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Beutz v. County of Riverside

May 26, 2010


APPEAL from the Superior Court of Riverside County. Edward D. Webster, Judge. Reversed with directions. (Super. Ct. No. RIC457351).

The opinion of the court was delivered by: King J.




In 2006, the County of Riverside (the County) formed a special assessment district consisting of all residential properties in the community of Wildomar in order to pay the annual ongoing costs of refurbishing and maintaining landscaping in four public parks in the community.*fn1 Plaintiff Steven Beutz, an owner of residential property in Wildomar, filed suit against the County to void the landscape assessment on the ground it violated article XIII D of the California Constitution*fn2 (Cal. Const., art. XIII D, § 4, subd. (a)), which was enacted following voters' adoption of Proposition 218 in 1996. Beutz claimed the County failed to separate the general benefits from the special benefits of the landscaping, and assess only for the special benefits the landscaping would confer on assessed parcels. Following the parties' cross-motions for summary judgment, the trial court entered judgment in favor of the County and Beutz appeals.

We conclude the County properly based the assessment on the larger public improvement project of which the landscaping costs were a part, namely, a master plan to acquire and develop the parks and park facilities, rather than on the landscape portion of the plan. Still, the County failed to meet its constitutional burden of demonstrating that the assessment was proportional to, and did not exceed, the value of the special benefits that the use and enjoyment of the parks would confer on assessed parcels. (Art. XIII D, § 4, subds. (a), (f).) For this reason, the assessment is invalid and the judgment must be reversed.


A. The Genesis of Proposition 218

In 1996, California voters adopted Proposition 218, known as the Right to Vote on Taxes Act, which added articles XIII C and XIII D to the California Constitution. (Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Cal.4th 830, 835-837.) In Howard Jarvis Taxpayers Assn. v. City of Riverside (1999) 73 Cal.App.4th 679 [Fourth District, Division Two], this court explained the genesis of Proposition 218:

"Proposition 218 can best be understood against its historical background, which begins in 1978 with the adoption of Proposition 13. 'The purpose of Proposition 13 was to cut local property taxes. [Citation.]' [Citation.] Its principal provisions limited ad valorem property taxes to 1 percent of a property's assessed valuation and limited increases in the assessed valuation to 2 percent per year unless and until the property changed hands. (Cal. Const., art. XIII A, §§ 1, 2.)

"To prevent local governments from subverting its limitations, Proposition 13 also prohibited counties, cities, and special districts from enacting any special tax without a two-thirds vote of the electorate. (Cal. Const., art. XIII A, § 4; [citation].) It has been held, however, that a special assessment is not a special tax within the meaning of Proposition 13. [Citation.] Accordingly, a special assessment could be imposed without a two-thirds vote.

"In November 1996, in part to change this rule, the electorate adopted Proposition 218.... Proposition 218 allows only four types of local property taxes: (1) an ad valorem property tax; (2) a special tax; (3) an assessment; and (4) a fee or charge. (Cal. Const., art. XIII D, § 3, subd. (a)(1)-(4); see also Cal. Const., art. XIII D, § 2, subd. (a).) It buttresses Proposition 13's limitations on ad valorem property taxes and special taxes by placing analogous restrictions on assessments, fees, and charges." (Howard Jarvis Taxpayers Assn. v. City of Riverside, supra, 73 Cal.App.4th at pp. 681-682; Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles, supra, 24 Cal.4th at pp. 835-842 [discussing the origins of Proposition 218 and its intent to limit a local government's ability to impose taxes, assessments, and fees on real property owners].)

B. Special Assessments and Article XIII D

The state Supreme Court explained the nature and distinguishing features of a special assessment in Knox v. City of Orland (1992) 4 Cal.4th 132 (Knox), a pre-Proposition 218 case: "A special assessment is a '"'compulsory charge placed by the state upon real property within a pre-determined district, made under express legislative authority for defraying in whole or in part the expense of a permanent public improvement therein....'" [Citation.]' [Citation.] In this regard, a special assessment is 'levied against real property particularly and directly benefited by a local improvement in order to pay the cost of that improvement.' [Citation.] 'The rationale of [a] special assessment is that the assessed property has received a special benefit over and above that received by the general public. The general public should not be required to pay for special benefits for the few, and the few specially benefited should not be subsidized by the general public. [Citation.]' [Citation.]" (Knox, supra, at pp. 141-142.)

The court also explained that a special assessment differs from a tax or a "special tax" in at least one important respect. Unlike a special assessment, a tax may be imposed "'"without reference to peculiar benefits to particular individuals or property,"'" or without regard to whether the person or property subject to the tax received any particular benefit from the tax. (Knox, supra, 4 Cal.4th at p. 142.) "The same holds true even for a special tax which... is a tax levied to fund a specific governmental project or program [citations]," but which "'need not... specifically benefit the taxed property' in the same manner as a special assessment[.]" (Ibid.) "Therefore, while a special assessment may, like a special tax, be viewed in a sense as having been levied for a specific purpose, a critical distinction between the two public financing mechanisms is that a special assessment must confer a special benefit upon the property assessed beyond that conferred generally." (Ibid., fn. omitted.)

