BILL ANALYSIS Ó
AB 2618
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CONCURRENCE IN SENATE AMENDMENTS
AB 2618 (John A. Pérez)
As Amended August 4, 2014
Majority vote
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|ASSEMBLY: |74-0 |(May 8, 2014) |SENATE: |35-0 |(August 7, |
| | | | | |2014) |
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Original Committee Reference: L. GOV.
SUMMARY : Amends the Property and Business Improvement District
(PBID) Law of 1994 to conform several of its provisions to
constitutional requirements established by Proposition 218 of
1996 (California Constitution Article XIII D).
The Senate amendments :
1)Define "general benefit" to mean "for purposes of a
property-based district, any benefit that is not a special
benefit as defined by current law."
2)Define "special benefit" to mean "for purposes of a
property-based district, a particular and distinct benefit
over and above general benefits conferred on real property
located in a district or to the public at large. Special
benefit includes incidental or collateral effects that arise
from the improvements, maintenance, or activities of
property-based districts even if those incidental or
collateral effects benefit property or persons not assessed.
Special benefit excludes general enhancement of property
value."
3)Define "clerk" to mean "the clerk of the legislative body."
4)Prohibit the value of any incidental, secondary, or collateral
effects that arise from a district's improvements,
maintenance, or activities that benefit property or persons
not assessed from being deducted from the entirety of the cost
of any special benefit or affect the proportionate special
benefit derived by each identified parcel.
5)Make changes to the information required to be included in a
management district plan for a proposed PBID.
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6)Make changes to the information required to be included in a
resolution adopted by a city council to form a PBID.
7)Revise language relating to the proportionality of special
benefit requirements of property-based assessments.
8)Allow a description of the boundaries of a proposed district
or an established district to be made by reference to any plan
or map that is on file with the clerk.
9)Find and declare that activities undertaken for the purpose of
conferring special benefits upon property to be assessed
inherently produce incidental or collateral effects that
benefit property or persons not assessed. Therefore, for
special benefits to exist as a separate and distinct category
from general benefits, the incidental or collateral effects of
those special benefits are inherently par of those special
benefits. The mere fact that special benefits produce
incidental or collateral effects that benefit property or
persons not assessed does not convert any portion of those
special benefits or their incidental or collateral effects
into general benefits.
10)Make other technical and conforming changes.
EXISTING LAW :
1)Allows, under the PBID Law of 1994, property owners to
petition a city or county to set up an improvement district to
levy assessments on property owners or business owners for
specified purposes.
2)Establishes requirements for the formation of a district,
including a management district plan which must contain
specified information.
3)Defines, pursuant to Proposition 218, "special benefit" to
mean "a particular and distinct benefit over and above general
benefits conferred on real property located in the district or
to the public at large. General enhancement of property value
does not constitute 'special benefit.'" (California
Constitution Article XIII D)
AS PASSED BY THE ASSEMBLY , this bill:
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1)Added definitions and requirements from the California
Constitution Article XIII D, put in place by Proposition 218
to the PBID Law of 1994.
2)Defined the following terms:
a) "Property-based assessment" to mean "any assessment made
pursuant to this part upon property";
b) "Property-based district" to mean "any district in which
a city levies a property-based assessment";
c) "General benefit" to mean "for purposes of a
property-based district, any benefit provided to the public
at large or any person or property other than the
properties located within the property-based district.
'General benefit' excludes all types and components of a
'special benefit'"; and,
d) "Special benefit" to mean "for purposes of a
property-based district a particular and distinct benefit
over and above general benefits conferred on real property
located in the property-based district, to the public at
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 enhancement of property value and
any 'general benefit.'"
3)Required assessments levied on real property to be levied
proportionally to the special benefit conferred on the real
property and shall not exceed the reasonable cost of the
proportional special benefit conferred on the assessed
property.
4)Added to the list that a management district plan, required
for a proposed PBID, shall include, but is not limited to, the
following in a property-based district:
a) The proportionate special benefit derived by each
identified parcel to be determined in relationship to the
entirety of the capital cost of a public improvements, the
maintenance and operation expenses of a public improvement,
or the cost of the activities. Prohibits an assessment
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from being imposed on any parcel that exceeds the
reasonable cost of the proportional special benefit
conferred on that parcel. Provides that only special
benefits are assessable and requires a property-based
district to separate the general benefits from the special
benefits conferred on a parcel. Prohibits parcels within a
property-based district that are owned or used by any city,
public agency, the State of California, or the United
States from being 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;
b) The sum of all special benefits to be provided to the
properties located within the property-based district;
c) The total amount of all special benefits to be conferred
on the properties in the property-based district;
d) The total amount of any general benefit; and,
e) 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.
