Amended in Assembly April 21, 2014

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, begin insert 36603.5, end insert 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 amended, 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 begin delete sum end delete begin insert total amount end insert of all special benefits to be begin delete provided to end delete begin insert conferred on end insert the properties located within the begin insert property-based end insert district, the begin delete sum end delete begin insert total amount end insert of any general benefit begin delete being primarily provided to the public or any entity other than the properties located within the district end delete , 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, begin delete or end delete the public at large begin insert , or other real property end insert , 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 begin insert , maintenance, end insert 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 begin delete sum end delete begin insert total amount end insert of all special benefits to be begin delete provided to end delete begin insert conferred on end insert the properties within the begin insert property-based end insert district, and the begin delete sum end delete begin insert total amount end insert of any general begin delete benefit being primarily provided to the public or any entity other than the properties located within the district end delete begin insert benefit end insert .

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 business districts
in some 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 begin delete cities end delete begin insert business
districts end insert to fund business related improvements, maintenance, and
activities through the levy of assessments upon the businesses or
real property that receive certain benefits from those improvements.

(d) Assessments levied for the begin delete purpose of providing
improvements and promoting activities that end delete begin insert special end insert benefit
begin insert conferred upon end insert real property or businesses begin insert in a business district end insert
are not taxes for the general benefit of a city, begin delete 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. end delete begin insert even if there is some incidental benefit
to property or persons not assessed, from the improvements,
maintenance, or activities that confer the special benefit. end insert

(e) Property and business improvement districts formed
throughout this state have begin delete provided many end delete begin insert conferred special end insert benefits
begin delete to this state’s communities that have resulted in end delete begin insert on properties and
businesses within their districts and have made assessed properties
and businesses more useful by providing end insert the following benefits:

(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.

(2) Job creation.

(3) Business attraction.

(4) Business retention.

(5) Economic growth.

(6) New investments.

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

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

begin delete

(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 delete begin insert

(h) The act amending this section is intended to provide the
Legislature’s guidance with regard to this act, its interaction with
the provisions of Article XIII D of the Constitution, and the
determination of special benefits in property-based districts.

end insert

(1) The lack of legislative guidance begin delete appears to have created end delete begin insert has
resulted in end insert uncertainty begin delete among various courts with regard to the
determination of special benefits, which could be perceived as
providing an unclear or inconsistent standard. end delete begin insert and inconsistent
application of this act, which discourages the use of assessments
to fund needed improvements, maintenance, and activities in
property-based districts, contributing to blight and other
underutilization of property. end insert

begin insert

(2) Improvements, maintenance, or activities conferring special
benefits upon property to be assessed also inevitably provide
incidental, secondary, or collateral effects that benefit others not
assessed. This incidental benefit is part of a special benefit and is
not intended to generally benefit the public and, therefore, does
not constitute a general benefit under Article XIII D of the
Constitution.

end insert begin delete

(2)

end delete

begin insert (3) end insert  It is of utmost importance that property-based districts
created under begin delete the end delete 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.

begin delete

(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.

(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 delete

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 property and business improvement district, to begin delete assure end delete
begin insert ensure end insert that those assessments conform to all constitutional
requirements and are determined and assessed in accordance with
the guidance set forth in begin delete Dahms v. Downtown Pomona Property
and Business Improvement District (2009) 174Cal. App.4th 708 end delete
begin insert this act 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.

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 36603.5 of the end insert begin insert Streets and Highways Code end insert begin insert is
amended to read: end insert

36603.5.  

Any provision begin delete in end delete begin insert of end insert this part that conflicts with any
other provision of law shall prevail over the other provision of
law begin insert , as to districts created under this part end insert .

begin delete SEC. 3. end delete
begin insert SEC. 4. end insert   

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

36606.5.  

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

begin delete SEC. 4. end delete
begin insert SEC. 5. end insert   

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

36609.5.  

“General benefit” means begin insert , for purposes of a
property-based district, end insert any benefit begin delete being primarily end delete provided to
the public begin insert at large end insert or any begin delete entity end delete begin insert person or property end insert other than the
properties begin delete or businesses end delete located within the property-based district.
begin delete 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 end delete begin insert “General
benefit” excludes all types and components of a “special benefit”
as defined in Section 36615.5 end insert .

begin delete SEC. 5. end delete
begin insert SEC. 6. end insert   

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

36614.5.  

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

begin delete SEC. 6. end delete
begin insert SEC. 7. end insert   

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

36614.  

“Property” means real property situated within a district.

begin delete SEC. 7. end delete
begin insert SEC. 8. end insert   

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

36606.  

“Activities” means, but is not limited to, all of the
following begin insert that benefit businesses or real property in the district end insert :

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

(b) Furnishing of music in any public begin delete place within the district end delete
begin insert place end insert .

(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)  begin delete Activities which end delete begin insert Other services that end insert benefit businesses and
real property located in the district.

begin delete SEC. 8. end delete
begin insert SEC. 9. end insert   

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

36611.  