Article XIII D imposes both procedural and substantive limitations on an agency's ability to impose a special assessment. (Silicon Valley Taxpayers' Assn., Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431, 437-438, 443 (Silicon Valley).) The substantive limitations are twofold: (1) an assessment can be imposed only for a "special benefit" conferred on the real property assessed, and (2) the assessment must be in proportion to, and not greater than, the special benefit conferred on the property assessed. (Art. XIII D, § 4, subd. (a); Silicon Valley, supra, at p. 443.)

The special benefit and proportionality requirements of article XIII D are set forth in section 4, subdivision (a): "An agency which proposes to levy an assessment shall identify all parcels which will have a special benefit conferred upon them and upon which an assessment will be imposed. 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. No assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel. Only special benefits are assessable, and an agency shall separate the general benefits from the special benefits conferred on a parcel...."

Article XIII D defines "District" as "an area determined by an agency to contain all parcels which will receive a special benefit from a proposed public improvement or property-related service." (Art. XIII D, § 2, subd. (d).) "'Assessment' means any levy or charge upon real property by an agency for a special benefit conferred upon the real property." (Id., subd. (b).) A "special benefit" is narrowly defined as "a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public at large." (Id., subd. (i).) Correspondingly, the definition of special benefit further states: "General enhancement of property value does not constitute 'special benefit.'" (Ibid.; Silicon Valley, supra, 44 Cal.4th at p. 451.)

Thus, Proposition 218 tightened the definition of special benefit and broadened the definition of general benefit--without affirmatively defining "general benefit." (Silicon Valley, supra, 44 Cal.4th at pp. 451-452.) General benefits include "benefits conferred generally 'on real property located in the district'" (id. at p. 451, fn. omitted), while "a special benefit must affect the assessed property in a way that is particular and distinct from its effect on other parcels and that real property in general and the public at large do not share" (id. at p. 452, fn. omitted.)

The requirement that the agency "separate the general benefits from the special benefits conferred on a parcel" (art. XIII D, § 4, subd. (a)) helps ensure that the special benefit requirement is met. "Because only special benefits are assessable, and public improvements often provide both general benefits to the community and special benefits to a particular property, the assessing agency must first 'separate the general benefits from the special benefits conferred on a parcel' and impose the assessment only for the special benefits." (Silicon Valley, supra, 44 Cal.4th at p. 443.)

The special benefit and proportionality requirements are perhaps best understood as being interrelated, not separate, requirements. The proportionality requirement ensures that the aggregate assessment imposed on all parcels is distributed among all assessed parcels in proportion to the special benefits conferred on each parcel. (See Town of Tiburon v. Bonander (2009) 180 Cal.App.4th 1057, 1080-1085 (Tiburon) [varying amounts assessed on district parcels for the costs of undergrounding utility lines violated the proportionality requirement because the amounts individually assessed were not based on the special benefits the undergrounding project would confer on each assessed parcel].) The special benefit requirement is thus part and parcel of the proportionality requirement. It is useful, however, to separately discuss special benefits in order to ascertain whether the public improvement or property related service underlying the assessment confers any special benefits on district parcels in the first place. (Silicon Valley, supra, 44 Cal.4th at pp. 450-456 [discussing whether assessment to fund acquisition and maintenance of open space in County of Santa Clara conferred any special benefits on assessed properties].)

Article XIII D also limits an agency's ability to exempt publicly owned parcels from assessment: "Parcels within a district that are owned or used by any agency, the State of California or the United States shall not be exempt from assessment unless the agency can demonstrate by clear and convincing evidence that those publicly owned parcels in fact receive no special benefit." (Art. XIII D, § 4, subd. (a), last sentence.)

In addition to its substantive requirements, Article XIII D imposes "stricter procedural requirements" on agencies proposing to levy a real property assessment. (Silicon Valley, supra, 44 Cal.4th at p. 438.) "All assessments" are to be "supported by a detailed engineer's report[.]" (Art. XIII D, § 4, subd. (b).) Written notice of a proposed assessment must be given to "record owners" of the properties proposed to be assessed, together with the date, time, and location of a public hearing on the assessment, to be conducted no fewer than 45 days after the notice is mailed. (Id., subds. (c), (e).) The notice must include the amount to be assessed on the entire district, the amount chargeable to the owner's parcel, the reason for the assessment, its proposed duration, and the basis upon which the assessment was calculated. (Id., subd. (c).) Each notice must also include a ballot and a statement disclosing that a "majority protest" against the assessment will result in the assessment not being imposed. (Id., subds. (d), (e).)

At the noticed public hearing, the agency must "consider all protests," "tabulate the ballots," and "shall not impose an assessment if there is a majority protest." (Art. XIII D, § 4, subd. (e).) A majority protest exists if a majority of "ballots submitted in opposition to the assessment exceed the ballots submitted in favor...." (Ibid.) In tabulating the ballots, voting must be weighed "according to the proportional financial obligation of the affected property." (Ibid.)*fn3

As the provisions of article XIII D illustrate, Proposition 218 was enacted in order "to 'significantly tighten the kind of benefit assessments' an agency can levy on real property (Ballot Pamp., Gen. Elec. (Nov. 5, 1996) argument in favor of Prop. 218, p. 76) and to '"protect[] taxpayers by limiting the methods by which local governments exact revenue from taxpayers without their consent."' (Ballot Pamp., Gen. Elec., supra, text of Prop. 218, ยง 2, p. 108, reprinted in Historical Notes, 2A West's ...

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