Property assessments levied to fund the downtown Pomona Property and Business Improvement District did not violate Proposition 218, the Second District Court of Appeal has ruled for a second time.
The court issued the same ruling in 2006, which the state Supreme Court agreed to review. Instead of deciding the case, the state high court struck down an assessment in a different Proposition 218 case – Silicon Valley Taxpayers' Assn., Inc. v. Santa Clara County Open Space Authority, (2008) 44 Cal.4th 431 (SVTA) – and directed the Second District to rehear the Pomona case in light of the SVTA ruling.
Proposition 218, a progeny of Proposition 13 that added articles XIII C and XIII D to the state constitution, requires voter approval of most property-based assessments and fees. In SVTA, the court held that the measure shifts the burden of proof in assessment lawsuits to the government agency that imposes the assessment, and that courts should independently review levies.
Pomona's Property and Business Improvement District (PBID), as do many of the state's business improvement districts seeking to boost commerce downtown, assesses property owners to pay for security, streetscape maintenance, marketing and special events. In 2004, the city's affected property owners voted 126 to 66 to form the district. The weighted voted, based on property assessments, was $338,000 to $153,000.
In 2006, property owner Robert Dahms sued the city of Pomona to block the assessments. At the heart of Dahms's argument was the contention that Pomona, in forming the district, had violated Proposition 218's requirement that the assessment on each parcel in the district shall not exceed the reasonable cost of the proportional special benefit. Dahms's suit contended the city's discounted assessments for nonprofit entities, such as fraternal organizations and churches, was unjustified; some commercial properties were improperly assessed; and the city's method of determining assessments was illegal.
In rejecting Dahms's claims, the appellate court disagreed that Proposition 218 does not allow discounted assessments because they would not be proportional to the benefits received.
"[A]rticle XIII D does not require that the assessment be no less than the reasonable cost of the proportional special benefit conferred on that parcel," Justice Frances Rothschild wrote for the court. "That is, article XIII D leaves local governments free to impose assessments that are less than the proportional special benefit conferred – in effect, to allow discounts."
A discount on a parcel could run afoul of the constitution, Rothschild wrote, if it caused assessments on other parcels to exceed the cost of the proportional special benefit. However, Dahms did not argue this was the case in downtown Pomona.
In a separate concurring opinion, Orange County Superior Court Judge Ronald Bauer, sitting by assignment to the Second District, disagreed with the majority's handling of this question. Proportionality is "at the heart" of article XIII D, Bauer wrote, and thus cannot be ignored. Because the PBID system has no revenue other than the assessments, it "seems inevitable that an assessment against any parcel that is disproportionately low in relation to the benefits conferred thereon (that is, a ‘discount') would lead to an impermissibly high assessment against one or more other parcels. This would be a fatal flaw in such a system."
Because Dahms did not make this argument in his suit, Bauer sided with the two-justice majority in the ruling.
In rejecting Dahms's contention that some commercial parcels had been improperly assessed, the court held that even though Proposition 218 shifted the burden of proof in assessment litigation to the city of Pomona, Dahms failed to "support his own arguments on appeal in a manner that will make them susceptible of rational evaluation."
Finally, the justices disagreed with Dahms's contention that the city's formula for determining assessments was illegal because it counted only the length of street frontage of a property's address, and did not consider side street frontage. According to the formula, 40% of a property's assessment is based on street frontage, 40% on building size and 20% on lot size. The inclusion of building and lot size as criteria "should compensate for any disproportionality that might have resulted from exclusive reliance on front footage," the court ruled.
Dahms further contended that the city of Pomona failed to separate "general benefits" from "special benefits" in its assessments, noting that rising property values resulting from the assessments would be a general benefit. In SVTA, the state Supreme Court struck down a parks and open space assessment because it provided only general benefits – such as increased access to recreational areas and protected views – to all properties no matter how situated.
"The PBID is nothing like the district at issue in SVTA," Justice Rothschild wrote for the appellate court. "In SVTA, all seven of the putative special benefits were merely the alleged effects of the two services directly funded by the assessments, namely, the acquisition and maintenance of open space land. In contrast, the special benefits conferred by the PBID are not mere effects of the services funded by the assessments. Rather, the PBID's services themselves constitute special benefits to all of the assessed parcels. The assessments directly fund security services, streetscape maintenance services, and marketing and promotion services for the assessed parcels. SVTA in no way suggests that those services are not special benefits."
Dahms also argued the required public hearing on the assessment was premature because the city conducted the hearing on the 45th day after it mailed notices of proposed assessments. In rejecting the contention, the court noted that article XIII D requires the hearing "not less than 45 days after mailing the notice."
Dahms v. Downtown Pomona Property and Business Improvement District, No. B183545, 09 C.D.O.S. 5797, 2009 DJDAR 6855. Filed May 12, 2009. Modified June 8, 2009, at 2009 DJDAR 8321.
For Dahms: Ronald Friendt, Martineau & Knudson, (951) 285-9955.
For PBID: Scott Nichols, Alvarez-Glasman & Colvin, (626) 858-9121.