Legal Alerts Jul 14, 2020

Property Owners Must Participate in Public Hearing to Challenge BID Assessments

A “No” Vote is Not Enough, California Appellate Court Holds

Property Owners Must Participate in Public Hearing to Challenge BID Assessments

When it comes to assessments for business improvement districts, voting “no” is not enough to exhaust one’s administrative remedies. For a property owner to preserve the right to challenge a BID assessment, the property owner must provide the reasons for its objection to the assessment during the public hearing on the BID formation, in addition to submitting a ballot opposing the assessment, a California Appellate Court has held.
In Hill RHF Housing Partners, L.P. et al. v. City of Los Angeles, et al., businesses and property owners challenged the City’s recently formed BIDs. The BIDs were formed under the Property and Business Improvement District Law of 1994, and are authorized to fund public improvements benefiting assessed property within the BIDs through the levy of an assessment. Because the assessments would be levied on property, the City was required to comply with the requirements of Proposition 218 in addition to those in the PBID Law.
Consequently, prior to forming the BIDs, the City mailed a notice of public hearing and assessment ballot to property owners within the proposed BIDs’ boundaries. At the public hearing, affected property owners had the opportunity to state objections to the proposed BIDs, and the City was required to consider all objections or protests prior to forming the BIDs and levying the assessments. However, the petitioners did not present written or oral testimony at or prior to the hearing stating the reasons for their objections. PBID Law and Proposition 218 prohibit approval of such assessments if a majority of the ballots returned opposed formation of the BIDs and the assessments. There was no majority protest, and the BIDs were established.
The petitioners then filed a petition for writ of mandate, alleging (among other things) that the assessments’ special benefit allocation was flawed. While the trial court denied the petitions on the merits, the Second District Court of Appeal on June 29 affirmed the judgment on the threshold issue of whether the petitioners had exhausted their administrative remedies.
Parties in California must exhaust administrative remedies before resorting to the courts so that agencies have an opportunity to reach a reasoned and final conclusion on issues being contested. Exhausting administrative remedies narrows the scope of claims on judicial review, facilitates the development of a factual record, gives the agency a meaningful opportunity to apply its expertise and may even render litigation unnecessary.
Accordingly, submitting a “no” vote in the BID assessment did not exhaust administrative remedies, where the BID formation process required the City to consider all objections prior to acting on the BID formation. A “no” vote does not allow the agency to address a property owner’s grievance. Rather, objections must be “sufficiently specific so as to allow the agency the opportunity to evaluate and respond.” At minimum, property owners must submit a ballot and state the reasons for their objections at the public hearing, either verbally or in writing.
While Hill involves BID assessments, the decision’s exhaustion analysis may extend to challenges against the imposition of fees or levy of special taxes and other assessments. Hill may offer an answer to a question put forward, and left undecided, by the Supreme Court last year in Plantier v. Ramona Municipal Water District: can a public comment process, such as a Proposition 218 hearing, yield an adequate administrative remedy subject to exhaustion? When the agency retains discretion to act on objections raised at the public hearing, as in the BID context, Hill suggests that it does.

Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts, facts specific to your situation or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.

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