In Concerned Citizens for Responsible Government v. West Point Fire Protection District, (— Cal.Rptr.3d —-, Cal.App. 3 Dist., June 29, 2011), a court of appeal considered whether an assessment levied to fund additional fire suppression services was a special assessment and thus exempt from the requirement of two-thirds voter approval. The court of appeal held the assessment was not a special assessment because it conferred only general benefits and no special benefit was conferred on any particular parcel of land.
West Point Fire Protection District (“District”) was faced with a lack of resources from existing tax revenues to fully fund its fire suppression services. There had been a 340 percent growth in service calls between 2000 and 2006, but the increase in calls had not been matched by an increase in revenue. District’s board decided it needed to levy an assessment on property within the District to bring in between $130,000 to $150,000 per year. The District commissioned an engineer’s report to study the proposed assessment. The engineer noted that District lacked sufficient resources to provide around-the-clock fire services. The report concluded that it would cost $146,000 per year for District to have a senior firefighter on duty at all times. The report proposed a three-tiered structure for imposing assessment fees, which purported to allocate the assessments based on the benefits conferred on three types of parcels: improved, unimproved, and exempt.
Because pursuant to California law only special benefits to each parcel can be subject to a special assessment, the engineer’s report “purported to separate ‘special benefits’ conferred upon the parcels from the ‘general benefits’ accruing to the community at large.” In order to reach the goal of $146,000, the report proposed assessments of $87.58 for improved parcels, $45 for unimproved parcels, and $0 for exempt parcels. District conducted an election, the assessment passed by approximately 62 percent of the vote, and District’s board passed a resolution to levy the assessments beginning with the 2007-2008 tax year.
Concerned Citizens for a Responsible Government and William Doherty filed a reverse validation action on the ground that the assessment violated Proposition 218. The trial court found the assessment was valid and ruled in favor of the District.
The court of appeal reversed the decision of the trial court. The court held “the assessment did not comport with the substantive provisions of Proposition 218.” Voters passed Proposition 218 “in 1996 as a constitutional adjunct to Proposition 13,” which voters had passed in 1978 to limit “ad valorem property taxes to 1 percent of a property’s assessed valuation” and to also limit “increases in the assessed valuation to 2 percent per year unless and until the property changed hands.” Proposition 13 also provided that counties, cities, and special districts may not enact a special tax without approval of two-thirds of the electorate. Courts later interpreted the two-thirds approval requirement as not applicable to special assessments. Proponents of Proposition 218 felt this interpretation was an attempt “to make an ‘end-run’ around Proposition 13’s two-thirds voter approval requirement by levying taxes under a different name.”
Proposition 218 allows only the following 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.” “An assessment can be imposed only for a ‘special benefit’ conferred on a particular property” and the assessment “must be in proportion to the special benefit conferred on the property.” A special benefit is 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.” The agency seeking to impose the assessment has the burden of proving both the “special benefit” and “proportionality” requirements.
The court held District’s assessment did not meet the special benefit requirement. An agency must separate the special benefit conferred on the property from the general benefit and then only impose the assessment for the special benefit. The court found that the engineer’s report for the assessment at issue here “leaves little doubt that the assessment did not confer ‘particular and distinct’ benefits on identifiable parcels within the District over and above the benefits conferred on all parcels or on the public at large.” The goal of the assessment was to generate revenue to provide around-the-clock fire protection. The court concluded the goal of raising revenue for fire services “does not contemplate the conferring of special benefits on specific parcels sufficient to qualify as a special assessment.”
The court noted fire suppression service, like police protection or bus service, “is a classic example of a service that confers general benefits on the community as a whole” and is typically classified as providing only general benefits. Fire protection is supported by ad valorem property taxes, which "are deemed to benefit all property owners within the taxing district, whether or not they make use of or enjoy any direct benefit from such expenditures and improvements." Here, because the District delineated a specific service (i.e. fire suppression service) from the list of services that the fire protection service provides, District in effect created a special tax “[b]y earmarking the proposed funds to pay only for additional fire suppression services.” Special taxes are "’taxes which are levied for a specific purpose rather than . . . a levy placed in the general fund to be utilized for general governmental purposes.’" A special tax requires approval by a two-thirds majority of the electorate. District’s assessment failed to win approval from two-thirds of its voters.
The court concluded the assessment fails to comply with Proposition 218 because District failed to meet its burden to show that the assessment confers special benefits. The court, however, found that even if District could show that the assessment conferred special benefits it would still be invalid because it does not comply with the proportionality requirement. Here, the engineer determined the cost of the fire suppression services and then “worked backwards from that figure to arrive at a system of assessments that would yield the desired amount of revenue.” The court noted that other courts have previously rejected such a cost-driven approach. “[B]ecause general benefits may not be charged to the property owner, they must be subtracted from the assessment.” District’s assessment failed to subtract the general benefits from the assessment. Therefore, the court held District’s assessment violates both the special benefits and proportionality requirements of Proposition 218.
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