in 1989 (SB 975, Chapter
1449), this authority is expanded to include the maintenance of
streets, roads, and highways. As with most other assessment acts,
it may be used by cities, counties, and special districts which
are otherwise authorized to provide such services. It does,
however, have some differences that set it apart.
Assessments can
be levied on a parcel, a class of property improvement, use of
property, or any combination thereof. Assessments for flood
control services can be levied on the basis of proportionate
stormwater runoff from each parcel rather than a strict evaluation
of the flood protection being provided. The amount of assessment
must be evaluated and reimposed annually. Assessments are
collected in the same manner as property taxes.
As of this
writing, the public notice and assessment procedure under the Act
conflicts with the provisions of Proposition 218. Also, the Act
states that an assessment may be levied wherever service is
available, regardless of whether the service is actually used -
this may conflict with the initiative's definition of
"special benefit." Where differences exist between
statute and initiative, the requirements of the initiative
prevail. Legislation is needed to reconcile the Act with
Proposition 218.
Integrated
Financing District Act
(Government Code section 53175 et seq.)
This legislation
creates an alternate method for collecting assessments levied
under the 1911, 1913, and 1915 Acts, the Landscaping and Lighting
Act of 1972, the Vehicle Parking District Law of 1943, the Parking
District Law of 1951, the Park and Playground Act of 1909, the
Mello-Roos Community Facilities Act of 1982, the Benefit
Assessment Act of 1982, and charter cities' facility benefit
assessments. The Integrated Financing District Act applies to all
local agencies insofar as those agencies have the authority to use
any of the above listed financing acts. Assessments levied under
this act can be used to pay the cost of planning, designing, and
constructing capital facilities authorized by the applicable
financing act, pay for all or part of the principle and interest
on debt incurred pursuant to the applicable financing act, and to
reimburse a private investor in the project.
The Integrated
Financing District Act has two unique properties:
(1) it can levy
an assessment which is contingent upon future land development and
payable upon approval of a subdivision map or zone change or the
receipt of building permits;
(2) it allows
the local agency to enter into an agreement with a private
investor whereby the investor will be reimbursed for funds
advanced to the agency for the project being financed.
Because the
assessment is not triggered until development is ready to begin,
these features make the act an attractive option when development
is to occur in phases. Payment of assessments will be deferred
until such time as public improvements are needed.
The procedure
for creating an integrated financing district, including entering
into a reimbursement agreement, is in addition to the procedure
required by the applicable assessment act. The resolution of
intention must include a description of the rates and method of
apportionment, the contingencies which will trigger assessment of
the levy, the fixed dollar amount per unit of development for the
contingent levy, and a description of any proposed reimbursement
agreement. The assessment and entry into any agreement are
effective upon approval of the legislative body.
As of this
writing, the public notice and assessment procedure under the Act
conflicts with the provisions of Proposition 218. Where
differences exist, the requirements of the initiative prevail.
Legislation is needed to reconcile the Act with Proposition 218.
Street Lighting
Act of 1919
(Streets and Highways Code section 18000 et seq.)
This act allows
cities to levy benefit assessments for the maintenance and
operation of street lighting systems. Assessments may also finance
the installation of such a system by a public utility.
Assessments are
liens against land and are due within 30 days of being recorded by
the tax collector. The 1919 Act also establishes two alternate
methods for collecting payments on an installment basis in the
manner of property taxes. An assessment levied under this act must
be evaluated and reapplied annually after a public hearing, and ,
pursuant to Proposition 218, a vote of the property owners.
As of this
writing, the public notice and assessment procedure under the Act
conflicts with the provisions of Proposition 218. Where
differences exist, the requirements of the initiative prevail.
Legislation is needed to reconcile the Act with Proposition 218.
Municipal
Lighting Maintenance District Act of 1927
(Streets and Highways Code section 18600 et seq.)
This statute
provides for the maintenance and operation (but not the
installation) of street lighting systems within cities.
