California Legislature—2013–14 Regular Session

Assembly Bill No. 2618

Introduced by Assembly Member John A. Pérez

(Coauthors: Assembly Members Dickinson and Ting)

February 21, 2014

An act to amend Sections 36601, 36602, 36622, 36625, 36628.5, and 36632 of, to amend and renumber Sections 36606, 36611, 36612, 36613, 36614, and 36614.5 of, and to add Sections 36609.5, 36614.6, 36614.7, and 36615.5 to, the Streets and Highways Code, relating to benefit assessments.

LEGISLATIVE COUNSEL’S DIGEST

AB 2618, as introduced, John A. Pérez. Property and business improvement areas: benefit assessments.

The California Constitution generally requires that assessments, fees, and charges be submitted to property owners for approval or rejection after the provision of written notice and the holding of a public hearing.

The Property and Business Improvement District Law of 1994 authorizes cities to form property and business improvement districts that may levy assessments within a district for the purpose of making improvements and promoting activities of benefit to the properties and businesses within the district, and defines various terms for purposes of the act.

The act requires a management district plan to include, among other things, the name of the proposed district, a description of the boundaries of the district, and the total annual amount proposed to be expended for improvements, maintenance and operations, and debt service in each year of operation of the district.

This bill would require a management district plan to additionally include, for districts that are property-based, the proportionate special benefit derived by each identified parcel, the sum of all special benefits to be provided to the properties located within the district, the sum of any general benefit being primarily provided to the public or any entity other than the properties located within the district, and a detailed engineer’s report, as specified.

This bill would define the term “special benefit” for purposes of that act to mean a particular and distinct benefit over and above general benefits, as defined, conferred on real property located in a property-based district, as defined, or the public at large, as specified.

The act additionally requires the city council to adopt a resolution of formation containing, among other things, a statement that the improvements and activities to be provided in the district will be funded by the levy of the assessments and a finding that the property or businesses within the area of the district will be benefited by the improvements and activities funded by the assessments proposed to be levied.

This bill would require, for a property-based district, a statement of the source of funding to pay for any general benefits, a finding that the property within the district will receive a special benefit, the sum of all special benefits to be provided to the properties within the district, and the sum of any general benefit being primarily provided to the public or any entity other than the properties located within the district.

The act authorizes a city council to levy assessments on businesses or on property owners, or a combination of the 2, and requires the city council to structure the assessments on whatever manner it determines corresponds with the distribution of benefits from the proposed improvements and activities.

This bill would require any property-based assessment to be proportional to the special benefit conferred on the assessed property, and would prohibit the assessment from exceeding the reasonable cost of the proportional special benefit conferred, as specified.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 36601 of the Streets and Highways Code
is amended to read:

36601.  

The Legislature finds and declares all of the following:

(a) Businesses located and operating within begin delete the end delete business districts
begin insert in some end insert of this state’s communities are economically
disadvantaged, are underutilized, and are unable to attract
customers due to inadequate facilities, services, and activities in
the business districts.

(b) It is in the public interest to promote the economic
revitalization and physical maintenance of the business districts
of its cities in order to create jobs, attract new businesses, and
prevent the erosion of the business districts.

(c) It is of particular local benefit to allow cities to fund business
related improvements, maintenance, and activities through the levy
of assessments upon the businesses or real property that begin insert receive
certain end insert benefits from those improvements.

