Welcome to the Harris & Associates blog, where we discuss A/E/C industry issues related to construction management, engineering and public finance for the municipal, water, transportation and education markets.

 

Case In Point: Learn How to Protect Your Next Assessment

Recently, in the case of Sacramento Taxpayers Association, et al., v. County of Sacramento, et al., the Superior Court of California – County of Sacramento overturned a property owner-approved special assessment created by the Carmichael Recreation and Park District. Intended to pay for and maintain improvements to 13 District parks, the assessment was found to violate Proposition 218 and the Landscaping and Lighting Act of 1972. 

Prop 218

The challenges brought forth by petitioners hold valuable lessons for all public agencies considering similar assessments. A common theme across these lessons: pay strict attention to legal details.  

I pulled out three specific learnings from the case that seem to have the most universal application:     

  1. Use polling properly and avoid reverse engineering.

Petitioners in the Carmichael case argued that the District polled property owners to gauge an acceptable dollar amount for an assessment, and then determined the amount to charge based on that input. A 2008 California Supreme Court decision stated that assessments must be based on the actual costs of improvements, not on the amounts people are willing to pay.

In this case, the court found no proof of reverse engineering. However, it serves as a reminder to use polling only for determining assessment feasibility—not actual amounts.

  1. Properly calculate special and general benefits.

The law requires agencies creating assessments to separate special benefits to property and general benefits to people. Since only property owners can be charged an assessment, they should pay only for the special benefits they’ll receive.

The court ruled in this instance that the District didn’t do enough to properly quantify its calculations. In essence, the assessment engineers didn’t “show their work.” The judge didn’t see the rationale behind charging property owners with the final percentage, and the engineers could not explain how they arrived at their figures.  

Under Proposition 218, local courts have total autonomy to determine whether an assessment includes sufficient evidence and formulas for dividing up benefits, so the onus falls strictly on the agency and its engineers.

  1. Understand the statutory limits of the assessment.

The Carmichael Recreation and Park District included security guards as a line item in its assessments, citing the measure as a potential solution for reducing long-term maintenance costs. However, in reviewing similar cases as well as the details of the Landscaping and Lighting Act, the court determined this addition violated the statute and was grounds for invalidation.

Proceed with Care

The court understood the Carmichael Recreation and Park District’s need for money and the property owners’ will, but ultimately (and hesitantly) had to abide by the letter of the law. As a result, the Park District was forced to do away with its assessment and start over. I invite you to read the entire ruling to see the full reasoning.

Honestly, every assessment can be challenged—and there are many ways an assessment can go awry. One of the biggest issues most agencies face is quantifying general and specific benefits, which is both difficult and esoteric. Courts have only addressed it over the past six to eight years, and there is no established formula or storehouses for guidance.

How can your agency improve its chances for success?

  • Be proactive and start a dialogue instead of acting in a vacuum.
  • Look at what other agencies are doing and ask how they succeeded.   
  • Hire expert consultants and engineers with proven experience in this area.
  • Always pay close attention to the details.

If you want to learn more about funding maintenance through special assessment districts, I highly recommend reading Opportunities to Use Assessment Districts to Finance Facilities and Services in California Today by the California Debt and Investment Advisory Commission (and which I helped contribute to).

What are your thoughts on this ruling? Have you had a similar experience with an assessment? Keep the conversation going below.

 

Author

Dennis A. Anderson

For over 25 years, Dennis has helped communities throughout California and Nevada overcome legal hurdles and fund projects. He draws from an encyclopedic knowledge of the statutory and constitutional procedures and requirements for the formation and administration of public financing districts. Dennis knows how to work within the bounds set by Prop 218, the Mello-Roos Act and numerous other bond and district-creating laws so that agencies can deliver vital public infrastructure and services to their constituents. He is a member of the California Society of Municipal Finance Officers and the California Special Districts Association.

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