Assessments are limited to a maximum of 5 years.
As of this
writing, the public notice and assessment procedure under the Act
conflicts with the provisions of Proposition 218. Where
differences exist, the requirements of the initiative prevail.
Legislation is needed to reconcile the Act with Proposition 218.
Street Lighting
Act of 1931
(Streets and Highways Code section 18300 et seq.)
The 1931 Act is
another means for cities to finance the maintenance and service
(but not installation) of street lighting systems. Assessments
under this act are levied annually and collected in installments
in the manner of city taxes. The term of assessment is limited to
5 years.
As of this
writing, the public notice and assessment procedure under the Act
(which resembles the procedure under the 1919 Street Lighting Act)
conflicts with the provisions of Proposition 218. Where
differences exist, the requirements of the initiative prevail.
Legislation is needed to reconcile the Act with Proposition 218.
Parking District
Law of 1943
(Streets and Highways Code section 31500 et seq.)
This act
authorizes a city or county to levy assessments to finance:
the
acquisition of land for parking facilities;
the
construction, operation, and maintenance of parking facilities
(including garages); and,
the costs of
engineers, attorneys or other people necessary to acquisition,
construction, operations, and maintenance.
The Parking
District Law incorporates the assessment procedures and powers of
the 1911, 1913, and 1915 Acts discussed previously. It also
authorizes the use of meters, user fees, and ad valorem taxes to
raise funds.
Once parking
facilities have been acquired, administration of the parking
district is turned over to a "Board of Parking Place
Commissioners" appointed by the city mayor or county board of
supervisors. This board reports to the legislative body on the
status of the district each year. Annual assessments are levied by
the legislative body, in accordance with Proposition 218.
As mentioned
earlier, the public notice and assessment procedures of the 1911,
1913, and 1915 Acts currently conflict with the provisions of
Proposition 218. Where differences exist, the requirements of the
initiative prevail. Legislation is needed to reconcile the Act
with Proposition 218.
Parking District
Law of 1951
(Streets and Highways Code section 35100 et seq.)
Cities are
authorized to finance the following activities under this act:
acquisition
of land for parking facilities (including the power of eminent
domain);
improvement
and construction of parking lots and facilities;
issuance of
bonds; and,
- employee
salaries.
Special
assessments under the 1911 Act may be levied to replace the use of
fees and charges to repay outstanding bonds. Other revenue sources
may include user fees, parking meter charges, and ad valorem
taxes.
District
formation proceedings are initiated upon petition of involved land
owners and generally follow the pattern of other assessment acts.
As in the 1943 Act, the district is to be administered by an
appointed parking commission.
As with those
other acts, the public notice and assessment procedure of the 1951
Act currently conflicts with the provisions of Proposition 218.
Where differences exist, the requirements of the initiative
prevail. Legislation is needed to reconcile the Act with
Proposition 218.
Parking and
Business Improvement Area Law of 1989
(Streets and Highways Code section 36500 et seq.)
This act
recodifies and supplants the 1979 law of the same name, now
repealed. The Parking and Business Improvement Area Law of 1989
enables a city, county, or joint powers authority made up of any
combination of cities and counties to establish areas of benefit
and to levy assessments on businesses within those areas to
finance the following improvements:
- parking
facilities;
- parks;
- fountains,
benches, and trash receptacles;
- street
lighting; and,
- decorations.
- Assessment
revenues may also be used for any of the following activities:
- promotion of
public events benefiting area;
businesses
which take place in public places within the area;
furnishing
music to any public place in the area;
promotion of
tourism within the area; and,
any other
activities which benefit businesses located in the area.
Assessments must
be directly proportional to the estimated benefit being received
by the businesses upon which they are levied. Furthermore, in an
area formed to promote tourism, only businesses that benefit from
tourist visits may be assessed. The agency creating the assessment
district area is authorized to finance only those improvements or
activities which were specified at the time the area is formed. An
unusual feature of this law is that assessments may be apportioned
differently among zones of benefit, in relation to the benefit
being received by businesses within each zone. The agency should
carefully document the special benefit which each assessed
property willreceive. Pursuant to Proposition 218, the assessment
cannot finance improvements or services of general benefit.
