Assessments for services traditionally funded by property tax have faced an uphill battle after the passage of Proposition 218, the 1996 voter initiative that requires the local governments and special districts to seek voter approval for any proposed new or increased assessment before it could be levied. That hill has gotten steeper in the wake of a recent decision.
The decision from the Third Appellate District in Citizens for Responsible Government v. West Point Protection District suggests that the drafters of and voters for Proposition 218 achieved what they were after: further restrictions on the ability of public agencies to raise new revenue irrespective of the salutary purposes or modesty of the imposition. The case involves a fire protection assessment approved by 61.8% of the vote cast in a 218 election proceeding in Calaveras County; despite this strong majority, the court ruled that flaws in the way that the measure assessed the property owners' payments made the assessment unlawful.
Formed in 1948, the West Point Fire Protection District derives most of its funding from property tax. But with a rapidly increasing service population, the demands for service outpaced tax revenues. A study prepared for the district estimated that it would require an additional $146,000 per year (double its existing budget) to keep one full time firefighter/emergency medical technician available at all times. While that sort of service is standard in most urban areas, it can be scarce in rural parts of California.
However, neither the necessity for, nor the cost of the services is relevant to the legal question of whether or not an assessment is valid. Proposition 218 requires that the assessments be based upon the benefits conferred to those paying the assesments. After reviewing the history behind Proposition 218 and the court decisions which followed, primarily Silicon Valley Taxpayers' Assn., Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431 (see CP&DR Legal Digest Vol. 23, No. 8, Aug. 2008), the appellate court held this assessment to be flawed on several grounds.
The court's initial ruling was that the assessment was only for general benefits, and therefore did not qualify for an assessment. The court viewed the assessment as a general expansion of services which benefitted all properties. Since the delivery of general emergency services is a non-predictable event, this effectively precluded the existence of special benefits.
While the court's first holding disposed of the case, the court went on to say that even if one could argue that special benefits were found, the assessment was invalid as it failed the proportionality requirement. Relying on the holding of Town of Tiburon v. Bonandur 180 Cal.App.4th 1057 (see CP&DR Legal Digest Vol. 25, No. 2, Jan. 2010), the appellate court acknowledged that a proportionality determination was based upon the costs as measured by the relative benefits.
In finding that the assessment failed the proportionality requirement, the appellate court noted that the district's engineer had first determined the cost and then worked backwards to establish the amount of the assessments. It was, the court said, an error of oversimplification. The engineer's report also relied upon three categories for assessments: improved, unimproved and exempt. Improved properties would be assessed $87.58 per year, whereas unimproved properties paid $45.00. Exempt properties paid nothing.
The appellate court concluded that this assessment structure was flawed in that all increased services would be "special benefits," with no discount for general benefits. The formula resulted in disproportionate assessments between improved properties and those unimproved. In reaching this conclusion, the court relied upon the relative value of the properties (land and improvements) as the metric for analyzing the proportionality of the assessment. The court also highlighted that the assessment report noted that exempt properties would receive a "major benefit," implying that assessment report authors ought to be more careful in how they write their reports.
Citizens for Responsible Government v. West Point Protection District No. C061110, 2011 DJDAR. Filed June 29, 2011. Ordered published June 29, 2011.
Stephanie J. Finelli and Robert K. Reeve for Plaintiffs and Appellants
Nossaman LLP and Stephen N. Roberts for Defendants and Appellants