(d) Assessments levied for the purpose of providing
improvements and promoting activities that benefit real property
or businesses are not taxes for the general benefit of a city, but are
assessments for the improvements and activities which confer
special benefits upon the real property or businesses for which the
improvements and activities are provided.

begin insert

(e) Property and business improvement districts formed
throughout this state have provided many benefits to this state’s
communities that have resulted in the following benefits:

end insert begin insert

(1) Crime reduction. A study by the Rand Corporation has
confirmed a 12-percent reduction in the incidence of robbery and
an 8-percent reduction in the total incidence of violent crimes
within the 30 districts studied.

end insert begin insert

(2) Job creation.

end insert begin insert

(3) Business attraction.

end insert begin insert

(4) Business retention.

end insert begin insert

(5) Economic growth.

end insert begin insert

(6) New investments.

end insert begin insert

(f) With the dissolution of redevelopment agencies throughout
the state, property and business improvement districts have become
an even more important tool with which communities may combat
blight, promote economic opportunities, and create a clean and
safe environment.

end insert begin insert

(g) Since the enactment of this act, the people of California have
adopted Proposition 218, which amended Article XIII D of the
constitution to place certain requirements and restrictions on the
formation of, and activities, expenditures, and assessments by
property-based districts. Article XIII D of the constitution requires
that property-based districts may only levy assessments for special
benefits.

end insert begin insert

(h) Various courts have considered how special benefits should
be determined and assessed without guidance from the Legislature
in regard to how the Legislature intends for the Property and
Business Improvement District Law of 1994 to interact and comply
with the provisions of Article XIII D of the Constitution and how
special benefits are to be determined with regard to property-based
districts.

end insert begin insert

(1) The lack of legislative guidance appears to have created
uncertainty among various courts with regard to the determination
of special benefits, which could be perceived as providing an
unclear or inconsistent standard.

end insert begin insert

(2) It is of utmost importance that property-based districts
created under the this act have clarity regarding restrictions on
assessments they may levy and the proper determination of special
benefits. Legislative clarity with regard to this act will provide
districts with clear instructions and courts with legislative intent
regarding restrictions on property-based assessments, and the
manner in which special benefits should be determined.

end insert begin insert

(3) Of the appellate cases in which this act has been interpreted
Dahms v. Downtown Pomona Property and Business Improvement
District (2009) 174 Cal. App. 4th 708, most squarely relates to
property-based districts and its ruling provides clarity with regard
to how special benefits are determined and assessed with regard
to those districts.

end insert begin insert

(i) It is the intent of the Legislature that this act should reflect
the provisions of Article XIII D of the Constitution and the
guidance regarding the application of those provisions set forth
in Dahms v. Downtown Pomona Property and Business
Improvement District (2009) 174 Cal. App. 4th 708 including the
manner in which special benefits should be determined.

end insert

SEC. 2.  

Section 36602 of the Streets and Highways Code is
amended to read:

36602.  

The purpose of this part is to supplement previously
enacted provisions of law that authorize cities to levy assessments
within a begin insert property and end insert business improvement begin delete area end delete begin insert district, to assure
that those assessments conform to all constitutional requirements
and are determined and assessed in accordance with the guidance
set forth in Dahms v. Downtown Pomona Property and Business
Improvement District (2009) 174Cal. App.4th 708 end insert . This part does
not affect or limit any other provisions of law authorizing or
providing for the furnishing of improvements or activities or the
raising of revenue for these purposes.

SEC. 3.  

Section 36606 of the Streets and Highways Code is
amended and renumbered to read:

begin delete 36606. end delete
begin insert 36606.5. end insert   

“Assessment” means a levy begin insert or charge end insert for the purpose
of acquiring, constructing, installing, or maintaining improvements
and promoting activities begin delete which end delete begin insert that end insert will begin delete benefit the end delete begin insert provide certain
benefits to end insert properties or businesses located within a property and
business improvement district.

SEC. 4.  

Section 36609.5 is added to the Streets and Highways
Code, to read:

36609.5.  

“General benefit” means any benefit being primarily
provided to the public or any entity other than the properties or
businesses located within the property-based district. A general
benefit does not include a collateral benefit that arises incidentally
from a special benefit conferred on the properties or businesses
located within the property-based district.

SEC. 5.  

Section 36611 of the Streets and Highways Code is
amended and renumbered to read:

begin delete 36611. end delete
begin insert 36614.5. end insert   

“Property and business improvement district,” or
“district,” means a property and business improvement district
established pursuant to this part.