Establishment
proceedings may be initiated by either the legislative body of the
city or county. The procedure is generally similar to other
assessment acts and requires adoption of a resolution of intention
and a noticed public hearing at which protests may be considered.
If written protests are received from the owners of businesses
which would pay 50 percent or more of the proposed assessment, the
formation proceedings must be set aside for a period of one year.
If these protests are only against a particular improvement or
activity, the legislative body must delete that improvement or
activity from the proposal. After a district has been established
under this law, the legislative body must appoint an advisory
board to make recommendations on the expenditure of revenues from
the assessment. The advisory board may also be appointed prior to
the adoption of a resolution of intention to make recommendations
regarding that notice.
There's some
ambiguity over whether Proposition 218 applies to the 1989 Law.
Arguably, it does not apply since assessments are levied on
businesses and are therefore not "a charge upon real
property." Agencies should approach this assessment act with
caution and a strong opinion from counsel before choosing not to
comply with Proposition 218.
Property and
Business Improvement District Law of 1994
(Streets and Highways Code section 36600 et seq.)
A city, county,
or joint powers authority made up of cities and counties may adopt
a resolution of intention to establish this type of district upon
receiving a written petition signed by the property owners of the
proposed district who would pay more than 50 percent of the
assessments being proposed. The city, county, or JPA must appoint
an advisory board within 15 days of receiving a petition which
shall make recommendations to the legislative body regarding the
proposed assessments (Streets and Highways Code section 36631).
The improvements
which may be financed by these assessments include those
enumerated under the Parking and Business and Improvement Area Law
of 1989, as well as such other items as:
closing,
opening, widening, or narrowing existing streets;
rehabilitation
or removal of existing structures; and
facilities or
equipment, or both, to enhance security within the area.
Assessment
revenues may finance the activities listed under the 1989 Law,
as well as the following:
- marketing and
economic development; and
security,
sanitation, graffiti removal, street cleaning, and other
municipal services supplemental to those normally provided by
the municipality.
No provision is
made within this law for financing bonded indebtedness.
The property
owners' petition is required to include a management district plan
consisting of a parcel-specific map of the proposed district, the
name of the proposed district, a description of the proposed
boundaries, the improvements or activities being proposed over the
life of the district and their cost, the total annual amount
proposed to be expended in each year of the district's operation,
the proposed method and basis of levying the assessment, the time
and manner of collecting assessments, the number of years in which
assessments will be levied (this is limited to five years
maximum), a list of the properties being benefited, and other
related matters (Streets and Highways Code 36622).
The legislative
body's resolution must include the management district plan as
well as the time and place for a public hearing on the
establishment of the district and levy of assessments will be held
(Streets and Highways Code 36621). This hearing must be held
within 60 days after the adoption of the resolution. Hearing
notice must be provided pursuant to Government Code section
54954.6. Both mailed and newspaper notice are required (Streets
and Highways Code section 36623).
The proposal to
form the district must be abandoned if written protests are
received from the owners of real property within the proposed
district who would pay 50 percent or more of the assessments
(Streets and Highways Code section 36625). In addition, when a
majority protest has been tendered, the legislative body is
prohibited from reinitiating the assessment proposal for a period
of one year.
The public
notice and assessment procedures of the 1994 Law are similar to
the provisions of Proposition 218. An agency proposing to use the
Act should take care to ensure that they are proceeding in harmony
with Proposition 218 and that the properties being assessed are
receiving an actual special benefit. Where conflicts exist, the
requirements of the initiative prevail.
No assessments
under this law can be levied on residential properties or on land
zoned for agricultural use (Streets and Highways Code section
36635).
