by Thomas F. Stone

Last year, a special issue of Lawbriefs reported that the case of Silicon Valley Taxpayers Association v. Santa Clara County Open Space District had been appealed to the California Supreme Court, challenging traditional definitions of "special benefit" in assessment proceedings.

In Silicon Valley an open space district levied a special assessment on all real property in Santa Clara County (except property in an existing open space district) to pay for purchase and development of open space to be designated in the future.

The Court of Appeals held that acquisition and maintenance of open space conferred a special benefit on the assessed properties and the assessment was properly levied in proportion to the special benefits conferred under the formula for division of general and special benefits adopted by the Authority. The decision relied on the rules of pre-Prop 218 cases

The Taxpayers Association challenged the ruling in the California Supreme Court. The Court reversed the Court of Appeals and ruled for the Taxpayers Association.

In its opinion, the Court points out that Prop. 218 tightens the definition of two key findings necessary to support an assessment: special benefit and proportionality.

The Court said that an assessment may be imposed only for a "special benefit" conferred on a particular property. A special benefit is a particular and distinct benefit over and above general benefits to property located in the assessment district or to the public at large. General enhancement of property value does no constitute "special benefit." The special benefit may be from a public improvement or service.

In addition, the assessment on each parcel must be in proportion to the cost of the special benefit conferred on that parcel.

Consequently, it is necessary to separate the general benefits from the special benefits for each parcel, and assess only for special benefits, the Court said.

Possibly the most important part of the ruling is a dramatic change in the standard used by the Courts to review the decisions of boards to impose an assessment.

In the past, the courts presumed that the assessment was valid. It was up to the challenger to show that the evidence presented to the board "clearly" did not support findings of special benefit and proportionality. Boards were often very loose with the evidence they accepted to support their findings, and challengers had a difficult burden to prove the findings invalid.

In Silicon Valley, the Supreme Court said Proposition 218 changes this standard of review by providing that the burden is on the assessing agency to demonstrate special benefit and proportionality from evidence before the agency.

In addition, the Court held that a court reviewing an agency decision must not merely accept evidence of special benefit and proportionality presented to the agency, but must review all the evidence that was before the agency from all sources and exercise its independent judgment to decide whether benefits are "special" or "general" and whether assessments are proportional to special benefits.

Then the Supreme Court analyzed the evidence in the Silicon Valley case, and found that when the court's independent judgment was used, the evidence was not sufficient to support the findings.

The District's engineers' report listed seven benefits to property in the assessment district, but the Court said that the report did not tie benefit to particular pieces of property, and that most benefits listed were really general benefits shared by approximately 1.2 million people and all property in the county-wide District.

Finally, the Court said the report was wrong to conclude that general benefit was only the benefit to those living outside the assessment district. It should have included benefits that accrued to all property in the district in a substantially similar way as general benefit, and then treated the benefits that were different to individual or groups of property as "special benefit" subject to assessment.

The Court points out, in a footnote, that the decision is not intended to prohibit a "special benefit" to all property in a district that is narrowly drawn to include only property benefiting directly from an improvement or service.

Please note that this decision was filed July 14, 2008, and is not yet final. Do not rely on the case unless you check the current status at the time.