SEC. 6.  

Section 36612 of the Streets and Highways Code is
amended and renumbered to read:

begin delete 36612. end delete
begin insert 36614. end insert   

“Property” means real property situated within a district.

SEC. 7.  

Section 36613 of the Streets and Highways Code is
amended and renumbered to read:

begin delete 36613. end delete
begin insert 36606. end insert   

“Activities” means, but is not limited to, all of the
following:

(a) Promotion of public events which benefit businesses or real
property in the district.

(b) Furnishing of music in any public place within the district.

(c) Promotion of tourism within the district.

(d) Marketing and economic development, including retail
retention and recruitment.

(e) Providing security, sanitation, graffiti removal, street and
sidewalk cleaning, and other municipal services supplemental to
those normally provided by the municipality.

(f) Activities which benefit businesses and real property located
in the district.

SEC. 8.  

Section 36614 of the Streets and Highways Code is
amended and renumbered to read:

begin delete 36614. end delete
begin insert 36611. end insert   

“Management district plan” or “plan” means a proposal
as defined in Section 36622.

SEC. 9.  

Section 36614.5 of the Streets and Highways Code is
amended and renumbered to read:

begin delete 36614.5. end delete
begin insert 36612. end insert   

“Owners’ association” means a private nonprofit entity
that is under contract with a city to administer or implement
activities and improvements specified in the management district
plan. An owners’ association may be an existing nonprofit entity
or a newly formed nonprofit entity. An owners’ association is a
private entity and may not be considered a public entity for any
purpose, nor may its board members or staff be considered to be
public officials for any purpose. Notwithstanding this section, an
owners’ association shall comply with the Ralph M. Brown Act
(Chapter 9 (commencing with Section 54950) of Part 1 of Division
2 of Title 5 of the Government Code), at all times when matters
within the subject matter of the district are heard, discussed, or
deliberated, and with the California Public Records Act (Chapter
3.5 (commencing with Section 6250) of Division 7 of Title 1 of
the Government Code), for all documents relating to activities of
the district.

SEC. 10.  

Section 36614.6 is added to the Streets and Highways
Code, to read:

36614.6.  

“Property-based assessment” means any levy or
charge upon real property by a city.

SEC. 11.  

Section 36614.7 is added to the Streets and Highways
Code, to read:

36614.7.  

“Property-based district” means any district supported
in part by any property-based assessment.

SEC. 12.  

Section 36615.5 is added to the Streets and Highways
Code, to read:

36615.5.  

“Special benefit” means a particular and distinct
benefit over and above general benefits conferred on real property
located in a property-based district or to the public at large. General
enhancement of property value does not constitute “special
benefit.” To the extent a special benefit concomitantly produces
a collateral benefit for properties generally or for the public at
large, that collateral benefit is not a general benefit.

SEC. 13.  

Section 36622 of the Streets and Highways Code is
amended to read:

36622.  

The management district plan shall contain all of the
following:

(a) If the assessment will be levied on property, a map of the
district in sufficient detail to locate each parcel of property and, if
businesses are to be assessed, each business within the district. If
the assessment will be levied on businesses, a map that identifies
the district boundaries in sufficient detail to allow a business owner
to reasonably determine whether a business is located within the
district boundaries. If the assessment will be levied on property
and businesses, a map of the district in sufficient detail to locate
each parcel of property and to allow a business owner to reasonably
determine whether a business is located within the district
boundaries.

(b) The name of the proposed district.