This statute is
an alternative to the Parking and Business and Improvement Area
Law of 1989 and does not affect any districts formed under that
law.
Pedestrian Mall
Law of 1960
(Streets and Highways Code section 11000 et seq.)
This authorizes
cities and counties to establish pedestrian malls, acquire land
for such malls (including power of eminent domain), restrict auto
traffic within the malls, and to levy benefit assessments to fund
mall improvements. Improvements may include:
- street
paving;
- water lines;
- sewer and
drainage works;
- street
lighting;
- fire
protection;
- flood control
facilities;
- parking
areas;
- statues,
fountains and decorations;
- landscaping
and tree planting;
- child care
facilities;
- improvements
necessary to a covered air-conditioned mall; and,
- relocation of
city-owned facilities.
Assessments may
also be used to pay damages awarded to a property owner as a
result of the mall.
Establishment
proceedings are similar to those found in other assessment acts.
Accordingly, these provisions do not currently conform to the
requirements of Proposition 218 and await reconciliation. Where
conflicts exist, the requirements of the initiative prevail.
Assessments and bonds are to be levied in accordance with the
provisions of the Vehicle Parking District Law of 1943 (which
provides for use of the 1911 and 1915 Acts, among others).
Permanent Road
Divisions Law
(Streets and Highway Code sections 1160 et seq.)
This statute
enables counties to establish areas of benefit (called
"divisions" under this law) within which assessments may
be levied in order to finance construction, improvement, or
maintenance of any county road, public road easement, or private
road or easement which contains a public easement (Streets and
Highways Code section 1179.5). The statute also empowers a board
of supervisors to levy special taxes for these purposes upon
approval by 2/3 of the electorate within the division.
Proceedings for
the formation of a road division may be initiated by either: (1) a
resolution of the Board of Supervisors; or, (2) submittal to the
Board of Supervisors of a petition containing either the
signatures of a majority of the land owners within the proposed
division or the owners of more than 50 percent of the assessed
valuation. The public notice and assessment procedures of the
Permanent Road Divisions Law conflict with the provisions of
Proposition 218 by failing to provide for a property owners'
ballot. The requirements of Proposition 218 must be followed in
order to establish a division. Legislation is needed to reconcile
the Act with Proposition 218.
Community
Rehabilitation District Law of 1985
(Government Code section 53370 et seq.)
This act
provides a means for cities and counties to finance the
rehabilitation, renovation, repair or restoration of existing
public infrastructure. It cannot, however, be used to pay for
maintenance or services. A Community Rehabilitation District
cannot be formed within a redevelopment project area.
A district
established under the 1985 Act can rehabilitate public capital
facilities such as:
- streets;
- sewer and
water pipes;
- storm drains;
- sewer and
water treatment plants;
- bridges and
overpasses;
- street
lights;
- public
buildings;
- criminal
justice facilities;
- libraries;
and,
- park
facilities.
It can also
finance the expansion of facility capacity or the conversion to
alternative technology.
The 1985 Act
allows a rehabilitation district to use any of the following
financing tools:
Special
assessments under the Improvement Act of 1911 and the
Municipal Improvement Act of 1913 and bonds under the
Improvement Bond Act of 1915.
Special taxes
and bonds pursuant to the Mello-Roos Community Facilities Act
of 1982.
Fees or
charges, provided that these do not exceed the amount
reasonably necessary to cover the cost of the involved
project.
Senior
obligation bonds under the 1985 Act's own provisions (Gov.
Code section 53387 et seq.).
Certain of the
public notice and assessment procedures of this act conflict with
Proposition 218. An agency proposing to use the Community
Rehabilitation District Law should take care to ensure that they
are proceeding in harmony with Proposition 218 and that the
properties being assessed are receiving a concrete special
benefit. Under Proposition 218, a general enhancement of property
value is not a special benefit.
