By Cori Badgley

Generally, when a plaintiff challenges the action of a government agency, the plaintiff has the burden to overcome the presumption that the government agency acted lawfully. In regards to special assessments falling within the protections of Proposition 218, the burden shifts. When a plaintiff challenges a special assessment, the government agency has the burden to prove that it acted lawfully, and the court reviews the agency’s decision de novo.

In Silicon Valley Taxpayers Association, Inc. v. Santa Clara County Open Space Authority (2008) LEXIS 8667, the California Supreme Court clarified the standard of review in actions challenging the imposition of a special assessment under Proposition 218 (Cal. Const. Art. XIIID) and invalidated a special assessment imposed by the Santa Clara County Open Space Authority. The assessment at issue involved the creation of an open space assessment district in which each single family home would pay an increase of $20 with their property taxes. Other types of property, such as commercial, were also charged based on a slightly different formula than that used for single family homes. 

The Santa Clara Open Space Authority (“OSA”) decided that the “tax” fell under the definition of “special assessment” pursuant to Proposition 218, and thus, the tax could be imposed if it was passed by a majority of the property owners, instead of two-thirds as required when a special tax is imposed. The Silicon Valley Taxpayers Association, Inc. (“SVTA”) along with the Howard Jarvis Taxpayers Association and individual taxpayers brought suit alleging that the tax had not been properly balloted and passed pursuant to Proposition 218. Specifically, they alleged that the “notice and balloting procedures did not comport with Proposition 218 and the Government Code” and the assessment was actually a special tax, requiring two-thirds voter approval. The trial court and the court of appeal ruled in favor of the taxpayers, and the California Supreme Court agreed to review the case on appeal.

Before addressing the substantive issues of the case, the Supreme Court spent the majority of the opinion discussing the standard of review that applies in challenges brought under Proposition 218. Prior to this case, the Court of Appeal, First Appellate District ruled that “case law decided prior to passage of Proposition 218, under which legislative-like determinations by public improvement agencies are reviewed under an abuse of discretion standard, continues to apply in the post-Proposition 218 legal environment.” (Not About Water Committee v. Solano County Board of Supervisors (2002) 95 Cal.App.4th 982, 994.) Similar to the rule applied in Not About Water, the Court of Appeal, Sixth Appellate District in this case also applied an abuse of discretion/substantial evidence standard of review:

A special assessment finally confirmed by a local legislative body in accordance with applicable law will not be set aside by the courts so long as the local legislative body demonstrates, by reference to the face of the record before that body, that the property or properties in question will 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. In all other respects, such an assessment shall not be set aside by the courts unless it clearly appears on the face of the record before the legislative body, or from facts which may be judicially noticed, that the assessment constitutes a manifest abuse of discretion.

After reviewing the language of Proposition 218 and its legislative history, the California Supreme Court overruled both courts of appeal. 

Section 4, subdivision (f) of Article XIIID states:

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 any contested assessment is proportional to, and no greater than, the benefits conferred on the property or properties in question.

The court found that the word “burden” was imprecise, and it was unclear whether “burden” meant that the burden shifted to the agency. However, after looking at the legislative history, the court found that the purpose of subdivision (f) was to shift the burden to the local agency. Therefore, “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 Proposition 218.” It appears that the court not only shifted the burden but eliminated any presumption of validity that used to apply to local agency decisions.

In applying the standard of review to the facts in this case, the court held that the assessment amounted to a special tax, and therefore two-thirds of the voters must approve it in order for it to be valid. The “special benefits” listed by the OSA include “enhanced recreational activities and expanded access to recreational areas,” “increased economic activity,” “expanded employment opportunity,” and “enhanced quality of life and desirability of the area.” The court found that none of these benefits amounted to a special benefit inuring to the properties taxed. This list constitutes general benefits that would be gained from imposition of the special tax, not special benefits for which a special assessment would apply. Because the court found that the assessment was a special tax and the assessment had been approved by only a little over 50 percent of the voters, the court invalidated the assessment.

According to the Supreme Court, Proposition 218 eliminates any shield normally held by local agencies against challenges to their decisions. Without any presumption of validity, the burden now lies on the agency to prove why its decision was valid.

Cori Badgley is an associate with Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.