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Some property and business owners say assessment districts are the perfect tool to revitalize and promote their neighborhoods. Others say they are often mismanaged and are an illegal way for municipalities to get more bang in regards to public services for less buck.

Soon, we will see how a San Diego Superior Court Judge views them.

In a new legal complaint, government advocacy group, San Diegans for Open Government questions the legality of another type of assessment district, the Business Improvement District. The first was filed last year and dealt specifically with property-based assessments.

Despite the separate lawsuits, San Diegans for Open Government wants one question answered: Is an "assessment" is just a convenient word for "tax"?

And, if so, then the districts, all 68 or so of them in the City are illegal.

"This lawsuit challenges Defendants' authorization of a variety of "tax" levies and collections —euphemistically labeled "assessments" by Defendants in order to avoid public scrutiny-without first obtaining the requisite approval ofthe voters of the City of San Diego. The illegal tax scheme received final approval on or about May 24, 2013, in order to generate revenues for what are commonly known as Business Improvement Districts ("BIDs") for Fiscal Year 2013-14, the proceeds of which are used to fund the activities of the BIDs under management agreements between Defendants and third-party contractors.

In the complaint, Cory Briggs, attorney for San Diegans for Open Government, writes that the districts violate Proposition 26, a 2010 amendment to the California Constitution that prohibits municipalities from enacting taxes without voter approval unless that money pays for "specific" benefits for property owners.

Briggs wants the court to consider council's recent approval of budgets for the assessment districts a violation to the California Constitution. He is also asking for "injunctive relief prohibiting Defendants from taking any action to levy, collect, or spend any ofthe taxes authorized by the BID Resolutions," and to refund property owners all assessments levied and collected by the City.

The complaint shouldn't come as a big surprise to elected officials or proponents of any type of assessment districts whether they be a maintenance assessment district, a Business Improvement District, or a PBID.

In 2007, a group of Golden Hill and South Park residents sued the City over their assessment district. After a long, protracted legal battle, the residents prevailed. The judge ruled that the vote was improperly weighted and that there was no real distinction between "specific" benefits for property owners and "general" benefits for non-paying members of the public.

Despite the ruling, elected officials, developers, and property owners continue to push for the formation of assessment districts.

In Barrio Logan, an assessment was levied with only 44 percent support (see my article from April 25 for more.) The proponents of the so-called "community benefit district were mostly landowners or developers such as Kevin McCook from Shea Properties or low-income housing developer, MAAC. In all, only 14 landowners were responsible for 70 percent of the weighted vote.

And there are more to come. On June 5, big-time developer Sudberry Properties asked members of the Public Safety and Neighborhood Services Committee to get the ball rolling on a new maintenance assessment district for their 4,780 unit mixed-use development, Civita, in Mission Valley. If approved, the assessment will help pay for upkeep on roads and streetlights.This, despite the developer having just got the ball rolling on the first phase of construction and despite the fact that there are only 21 property owners, Sudberry Properties, of course, being one.

But as city officials continue to discuss the formation of new assessment districts, the City Attorney's Office will be looking at ways to defend the legality of them.

If they are unable to do so, then the City might be on the hook for millions of dollars in refunds.

Click here to read the entire complaint:

http://www.sandiegoreader.com/documents/2013/jun/13/lawsuit-san-diegans-open-government-over-assessmen/

story has been changed to include the complaint's focus on BIDs. I apologize for the error.

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Comments

nostalgic June 13, 2013 @ 1:46 p.m.

How much money stays in the office, and what is left over for maintenance Projects? Now much relieves developers of financial responsibilities they would otherwise bear? These are not questions that can be answered outside of public scrutiny. Makes it hard for the city to defend in court.

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BlueSouthPark June 14, 2013 @ 11:08 a.m.

The SDOG lawsuit filed on 6/12/2013 is about business improvement districts; a previous SDOG suit concerning maintenance assessment (property-tax-based) districts was filed on 8/29/2012.

This latest suit concerns the recent annual renewal of BID assessments that "are collected by the City Treasurer at the same time and in the same manner as the City's business tax; approximately $1.4 million annually from 12,000 businesses." (From Item-S500, Council docket 4/23/2013, Supporting Materials, Request for Council Action).

The recipients of this tax imposed on all business owners in "their" districts are 18 business associations, one for each of the 18 districts. These associations are nonprofit organizations that have solicited the City to form the districts and go through the formation process. A vote of all business owners in the proposed district (the boundaries of which are determined by the associations) determines whether a BID is formed. Big businesses are assessed more than little businesses. If businesses representing 50% of the total assessment dollars vote "yes" then all businesses must pay. The big businesses control the outcome. The City then imposes, collects, and distributes the money to the associations, which are typically controlled by boards consisting of the big business owners.

Every registered business at any address within the defined district area must pay an extra tax that goes to the business association, at the time of renewal of their annual business license with the City.

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Dorian Hargrove June 14, 2013 @ 12:07 p.m.

BlueSouthPark, you are correct again. I should have made the distinction. The story has been changed. Thanks for the help --dh

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BlueSouthPark June 15, 2013 @ 10:25 a.m.

dh - You're welcome. The various privatizing schemes do get blurry sometimes. In fact, the private taxation scams for BIDs and MADs have in common an outrageous anti-democracy voting setup. Imagine if in voting to elect officeholders that votes for and against were based directly on the dollars of donations a candidate got. One David Koch vote for a candidate could beat a million votes for the other candidate, if Koch donated millions and opposition voters donated less.

The point of SDOG's lawsuits is the argument that levies imposed in BIDs and MADs are really taxes, which require passage by 2/3 of voters - one person, one vote. Laws for voting on fees and assessments are not that restrictive, so the BID and MAD proponents (wrongly) call the levies by those other names, and go for the ridiculously anti-democratic dollar vote. One large business can defeat hundreds of small businesses and via the BID formation can force the little guy to pay. One owner of multiple or very large properties can defeat hundreds of single-small-property owners and via the MAD force them to pay. In both BIDs and commercial MADs (those administered by Economic Development), the assessments are spent to promote and advertise, something of value only to the large owners. The community grocers or barbershops and the local private residential homeowners have little interest in promoting, branding, and attracting outsiders, and may even suffer, rather than benefit, from such commercialization.

The legal argument that won and led to the abolishment of the Greater Golden Hill MAD was that even if the levy was called an assessment, under assessment law it still did not meet the law's requirements. The court found that to be true. It is true for every remaining commercial MAD run by the Economic Development department, including the newly created one, a rather astonishing palimpsest writ by our local wizard of levies, abetted by one of our otherwise most promising councilmen. But unless a property owner in one of those levy districts sues, it won't stop. An embezzler can keep on embezzling until someone presses charges.

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