From: Kiana Buss
Sent: Tuesday, July 29, 2008 11:03 AM
To: Kiana Buss
Subject:
To:
Public Works Directors
Planning Directors
CEAC Transportation Policy Committee
FYI
– An update on a recent California Supreme Court decision on special
assessments.
Daily Journal
Engineering a Change
July 25, 2008
By Sophie N. Froelich
This
month, a California Supreme Court decision changed the way special assessments
can be levied and challenged. Special assessments that are applied evenly to
all parcels within a district now run a high risk of being viewed as special
taxes requiring a two-thirds vote of residents within a local agency's
jurisdiction, and any assessment challenged in court will now be subject to
independent judicial review. The decision will likely have far-reaching
implications for local governments and special districts that depend on special
assessment funding.
The
unanimous decision, Silicon Valley Taxpayers Association Inc. v. Santa Clara
County Open Space Authority, 2008 DJDAR 10675, was handed down July 14. It
clarified the standard of judicial review for assessments and held that any
assessment will be reviewed de novo by a court. Further, it revised the
substantive law underlying assessments, by, among other things, rejecting
traditional methods of apportioning assessments and making it clear that any
benefits that accrue to all properties within the special benefit assessment district
are no longer considered "special benefits" unless the engineer's
report shows that the particular benefit accrues to particularized parcels.
The
Santa Clara County Open Space Authority was created in 1992 to acquire and
preserve open space within the county. Although the act that created the Open
Space Authority did not provide any particular method to fund such
acquisitions, the act authorizes the group to levy special assessments under
the Street and Highways Code. Pursuant to that authority, the group imposed its
first countywide assessment to fund a program to acquire, improve and maintain
unspecified open space lands in the
After
the original Open Space Authority assessment was created, Proposition 218, a
voter initiative amending the California Constitution, passed in 1996. Among
other things, Proposition 218 dictates that, before a local agency levies an
assessment, the agency must follow certain procedural steps concerning notice
to all property owners and balloting.
Proposition
218 also imposes substantive requirements for assessments, including that each
assessment be imposed only for a "special benefit" conferred on
particular property, and that the assessment imposed on any given parcel be in
proportion to the special benefit conferred on each parcel. It also requires
that an engineer report be prepared to justify the special benefits assessed on
each property. (Finally, in any legal action contesting the validity of an
assessment, Proposition 218 shifts the burden of proof to the agency to
demonstrate that the properties in question receive a special benefit over and
above the benefits conferred upon the public at large, and that the amount of
the assessment is proportional to the benefits conferred on the particular
property.
In
2001, the Open Space Authority determined that it needed additional funding to
purchase open space. The group's board of directors authorized a poll of
The
engineer's report is the cornerstone of any post-Proposition 218 assessment.
The report "stated that the assessment would fund the '[a]cquistion,
installation, maintenance, and servicing' of open space lands for recreation,
conservation, watersheds, easements, and similar purposes. Although the ...
report identified areas OSA was considering for potential acquisition and
improvement and outlined general considerations OSA would use to identify and
acquire open space lands, it identified no particular parcels to be acquired
and no particular areas to be prioritized." Further, it used this $20 as a
starting point for the assessment, setting the assessment rate for single
family homes at $20 per year, and used the $20 single family home assessment
unit as the basis for the rates imposed on other parcels. It then identified
benefits that accrued to each parcel, as well as a formula for estimating the
proportionate special benefit that other property on the tax rolls would
receive. "Using the $20 property tax increase per single-family home, the
... engineer's report calculated that the assessment would produce an
approximately $8 million increase in OSA's budget." Following a noticed
balloting procedure, the assessment passed by more than 50 percent; the report
was adopted by the Open Space Authority's board, and the assessment was
enacted. Thereafter, the board renewed the assessment for 2003-2004 and added a
cost-of-living increase.
Plaintiffs,
taxpayers advocacy groups and individuals, challenged the assessment via a writ
of mandate on the grounds that it failed to comply with the procedural and
substantive requirements set forth in Proposition 218 and its implementing
legislation. Ultimately, the court agreed with the plaintiffs, and invalidated
the assessment and the engineer's report supporting it. But first, the court
considered the standard of review a court should apply to an assessment in the
post-Proposition 218 world.
In
cases such as Knox v. City of
Specifically,
the court held that "Proposition 218 tightened the definition of special
benefits and broadened the definition of general benefits" that existed
prior to 1996 "to include benefits conferred generally 'on real property
located in the [newly formed benefit assessment] district.'" Accordingly,
benefits that accrue to all properties within the benefit assessment district
generally, such as enhanced economic conditions, protection of views, scenery,
property generally and environmental benefits, are no longer "special
benefits" upon which an assessment can be based. Because the engineer's
report specifically identified these kinds of general benefits, the court held
it was insufficient as a matter of law under Proposition 218.
Additionally,
the court expressly rejected the proportionality analysis in the engineer's
report because it was based on Open Space Authority's projected annual budget
for its open space program rather than on a calculation or estimation of the
cost of the particular public improvement to be financed by the assessment.
"An
assessment that works backward by starting with an amount taxpayers are likely
to pay, and then determines an annual spending budget based thereon, does not
comply with the law governing assessments, either before or after Proposition
218."
Such
funding would at best be called a tax or a special tax, and not an assessment.
This was particularly true here, where the assessment funded the agency's
ongoing operations, costs and budget.
The
Silicon Valley case will likely make it harder to justify and defend
assessments in the future, particularly for agencies like the Open Space
Authority, fire districts and other agencies that levy assessments benefitting
all within their particular jurisdictions, as opposed to assessments that
benefit particular parcels of property.
Further, engineers' reports
will be subject to close scrutiny and independent review by the courts going
forward, and so particularized benefits to each parcel in the agency's
jurisdiction, together with any methodologies apportioning benefits among those
parcels, must be spelled out clearly in them. Finally, it appears that
determining how much to assess a parcel by surveying the residents within a
jurisdiction to find out how much they might be willing to pay, and by adding
in how much the agency may need to raise is no longer a valid way to calculate
an assessment. Rather, the starting point will have to be how much the service
or benefit will cost for each parcel.
Sophie N. Froelich is
a partner in the