(c) A description of the boundaries of the district, including the
boundaries of benefit zones, proposed for establishment or
extension in a manner sufficient to identify the affected lands and
businesses included. The boundaries of a proposed property
assessment district shall not overlap with the boundaries of another
existing property assessment district created pursuant to this part.
This part does not prohibit the boundaries of a district created
pursuant to this part to overlap with other assessment districts
established pursuant to other provisions of law, including, but not
limited to, the Parking and Business Improvement Area Law of
1989 (Part 6 (commencing with Section 36500)). This part does
not prohibit the boundaries of a business assessment district created
pursuant to this part to overlap with another business assessment
district created pursuant to this part. This part does not prohibit
the boundaries of a business assessment district created pursuant
to this part to overlap with a property assessment district created
pursuant to this part.

(d) The improvements and activities proposed for each year of
operation of the district and the maximum cost thereof. If the
improvements and activities proposed for each year of operation
are the same, a description of the first year’s proposed
improvements and activities and a statement that the same
improvements and activities are proposed for subsequent years
shall satisfy the requirements of this subdivision.

(e) The total annual amount proposed to be expended for
improvements, maintenance and operations, and debt service in
each year of operation of the district. If the assessment is levied
on businesses, this amount may be estimated based upon the
assessment rate. If the total annual amount proposed to be expended
in each year of operation of the district is not significantly different,
the amount proposed to be expended in the initial year and a
statement that a similar amount applies to subsequent years shall
satisfy the requirements of this subdivision.

(f) The proposed source or sources of financing, including the
proposed method and basis of levying the assessment in sufficient
detail to allow each property or business owner to calculate the
amount of the assessment to be levied against his or her property
or business. The plan also shall state whether bonds will be issued
to finance improvements.

(g) The time and manner of collecting the assessments.

(h) The specific number of years in which assessments will be
levied. In a new district, the maximum number of years shall be
five. Upon renewal, a district shall have a term not to exceed 10
years. Notwithstanding these limitations, a district created pursuant
to this part to finance capital improvements with bonds may levy
assessments until the maximum maturity of the bonds. The
management district plan may set forth specific increases in
assessments for each year of operation of the district.

(i) The proposed time for implementation and completion of
the management district plan.

(j) Any proposed rules and regulations to be applicable to the
district.

(k)  begin insert (1) end insert begin insert   end insert A list of the properties or businesses to be assessed,
including the assessor’s parcel numbers for properties to be
assessed, and a statement of the method or methods by which the
expenses of a district will be imposed upon benefited real property
or businesses, in proportion to the benefit received by the property
or business, to defray the cost thereof, including operation and
maintenance.

begin insert

(2) In a property-based district, the proportionate special benefit
derived by each identified parcel shall be determined in
relationship to the entirety of the capital cost of a public
improvement, the maintenance and operation expenses of a public
improvement, or the cost of the property related service being
provided. An assessment shall not be imposed on any parcel that
exceeds the reasonable cost of the proportional special benefit
conferred on that parcel. Only special benefits are assessable, and
a property-based district shall separate the general benefits from
the special benefits conferred on a parcel. Parcels within a
property-based district that are owned or used by any city, public
agency, the State of California, or the United States shall not be
exempt from assessment unless the governmental entity can
demonstrate by clear and convincing evidence that those publicly
owned parcels in fact receive no special benefit.

end insert begin insert

(l) In a property-based district, the sum of all special benefits
to be provided to the properties located within the property-based
district.

end insert begin insert

(m) In a property-based district, the sum of any general benefit
being primarily provided to the public or any entity other than the
properties located within the district. A general benefit does not
include any collateral benefit that arises incidentally from the
provision of a special benefit to properties located within the
property-based district, and the amount of those collateral benefits
need not be deducted from the sum of special benefits to be
provided to the properties located within the property-based
district.

end insert begin insert

(n) In a property-based district, a detailed engineer’s report
prepared by a registered professional engineer certified by the
State of California supporting all assessments contemplated by
the management district plan.

end insert begin delete

(l) 

end delete

begin insert (3) end insert begin insert   end insert Any other item or matter required to be incorporated therein
by the city council.

SEC. 14.  

Section 36625 of the Streets and Highways Code is
amended to read:

36625.  

