(Super. Ct. Nos. 37-2007-00074201-CU-WM-CTL, 37-2008-00088429-CU-MC -CTL) APPEALS from a judgment of the Superior Court of San Diego County, Richard S. Whitney, Judge. Vacated with directions.
The opinion of the court was delivered by: Irion, J.
CERTIFIED FOR PUBLICATION
In August 2007, the City of San Diego (the City) formed a special assessment district known as the Greater Golden Hill Maintenance Assessment District (the District) for the purpose of providing various services and improvements for the benefit of properties in the District. The same month, Golden Hill Neighborhood Association, Inc. -- an association of property owners in the Golden Hill area -- and individual property owner John McNab*fn1 filed a lawsuit challenging the legality of the District and its initial assessments under article XIII D of the California Constitution,*fn2 which was enacted by the voters' passage of Proposition 218 in 1996. The Association filed a second suit in 2008 challenging the District's assessment charges for fiscal year 2008-2009 and decision to carry over to that fiscal year unspent funds from the assessments collected for fiscal year 2007-2008. The court consolidated the two actions and tried the case on documentary evidence and the parties' oral argument. The trial court entered judgment for the Association on the first cause of action, "For Writ of Mandamus," in their 2007 complaint and entered judgment for the City on every other cause of action in the Association's consolidated pleadings.
The City and the Association both appeal the judgment. The City appeals the portion of the judgment in favor of the Association on its initial mandamus cause of action, contending the formation of the District and the special assessments levied by the District complied with all of the requirements of article XIII D. The Association appeals the portion of the judgment in favor of the City, contending, among other things, that the District should be dissolved because (1) there would not have been a majority of votes in favor of its formation if the voting weight assigned to the City's open space and park land in the District had not been improperly inflated; (2) the services and improvements for which the assessment was levied do not confer special benefit on the assessed properties; and (3) as the trial court ruled, the engineer's report supporting the assessment failed to separate general benefits from special benefits as required by article XIII D.*fn3
We conclude that the Association's challenge to the vote establishing the District is meritorious and that the trial court correctly ruled that the required engineer's report supporting the District assessments failed to adequately separate general benefits from special benefits as required by article XIII D. Accordingly, we direct the issuance of a writ of mandate vacating the resolution establishing the District and invalidating the assessments levied by the District.
Because the City's appeal and the Association's appeal raise the same essential issue -- whether the formation of the District and the District's assessments comply with the requirements of article XIII D -- we begin with an overview of article XIII D to provide a proper context for the factual and procedural background of the case.
Article XIII D limits a local government's ability to levy special assessments against real property. The California Supreme Court has explained that "[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 special assessment[s] 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.] . . . [¶] A tax, on the other hand, is very different. Unlike a special assessment, a tax can be levied " 'without reference to peculiar benefits to particular individuals or property.' " [Citation.] Indeed, "[n]othing is more familiar in taxation than the imposition of a tax upon a class or upon individuals who enjoy no direct benefit from its expenditure, and who are not responsible for the condition to be remedied." [Citations.] . . . [¶] 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.' " (Silicon Valley Taxpayers' Assn., Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431, 442 (Silicon Valley).)
In passing Proposition 218 and enacting article XIII D, "the voters clearly sought to limit local government's ability to exact revenue under the rubric of special assessments." (Silicon Valley, supra, 44 Cal.4th at p. 446.) Article XIII D "restricts government's ability to impose assessments in several important ways. First, it tightens the definition of the two key findings necessary to support an assessment: special benefit and proportionality. An assessment can be imposed only for a 'special benefit' conferred on a particular property. (Art. XIII D, §§ 2, subd. (b), 4, subd. (a).) A special benefit is 'a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public at large.' (Art. XIII D, § 2, subd. (i).) The definition specifically provides that '[g]eneral enhancement of property value does not constitute "special benefit." ' (Ibid.) Further, an assessment on any given parcel must be in proportion to the special benefit conferred on that parcel: 'No assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel.' (Art. XIII D, § 4, subd. (a).) '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.' (Ibid.) 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. (Art. XIII D, § 4, subd. (a).) [¶] Second, . . . [article XIII D] established strict procedural requirements for the imposition of a lawful assessment." (Silicon Valley, at p. 443.)
Under article XIII D, "local agencies must give the record owners of all assessed parcels written notice of the proposed assessment, a voting ballot, and a statement disclosing that a majority protest will prevent the assessment's passage. (Art. XIII D, § 4, subds. (c), (d).) The proposed assessment must be 'supported by a detailed engineer's report.' (Art. XIII D, § 4, subd. (b).) At a noticed public hearing, the agencies must consider all protests, and they 'shall not impose an assessment if there is a majority protest.' (Art. XIII D, § 4, subd. (e).)" (Silicon Valley, supra, 44 Cal.4th at p. 438.) "A majority protest exists if, upon the conclusion of the hearing, ballots submitted in opposition to the assessment exceed the ballots submitted in favor of the assessment. In tabulating the ballots, the ballots shall be weighted according to the proportional financial obligation of the affected property." (Art. XIII D, § 4, subd. (e).)
