Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2017

California Constitutional Provisions

Article XIII D Assessment and Property-Related Fee Reform

Section 2

Sec. 2. Definitions. As used in this article:

(a) "Agency" means any local government as defined in subdivision (b) of Section 1 of Article XIII C.

(b) "Assessment" means any levy or charge upon real property by an agency for a special benefit conferred upon the real property. "Assessment" includes, but is not limited to, "special assessment," "benefit assessment," "maintenance assessment" and "special assessment tax."

(c) "Capital cost" means the cost of acquisition, installation, construction, reconstruction, or replacement of a permanent public improvement by an agency.

(d) "District" means an area determined by an agency to contain all parcels which will receive a special benefit from a proposed public improvement or property-related service.

(e) "Fee" or "charge" means any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service.

(f) "Maintenance and operation expenses" means the cost of rent, repair, replacement, rehabilitation, fuel, power, electrical current, care, and supervision necessary to properly operate and maintain a permanent public improvement.

(g) "Property ownership" shall be deemed to include tenancies of real property where tenants are directly liable to pay the assessment, fee, or charge in question.

(h) "Property-related service" means a public service having a direct relationship to property ownership.

(i) "Special benefit" means a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public at large. General enhancement of property value does not constitute "special benefit."

Construction.—A ballot measure to amend a city charter to require a two-thirds vote of the electorate for approval of any new general tax or an increase in an existing general tax was invalid because it directly conflicted with subdivision (b) of this section. Howard Jarvis Taxpayers Assn. v. City of San Diego, 120 Cal.App.4th 374.

Procedure.—Property owners challenging assessments imposed on specific parcels of real property under the Municipal Improvement Act of 1913, Streets and Highways Code Section 10000 et. seq. are not required to comply with the requirements governing validation proceedings brought under Code of Civil Procedure Sections 860 through 870.5. Bonander v. Town of Tiberon, 46 Cal.4th 646.

Assessment.—A city's business improvement district assessment imposed on businesses pursuant to the Parking and Business Improvement Area Law of 1989, Streets and Highways Code Section 36500 et. seq., is not an assessment within the meaning of Article XIII C and Article XIII D. The definition of "assessment" in subdivision (b) unambiguously applies only to levies upon real property, and the assessment at issue was not imposed upon real property but upon businesses. Howard Jarvis Taxpayers' Assn. v. City of San Diego, 72 Cal.App.4th 230. An assessment within the meaning of this article must not only confer a special benefit on real property, but it also must be imposed on identifiable parcels of real property. Thus, when a local water district did not impose a capacity charge on identifiable parcels of real property, but only on individuals who requested a new service connection, the capacity charge was not an assessment within the meaning of this article. Richmond v. Shasta Community Services Dist., 32 Cal.4th 409.

Changes in methods of calculating taxes.—A city's increased cell phone service tax, which changed the way the tax was calculated, violated Proposition 218 because the city failed to submit the increase to the voters before implementing the new tax. A local government's methodology cannot evolve. Proposition 218 does not allow a fluctuating local government tax even if the fluctuation is due to expanding constitutional boundaries. AB Cellular LA, LLC v. City of Los Angeles, 150 Cal.App.4th 747.

Commodity charges.—Water service fees may be considered fees or charges under article XIII D, but only if the fees are imposed upon a person as an incident of property ownership. For example, a fee for ongoing water service through an existing connection is imposed as an incident of property ownership because it requires nothing other than normal ownership and use of property. Thus, fees for ongoing service are subject to this article's voter approval requirements. On the other hand, a fee for making a new water connection is not considered a fee or charge under Article XIII D because it is not imposed as an incident of property ownership, but instead is imposed as a result of a voluntary act on the part of a property owner in applying for water service connection. Richmond v. Shasta Community Services Dist., 32 Cal.4th 409. Domestic water delivery through a pipeline is a property-related service within the meaning of Articles XIII D and XIII C, section 3. Thus, once a property owner or resident has paid the connection charges and has become a customer of a public water agency, all charges for water delivery incurred thereafter are charges for a property-related service, whether the charge is calculated on the basis of consumption or is imposed as a fixed monthly fee. Bighorn-Desert View Water Agency v. Verjil, 39 Cal.4th 205.

Inspection fee.—An inspection fee imposed upon landlords in their capacity as business owners, not in their capacity as landowners, does not fall within the scope of this article, which applies only to exactions levied solely by virtue of property ownership. Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles, 24 Cal.4th 830.

Groundwater augmentation fee.—A groundwater augmentation fee to be charged to operators of wells who extract water from the wells for the purposes of paying the costs of purchasing, capturing, storing, and distributing supplemental water for use, while not a tax or assessment, is a property-related fee or charge "imposed . . . as an incident of property ownership," and, thus, subject to constitutional preconditions for the imposition of such charges. Pajaro Valley Water Mgmt. Agency v. Amrhein, 150 Cal.App.4th 1364.