Business Improvement Districts created by cities under the Parking and Business Improvement Area Law of 1989 are not subject to the voting requirements of Proposition 218, the Fourth District Court of Appeal has ruled. The unanimous three-judge panel said that Proposition 218 has no effect on cities' ability to levy assessments under the 1989 law (Streets & Highways Code §§ 36500-36551). The court concluded that San Diego's Pacific Beach Business Improvement District did not impose an "assessment" within the meaning of Proposition 218. In a decision closely watched by cities around the state, the court noted the difference between the 1989 measure, which allows assessments on business owners, and the Property and Business Improvement District Law of 1994, which provides for levies on property. For all 16 of its Business Improvement Districts, San Diego assesses business owners — not property owners — under the 1989 law, Deputy City Attorney James Chapin said. "That's the critical distinction for the purposes of Proposition 218," he said. If San Diego relied on the 1994 law to create the BID, "we wouldn't have been successful" because a BID based on the 1994 law would be subject to the proposition, he said. California voters approved Proposition 218 — the Right to Vote on Taxes Act — in November 1996. The measure requires two-thirds voter approval for adoption, extension or increase of taxes or assessments on real property. The initiative threw into question the validity of many lighting and landscaping district assessments and other levies issued by cities and special districts for specific services. The City of San Diego created the Pacific Beach BID to acquire, construct and maintain parking facilities in the area, to promote public events in the area, to furnish music, and to decorate the district. Business Improvement Districts are increasingly popular tools to raise revenue to fund street fairs, dress up neighborhoods and even add private security (see CP&DR Trends, December 1998). In fact, 85 cities joined in an Amicus Curiae brief to aid San Diego's case. In the Pacific Beach BID, the city assesses businesses based on the business size, type and location within the district. San Diego based the BID on the 1989 Parking and Business Improvement Area Law, rather than the Business Improvement District Law of 1994 (§ 36600). Four businesses registered their opposition to the Pacific Beach BID during a public hearing in June 1997, but the city went ahead with the BID anyway. The four business are assessed $60 apiece every year, according to Chapin. Arguing that the BID assessment violated Proposition 218, the protesting businesses and the Howard Jarvis Taxpayers Association then filed suit for declaratory and injunctive relief. San Diego County Superior Court Judge S. Charles Wickersham awarded the city summary judgement on the bases that Proposition 218 did not apply to the BID. On appeal, the BID opponents argued that Proposition 218 provides a "constitutional definition of assessment" that includes, but is not limited to, special assessments, benefit assessments, maintenance assessments, and special assessment taxes. The court, however, noted that Proposition 218 specifies "any levy or charge upon real property." "Proposition 218 clearly does not state a constitutional definition of assessment for all constitutional and statutory provisions," Presiding Justice Daniel J. Kremer wrote for the Fourth Appellate District, Division One. "To read such an all encompassing ‘constitutional definition' of assessment into Proposition 218 would require us to ignore the clear language of the proposition and rewrite the proposition. This we may not do." Extending Proposition 218 to other assessments not based on real property would result in the repeal of numerous levies, ranging from assessments on health care providers for state oversight, to assessments on avocado growers to fund the California Avocado Commission, the court said. The court also rejected the BID opponents' argument that the Pacific Beach BID levied a "special tax" within the meaning of Proposition 218. State law recognizes a distinction between a special tax and a special assessment. The California Supreme Court in Knox v. City of Orland, (1992) 4 Cal4th 132, explained that a special assessment is a "compulsory charge to recoup the cost of a public improvement made for the special benefit of a particular property." A special tax, meanwhile, is levied "without reference to peculiar benefits to particular individuals or property." The court in Evans v. City of San Jose, (1992) 3 Cal.App.4th 728, ruled that a levy imposed on business owners under the 1989 Parking and Business Improvement Area Law was not a special tax and was not subject to Proposition 13 because it benefited a discreet group. The reasoning in Evans applies to the San Diego case, the court said. Proposition 218 did not overrule the Evans decision, not did it change the meaning of "special taxes," the court said. The Case: Howard Jarvis Taxpayers Association v. City of San Diego, No. D031348, 99 C.D.O.S. 3693, 1999 Daily Journal D.A.R. 4719, filed May 19, 1999. The Lawyers: For Jarvis: Trevor A. Grimm, (213) 380-0303. For San Diego: James M. Chapin, deputy city attorney, (619) 533-5800.