(a) If the city council, following the public hearing,
decides to establish the proposed property and business
improvement district, the city council shall adopt a resolution of
formation that shall contain all of the following:

(1) A brief description of the proposed activities and
improvements, the amount of the proposed assessment, a statement
as to whether the assessment will be levied on property, businesses,
or both within the district, a statement about whether bonds will
be issued, and a description of the exterior boundaries of the
proposed district. The descriptions and statements do not need to
be detailed and shall be sufficient if they enable an owner to
generally identify the nature and extent of the improvements and
activities and the location and extent of the proposed district.

(2) The number, date of adoption, and title of the resolution of
intention.

(3) The time and place where the public hearing was held
concerning the establishment of the district.

(4) A determination regarding any protests received. The city
shall not establish the district or levy assessments if a majority
protest was received.

(5) A statement that the properties, businesses, or properties
and businesses in the district established by the resolution shall be
subject to any amendments to this part.

(6) A statement that the improvements and activities to be
provided in the district will be funded by the levy of the
assessments begin insert , and, for a property-based district, to the extent that
general benefits are provided, the source of funding to pay for
those general benefits end insert . The revenue from the levy of assessments
within a district shall not be used to provide improvements or
activities outside the district or for any purpose other than the
purposes specified in the resolution of intention, as modified by
the city council at the hearing concerning establishment of the
district.

(7) A finding that the property or businesses within the area of
the property and business improvement district will be benefited
by the improvements and activities funded by the assessments
proposed to be levied begin insert , and, for a property-based district end insert begin insert , that
property within the district will receive a special benefit end insert .

begin insert

(8) In a property-based district, the sum of all special benefits
to be provided to the properties within the property-based district.

end insert begin insert

(9) In a property-based district, the sum of any general benefit
being primarily provided to the public or any entity other than the
properties located within the property-based district. General
benefits do not include collateral benefits that arise incidentally
from the provision of special benefits to the properties located
within the property-based district, and the amount of those
collateral benefits need not be deducted from the sum of special
benefits to be provided to the properties located within the
property-based district.

end insert

(b) The adoption of the resolution of formation and, if required,
recordation of the notice and map pursuant to Section 36627 shall
constitute the levy of an assessment in each of the fiscal years
referred to in the management district plan.

SEC. 15.  

Section 36628.5 of the Streets and Highways Code
is amended to read:

36628.5.  

The city council may levy assessments on businesses
or on property owners, or a combination of the two, pursuant to
this part. The city council shall structure the assessments in
whatever manner it determines corresponds with the distribution
of benefits from the proposed improvements and activities begin insert ,
provided that any property-based assessment is proportional to
the special benefit conferred on the assessed property end insert .

SEC. 16.  

Section 36632 of the Streets and Highways Code is
amended to read:

36632.  

(a) The assessments levied on real property pursuant
to this part shall be levied begin delete on the basis of the estimated end delete
begin insert proportionally with the distribution of a special end insert benefit to the real
property begin insert , and shall not exceed the reasonable cost of the
proportional special benefit conferred on the real property. Any
additional costs of providing general benefits shall not be included
in the amounts assessed. However, a general benefit does not
include collateral benefits that arise incidentally from special
benefits conferred on the properties or businesses located end insert within
the begin delete property and business improvement end delete begin insert property-based end insert district.
The city council may classify properties for purposes of
determining the begin insert special end insert benefit begin insert provided end insert to property begin delete of end delete begin insert by end insert the
improvements and activities provided pursuant to this part.

(b) Assessments levied on businesses pursuant to this part shall
be levied on the basis of the estimated benefit to the businesses
within the property and business improvement district. The city
council may classify businesses for purposes of determining the
benefit to the businesses of the improvements and activities
provided pursuant to this part.

(c) Properties zoned solely for residential use, or that are zoned
for agricultural use, are conclusively presumed not to benefit from
the improvements and service funded through these assessments,
and shall not be subject to any assessment pursuant to this part.