Public notice
must be provided over a period of 5 weeks prior to the district
formation hearing. This notice must contain the text of the
resolution of intent, the time and place of the hearing, and a
statement that the hearing will be open to all interested persons
in favor of or opposed to any aspect of the district. If the
district will utilize any of the above special assessment or
community facilities acts, it may combine the notices required by
those acts with this notice.
A separate
procedure exists for issuing, administering, and refunding senior
obligation bonds pursuant to the 1985 Act (Gov. Code sections
53387 - 53594). Issuance involves adopting a resolution of
intention and submitting the bond issue to the voters of the
district. Affirmation by a simple majority of voters is necessary
to approve issuance of the bonds.
Geologic Hazard
Abatement District
(Public Resources Code section 26500 et seq.)
This statute
authorizes a city or county to create an independent Geologic
Hazard Abatement District (GHAD) empowered to finance the
prevention, mitigation, abatement, or control of actual or
potential geologic hazards through the levy and collection of
special assessments. The statute broadly defines geologic hazards
to include: landslides, land subsidence, soil erosion,
earthquakes, or "any other natural or unnatural movement of
land or earth."
A district can:
acquire
property by purchase, lease, gift, or eminent domain;
- construct
improvements;
maintain,
repair, or operate any improvements; and,
use any of
the assessment and bond procedures established in the
Improvement Act of 1911, the Municipal Improvement Act of
1913, and the Improvement Bond Act of 1915.
Proceedings for
forming a GHAD may be initiated by resolution of the city or
county or by petition of the owners of at least 10% of affected
property. A landowner petition must include signatures, legal
descriptions, and a map of the proposed district boundaries. In
addition, the city, county, or petitioners must include a
"plan of control" prepared by an engineering geologist
which describes the geologic hazard to be addressed, its location,
the affected area, and a plan for the prevention, mitigation,
abatement, or control of the hazard.
When forming a
GHAD, the legislative body of the city or county can be the
governing body of the district. Alternatively, the legislative
body can appoint five land owners to act as the district's board
of directors. Thereafter, board members will be elected every four
years from within the district. Unlike most special assessment
districts, the GHAD is an entity independent of the city or
county.
The current
procedure for forming a GHAD conflicts with Proposition 218 in
that it does not provide for a property owners' ballot on the
question of formation. When forming a GHAD, the city or county
must conform its procedure to the engineer's report, public
notice, balloting, and other requirements of Proposition 218.
The statute also
provides for emergency formation of a GHAD upon the request of
two-thirds of the affected property owners (Public Resources Code
sections 26568-26597.7). This is invalid to the extent it
conflicts with Proposition 218.
The statute does
not describe the method for dissolving a GHAD. However, the
California Court of Appeal has opined that dissolution of a GHAD
is subject to the procedures of the Cortese-Knox Local Government
Reorganization Act (Gov. Code 56000, et seq.) and cannot be
unilaterally undertaken by a city (Las Tunas GHAD v. Superior
Court (City of Malibu) (1995) 38 Cal.App.4th 1002). Under this
interpretation, although district formation is undertaken by a
city or county without the involvement of the county Local Agency
Formation Commission (LAFCO), dissolving a district requires
adherence to LAFCO procedures.
A GHAD has
several advantages to recommend it. One, its boundaries need not
be contiguous, so it can focus on just those properties subject to
hazard. Second, it is an independent district with its own board
of directors drawn from the affected property owners. Third, it is
not limited to a single city or county; its boundaries can cross
jurisdictional lines. Fourth, its formation proceedings are not
subject to review by the Local Agency Formation Commission,
thereby simplifying the process. Fifth, its formation is exempt
from the California Environmental Quality Act.
Contra Costa
County has formed GHADs in its Blackhawk and Canyon Lakes
developments. In both, the County Board of Supervisors serves as
the governing body.
Open Space
Maintenance Act
(Government Code sections 50575 et seq.)