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

begin delete SEC. 9. end delete
begin insert SEC. 10. end insert   

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

36612.  

“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 begin delete documents end delete begin insert records end insert relating to
activities of the district.

begin delete SEC. 10. end delete
begin insert SEC. 11. end insert   

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

36614.6.  

“Property-based assessment” means any begin delete levy or
charge end delete begin insert assessment made pursuant to this part end insert upon begin delete real property
by a city end delete begin insert property end insert .

begin delete SEC. 11. end delete
begin insert SEC. 12. end insert   

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

36614.7.  

“Property-based district” means any district begin delete supported end delete
in begin delete part by any end delete begin insert which a city levies a end insert property-based assessment.

begin delete SEC. 12. end delete
begin insert SEC. 13. end insert   

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

36615.5.  

“Special benefit” means begin insert , for purposes of a
property-based district, end insert a particular and distinct benefit over and
above general benefits conferred on real property located in a
property-based district begin delete or end delete begin insert , end insert to the public at begin delete large. General end delete begin insert large, or
to other real property from the improvements, maintenance, or
activities of a property-based district and the incidental secondary
or collateral benefit from those improvements, maintenance, or
activities. “Special benefit” excludes general end insert enhancement of
property value begin delete 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 end delete begin insert and any “general benefit” as defined in
Section 36609.5 end insert .

begin delete SEC. 13. end delete
begin insert SEC. 14. end insert   

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

36622.  

The management district plan shall begin delete contain end delete begin insert include,
but is not limited to, end insert 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 begin insert , maintenance, end insert and activities proposed
for each year of operation of the district and the maximum cost
thereof. If the improvements begin insert , maintenance, end insert and activities proposed
for each year of operation are the same, a description of the first
year’s proposed improvements begin insert , maintenance, end insert and activities and a
statement that the same improvements begin insert , maintenance, end insert 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 begin delete and operations end delete begin insert , or activities end insert , 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) (1) 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.

(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 begin delete property related service being provided end delete begin insert activities end insert .
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.

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

(m) In a property-based district, the begin delete sum end delete begin insert total amount end insert of begin delete 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 delete begin insert all special benefits to be conferred on the
properties in the property-based district end insert begin insert . end insert

begin insert

(n) In a property-based district, the total amount of any general
benefit.

end insert begin delete

(n)

end delete

begin insert (o) end insert  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.

begin delete

(3)

end delete

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

begin delete SEC. 14. end delete
begin insert SEC. 15. end insert   

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 begin delete the end delete begin insert a end insert proposed property and business
improvement district, the city council shall adopt a resolution of
formation that shall begin delete contain end delete begin insert include, but is not limited to, end insert all of the
following:

(1) A brief description of the proposed begin delete activities and end delete
improvements, begin insert maintenance, and activities, end insert 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 begin delete about end delete begin insert on end insert whether bonds will be issued, and a
description of the exterior boundaries of the proposed district. The
descriptions and statements begin delete do not end delete need begin delete to end delete begin insert not end insert be detailed and shall
be sufficient if they enable an owner to generally identify the nature
and extent of the improvements begin insert , maintenance, end insert 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 begin insert , maintenance, end insert and
activities to be begin delete provided in end delete begin insert conferred on end insert the district will be funded
by the levy of the assessments, and, for a property-based district,
to the extent that general benefits are provided, the begin delete source of end delete
funding begin delete to pay end delete begin insert source end insert for those general benefits. The revenue from
the levy of assessments within a district shall not be used to provide
improvements begin insert , maintenance, end insert 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 begin insert , maintenance, end insert and activities funded by the
begin delete assessments proposed to be levied end delete begin insert proposed assessments end insert , and, for
a property-based district, that property within the district will
receive a special benefit.

(8) In a property-based district, the begin delete sum of all special benefits
to be provided to end delete begin insert total amount of all special benefits to be conferred
on end insert the properties within the property-based district.

(9) In a property-based district, the sum of any general begin delete 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 delete begin insert benefit. 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.

begin delete SEC. 15. end delete
begin insert SEC. 16. end insert   

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 begin insert , maintenance, end insert and
activities, provided that any property-based assessment is
proportional to the special benefit conferred on the assessed
property.

begin delete SEC. 16. end delete
begin insert SEC. 17. end insert   

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 proportionally begin delete with end delete begin insert to end insert the begin delete distribution
of a end delete special benefit begin delete to end delete begin insert conferred on end insert the real property, 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.
begin delete However, a general benefit does not include collateral benefits
that arise incidentally from special benefits conferred on the
properties or businesses located within the property-based district. end delete
The city council may classify properties for purposes of
determining the special benefit begin delete provided to end delete begin insert conferred on end insert property
by the improvements begin insert , maintenance, end insert and activities begin delete provided end delete
begin insert c end insert begin insert onferred end insert 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 begin insert , maintenance, end insert and
activities begin delete provided end delete begin insert conferred end insert pursuant to this part.

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