5)Added to the requirements that must be included in a
resolution adopted by a city council to form a PBID to
include, but not be limited to:
a) A statement that the improvements, maintenance, and
activities to be conferred on the district will be funded
by the levy of the assessments, and for property-based
districts, to the extent that general benefits are
provided, the funding source for those general benefits;
b) A finding that in a property-based district, the
property within the district will receive a special
benefit;
c) The total amount of all special benefits to be conferred
on the properties within the property-based district; and,
d) The sum of any general benefit in a property-based
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district.
6)Replaced references to "improvements and activities" with
"improvements, maintenance, and activities."
7)Made changes to the definition of "activities" to clarify that
the existing list of activities must benefit businesses or
real property in the district.
8)Made other technical and conforming changes.
9)Made findings and declarations.
FISCAL EFFECT : None
COMMENTS :
1)Assessment Districts and Proposition 218. Special assessment
districts (also called benefit assessments) have a long
history in California. Business improvement districts are one
model for how local governments use assessment financing to
pay for projects to attract and retain businesses. The PBID
Law allows property owners to petition a city or county to set
up an "improvement district" and levy either property-based or
business-based assessments on property or business owners to
pay for promotional activities and physical improvements.
Most assessments are levied against real property, and are
generally collected on the property tax roll, secured by a
lien against the assessed property, and subject to Proposition
218. Assessments levied on businesses, not real property, are
not subject to Proposition 218, and are usually collected
along with business license taxes and are not secured by a
lien against real property. Proposition 218, which
distinguishes among taxes, assessments and fees for
property-related revenues, and requires certain actions before
such revenues may be collected.
Unlike business-based assessments, property-based assessment
districts' notice, protest, and hearing requirements for new,
extended, or increased assessments are governed by Proposition
218, which involves mailed protest ballots to all assessed
property owners, a 45-day protest period, and a public hearing
at which protests are counted and the presence or absence of a
majority protest is determined. After complying with notice,
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protest, and hearing requirements, if a majority protest is
not received from property owners, the legislative body may
adopt a resolution to establish the assessment district and
levy the assessment.
Proposition 218 also includes requirements to determine which
properties are included in a benefit assessment district and
the apportionment of each assessment. Local agencies must
determine the special benefit for each identified parcel and
separate the general benefits because only special benefits
are assessable. The cost of the assessment cannot exceed the
reasonable cost of the proportional special benefit that
parcel receives.
Proposition 218 requires a professional engineers report to
estimate the amount of special benefit to landowners and the
amount of general benefit, the overall benefit to society at
large. Case law in this area is constantly examining the
definition of a special versus general benefit, especially for
assessments that fund services that broadly benefit society.
Therefore, the engineer's report is heavily relied upon to
demonstrate that the improvements or services to be financed
will benefit assessed properties in a different manner than
the benefit society in general will receive and cannot rest
only on the general increase in property values that arise
from a better served community.
If there are parcels within an assessment district that are
owned by other local governments, the State of California, or
the United States, then the local agency can exempt those
parcels from the proposed assessment only if clear and
convincing evidence can be demonstrated by the local agency
that those publicly owned parcels receive no special benefit.
2)Purpose of this bill. This bill adds definitions, including
the terms "special" and "general benefits," and the
proportionality requirements established by Proposition 218 to
PBID Law. This bill includes Proposition 218 requirements to
identify and separate general and special benefits, the
professional engineers report, and the provision regarding
exemptions for property owned by governmental entities and
incorporates these into PBID Law. This bill is sponsored by
the Central City Association of Los Angeles.
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3)Author's statement. According to the author, "Because PBID
Law does not specifically address the distinction between
special and general benefits, when [California Constitution]
Article XIII D was enacted it resulted in confusion around
issues such as: district formation, the levying of
assessments and the permissible functions of PBIDs.
Consequently, cities throughout the state are using divergent
methodologies to form and assess PBIDs. Additionally,
lawsuits have been filed challenging PBIDs and the courts are
reaching inconsistent decisions. Ongoing litigation arising
from this lack of clarity threatens the viability of all of
California's PBIDs and the employment, public health and
safety as well as economic benefits they create."
4)Previous legislation. AB 483 (Ting), Chapter 552, Statues of
2013, defined "specific benefit" and "specific government
service" for the purpose of determining whether a levy is a
tax pursuant to California Constitution Article XIII C. These
definitions were put in place in response to the legal
uncertainty surrounding the application of Proposition 26 of
2010 to business-based assessments.
5)Arguments in support. Supporters argue the because PBID Law
does not address the distinction between special and general
benefits, California Constitution Article XIII D resulted in
statewide confusion about district formation, levying of
assessments, and the permissible functions of PBIDs.
Consequently, ongoing litigation arising from this lack of
clarity threatens the viability of all California's PBIDs and
the employment, safety, cleanliness, and economic development
they create. This bill will amend the existing PBID Law and
ensure that it conforms to the requirements of Proposition
218.
6)Arguments in opposition. None on file.
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958
FN: 0004369
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