Cities and
counties are empowered to spend public funds to acquire open space
land for preservation (Government Code sections 6950-6954). The
Open Space Maintenance Act provides a means to levy an ad valorem
special assessment to pay for the following services related to
such land:
- conservation
planning;
- maintenance;
- improvements
related to open space conservation; and,
reduction of
fire, erosion, and flooding hazards through clearing brush,
making fire protection improvements not otherwise provided the
area, planting and maintaining trees and other vegetation,
creating regulations limiting area use, and construction of
general improvements.
The owners of
lands representing 25% or more of the value of the assessable land
within the proposed district may initiate district formation by
filing a petition with the involved city or county. The local
legislative body must then prepare a preliminary report containing
a description of the proposed boundaries, the work to be done, an
estimate of the cost of the assessment, and illustrating the
parcels to be benefitted. The planning commission must review the
report and make recommendation to the legislative body. Once the
legislative body has reviewed the report, concluded that such a
district is justified, and adopted an ordinance of intention to
form an assessment district, it will set a time and place for
hearing objections to the proposal. The ordinance of intention
must specify the district boundaries, the proposed projects, the
annual assessment, the maximum assessment, and the time of the
protest hearing (Government Code section 50593). Notice must be
placed in a newspaper of general circulation, mailed to involved
property owners, and posted in a public place. The formation
proceedings in current law conflict with the requirements of
Proposition 218. A city or county must be careful to substitute
the requirements of Proposition 218 for any conflicting provisions
in the code. This statute needs to be amended to reconcile it with
Proposition 218.
Fire Suppression
Assessment
(Government Code section 50078 et seq.)
Special
districts, county service areas, counties, and cities which
provide fire suppression services (including those provided by
contracting with other agencies) are authorized to levy
assessments under this act. The resulting revenues may be used to
obtain, furnish, operate, and maintain fire fighting equipment and
to pay salaries and benefits to firefighting personnel.
Unlike the other
special assessment acts, invocation of fire suppression
assessments does not require establishment of an assessment
district. Instead, the jurisdiction levying the assessment
specifies those parcels or zones within its boundaries that will
be subject to assessment.
Assessments are
based upon uniform schedules or rates determined by the risk
classification of structures and property use. Agricultural,
timber, and livestock land is assessed at a lower rate on the
basis of relative risk to the land and its products. The local
agency may establish zones of benefit, restricting the
applicability of assessments. In addition, assessments may be
levied on parcels, classes of improvement or property use or any
combination thereof. Assessments are proportional to the fire
protection benefits received by property and improvements, but may
be levied whether or not the service is actually used.
The procedure
for establishing a fire suppression assessment includes:
filing of a
report which details the land to be assessed, the initial
amount of assessment, the maximum assessment, the duration of
the assessment, and the schedule or rate of assessment;
- public notice
and hearing;
- protest
procedures; and,
adoption of
an ordinance or resolution imposing the levy.
Proposition 218,
with its strict definition of "special benefit," may
pose a problem for new or increased assessments under this code.
In fact, some jurisdictions, such as the Tamalpais Valley Fire
District and the County of Los Angeles, have placed fire
protection levies before the voters as special taxes (subject to
two-thirds approval), effectively converting them from
assessments.
The agency
proposing to levy fire suppression assessments must be careful to
document the special benefit (excluding any benefit to the general
public and any general enhancement of property value) accruing to
each parcel that is included in the assessment district. In
addition, the formation proceedings in current law conflict with
the requirements of Proposition 218. A city or county must
substitute the requirements of Proposition 218 for all conflicting
provisions in the code.
Facilities
Benefit Assessment
The City of San
Diego is levying assessments for capital improvements in
urbanizing areas designated on its general plan. The city's
Facilities Benefit Assessment (FBA) ordinance is generally based
upon the Municipal Improvement Act of 1913, but relies upon this
charter city's home rule powers rather than state statutes for
authority. It is being used to pay for capital improvements such
as major arterial and local streets, sewer and water facilities, a
park and ride lot, a fire station, and a library in the North City
West Community Plan area.