The California Supreme Court noted in Silicon Valley that "[b]efore Proposition 218 was passed, courts reviewed quasi-legislative acts of local governmental agencies, such as the formation of an assessment district, under a deferential abuse of discretion standard." (Silicon Valley, supra, 44 Cal.4th at p. 443.) "The drafters of Proposition 218 specifically targeted this deferential standard of review for change. Article XIII D, section 4, subdivision (f), provides: 'In any legal action contesting the validity of any assessment, the burden shall be on the agency to demonstrate that the property or properties in question receive a special benefit over and above the benefits conferred on the public at large and that the amount of any contested assessment is proportional to, and no greater than, the benefits conferred on the property or properties in question.' " (Id. at p. 444.) A local agency's burden of proving that an assessment meets these requirements is to be liberally construed and "courts should exercise their independent judgment in reviewing local agency decisions that have determined whether benefits are special and whether assessments are proportional to special benefits within the meaning of [article XIII D]." (Id. at pp. 448, 450.)
FACTUAL AND PROCEDURAL BACKGROUND
In 2006, the Greater Golden Hill Community Development Corporation (GGHCDC) received a grant to explore the possible formation of a maintenance assessment district (MAD) in the Golden Hill area of San Diego. After holding two community meetings, GGHCDC mailed surveys to 3,550 Golden Hill property owners to gauge support for the formation of the District. Seventy-five percent of the 650 surveys returned to GGHCDC expressed support for the creation of a MAD. The City then retained the engineering firm SCI Consulting Group (SCI) to prepare the engineer's report that is required to form a MAD under the Landscape and Lighting Act of 1972, codified at Streets and Highways Code section 22500 et seq.*fn4 (Sts. & Hy. Code, §§ 22565 & 22586.)
In June 2007, the City Council passed a resolution stating its intention to form the District and collect assessments "to pay a prescribed portion of the costs of future improvements, maintenance and/or services of those items described in the Engineer's Report for [the District]." The City Council preliminarily approved SCI's engineer's report and directed the City Clerk to set a date for a public hearing on the proposed formation of the District and mail "assessment ballots" to the property owners in the District area at least 45 days before the hearing. On July 30, 2007, the City Council held a public hearing on the formation of the District and counted the ballots received from property owners. Of the 1,182 valid ballots the City received, 635 were in favor of forming a MAD and 547 were opposed. The vote for each property was weighted according to the proposed amount of the assessment to be levied against the property as specified in the engineer's report and attached assessment roll. The total assessment amount of $228,502.72 attributable to the 1,182 voting properties consisted of "yes" votes in the amount of $123,266.56 and "no" votes in the amount of $105,236.16. Thus, formation of a MAD was approved by 53.95 percent of the weighted vote. Based on those voting results, the City Council passed Resolution No. R-302887 ordering formation of the District, approving the engineer's report, and confirming assessments against properties in the District in the total amount of $488,890 for fiscal year 2007-2008, as estimated in the engineer's report.
The engineer's report*fn5 states that the purpose of the District is to provide funding for debris and litter removal, enhanced litter containers, sidewalk sweeping, sidewalk power washing, trash removal, landscaping services, graffiti removal, and trail and canyon beautification. The report further describes the services and improvements to be provided by the District as "[i]nstallation, maintenance and servicing of public improvements and incidental expenses, including but not limited to landscaping, sprinkler systems, shrubs and trees, sidewalks, gutters, water, street lighting, signage and materials, supplies, utilities and equipment, as applicable, for property within the District, and any incidental costs thereto . . . ."
The engineer's report divides the District into "Benefit Zone 1" and "Benefit Zone 2." The report specifies the following services to be provided in Zone 1 twice a week: sidewalk sweeping and weeding, graffiti removal, litter removal, street light inspections and reports, and enhanced trash receptacles with regular emptying. The report next specifies the following services to be provided in Zone 1 as needed: large bulk item pickup, removal of illegal dumping, removal of public health and sanitation hazards, and barricading of sidewalk and safety hazards. The report states that Zone 2 will receive sidewalk sweeping and weeding, and litter removal twice a month, and the following services as needed: graffiti removal, street light inspections and reports, large bulk item pickup, removal of illegal dumping, removal of public health and sanitation hazards, and barricading of sidewalk and safety hazards. Both Zone 1 and Zone 2 are to be provided basic landscaping and tree maintenance services as needed, and the following "enhanced service and maintenance" as needed: sidewalk power washing, infrastructure improvements, clock maintenance, and equipment. Both zones will also receive trail beautification services as needed and canyon beautification services quarterly. The report calls for the installation and maintenance of decorations and banners in Zone 1 and, for both zones, newsletter and Web site information and special events.
The engineer's report explains that the special benefit to each parcel was apportioned based on the parcel's linear square footage, stating: "Each property is assigned a single family equivalent benefit factor (SFE). The SFE for each single [f]amily home is 1, and [SFE's for other properties] are based upon the relative intensity of use (trip factors) in relation to a single family home." The report assigned SFE's of 0.7 to multi-family residences and condominiums, 0.0032 per square foot to commercial properties, and 1.0 to vacant properties, churches and parking lots.
The engineer's report concluded that "[s]ince building size/parcel area, property type and linear frontage are good determinates of relative benefit to property, and since the population density in the Greater Golden Hill area (and height of buildings) is average for an urbanized area, a 75/25 split of the assessments based on property's single family equivalent benefit units (SFE) versus linear frontage is deemed to be reasonable. Therefore, 75% of the assessments are allocated based on SFE and 25% are allocated based on street frontage." Significantly, as to publicly owned parcels, the report states: "An assessment has been levied upon each publicly owned parcel in the same manner as privately ...