The FBA
ordinance establishes areas of benefit to be assessed for needed
improvements in newly developing areas. Each parcel within an area
of benefit is apportioned its share of the total assessment for
all improvements (including those required for later development
phases) which is then recorded on the assessment roll. Assessments
are liens on private property as with the state assessment acts.
Upon application for a building permit the owner of the parcel
must pay the entire assessment (the payment is pro rated if only a
portion of the parcel is being developed at one time). Payment
releases the city's lien on the property. The funds that are
collected are placed in separate accounts to be used for the
needed improvements and do not exceed the actual cost of the
improvements plus incidental administrative costs. San Diego's FBA
financing relies upon assessments only and does not provide for
issuing bonds.
The procedure
for levying assessments laid out in the city's FBA ordinance
parallels the state improvement acts. For the North City West
Public Facilities Financing Plan FBA, the city prepared a report
detailing needed improvements, construction costs and schedule,
the proposed area of benefit, and the proposed formula for
apportioning the assessment. After adopting the report and a
notice of intention to consider enacting the assessment, the city
scheduled a public hearing for the purpose of considering
protests. At the hearing, the city presented additional
information regarding the proposed boundaries of the areas of
benefit, the facilities to be constructed, the method of
apportionment, the method of computing annual increases in the
assessment, and the amount of the city's contribution toward the
cost of the improvements.
Assessments are
apportioned based upon the parcels' Equivalent Dwelling Units
(EDU). EDUs were assigned according to the development potential
of the land as projected by the community plan, final map, or
other measure. EDUs were computed prior to adopting the FBA after
consultation with developers and landowners.
San Diego's FBA
has been upheld by the courts in the face of challenges that it
was a "special tax" subject to Proposition 13
requirements and that it was beyond the city's authority to enact
(J.W. Jones v. City of San Diego (1984) 157 Cal.App.3d 745 and
City of San Diego v. Holodnak (1984) 157 Cal.App.3d 760).
The City of
Sacramento has established an FBA that clones San Diego's model.
Sacramento is using it to pay for $16 million worth of
improvements within the city's South Natomas Community Plan area.
These include: traffic signals; bridges; street extensions and
widening; and portions of a library, a community center and a fire
station. As in San Diego, the city collects the full assessment
when building permits are issued and there is no mechanism for
issuing bonds.
Charter cities
are subject to the requirements of Proposition 218. A city
undertaking a facilities benefit assessment in the future, or
proposing to increase an existing assessment, must comply with all
the requirements and limitations of the initiative.
Seismic
Safety Assessment
The city of Long
Beach is using its powers as a charter city in forming a special
assessment district to finance the private building improvements
mandated by the city's seismic safety ordinance. Like many other
cities, Long Beach requires that older buildings be brought up to
current seismic safety standards. A strict city ordinance requires
the demolition of pre-1934 buildings that have not been upgraded
by 1991.
Participation in
the district is voluntary. Building owners who want to be included
in its boundaries must pay a non-refundable, good faith deposit
and provide the city an accurate estimate of the probable cost of
complying with the seismic safety ordinance. Once the city has
received the owners' cost estimates and deposits, it will initiate
district formation proceedings. The formation procedure is modeled
after the 1911 and 1913 Acts.
After formation
of the assessment district, the city issued $17.44 million in
taxable bonds to finance the district-wide cost of the
improvements. Individual assessments will be equal to the cost of
bringing a particular building into compliance with code, plus a
share of the debt service and administrative costs.
Through the
following measures, Long Beach will ensure that the funds
collected by the assessment district (and the associated bond
sale) go directly to addressing the community health and safety
concerns embodied in its seismic safety ordinance.
The city will be
responsible for hiring the necessary contractors to upgrade
participating buildings. No payments or loans will be made to
building owners.
The scope of the
work will be limited solely to those improvements required by the
city's seismic safety code. For example, fire sprinklers will not
be installed because they are not mandated by the ordinance.
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