Wednesday, Oct. 28, 2009 | For more than two years, maintenance services like sidewalk sweeping, tree trimming, and graffiti removal in Golden Hill have been funded by special taxes collected from property owners within the neighborhood’s maintenance assessment district.

A tentative ruling from a San Diego County Superior Court judge in a lawsuit challenging how the district spends those special taxes could put a stop to that.

The final ruling, expected as early as this week, has district administrators on edge as they await the decision and what it will mean for the neighborhood’s ability to fund day-to-day maintenance services that the city, facing a severe and widening budget deficit, has demonstrated itself unable to provide.

State law requires that funds collected from property owners within maintenance assessment districts be used to provide direct special benefits to each parcel of real property — benefits above and beyond those provided to the community at large. How, exactly, to measure those direct benefits has been largely left to the cities administering the MADs, but the judge’s tentative ruling indicates the special benefits threshold was not met in Golden Hill.

“The kind of work to be performed under the assessment district was not the kind that would provide special benefit to the properties,” said Steven Haskins, attorney for John McNab, a Golden Hill resident who filed the lawsuit in 2007 shortly after the maintenance assessment district was first established.

The original document that set out the special benefits the assessment would provide, called an engineer’s report, lists vague ones like enhanced visual aesthetics and enhanced quality of life, in addition to the maintenance services.

Those benefits, Judge Richard Whitney said in his tentative ruling, did not demonstrate that any special benefit was being conferred on individual parcels of property.

The City Attorney’s Office refused to comment on the case until the final ruling is issued, saying the tentative ruling “may or may not be changed.”

If it stands, the case carries serious implications for a maintenance assessment district that has been mired in controversy since its formation more than two years ago, when opponents argued the city followed improper procedure in establishing it.

Because the guiding document was voted on by Golden Hill residents and adopted by the City Council, the invalidated provisions could call into question the legality of the entire maintenance assessment district, also known as a MAD.

“If it’s not valid then it questions the engineer’s report and requires that a new one be written,” said Barbara Houlton, a member of the advisory committee for the MAD’s board of directors.

The MAD’s opponents hope that would force the city to disband it and start from scratch, said John Kroll, a Golden Hill resident who opposed its formation.

“If the community were to lose the maintenance assessment district it would be a big blow,” said Pedro Anaya, director of the Greater Golden Hill Community Development Corp., which administers the community’s MAD.

The Golden Hill MAD is one of 57 citywide and one of eight operated by a private non-profit organization instead of the city’s Park Department. In Golden Hill, that organization is the Community Development Corp., which contracts with service providers to trim palm trees, cover graffiti, and clean sidewalks, services similar to those provided in other MADs.

Losing the MAD would mean those services would not be provided, Anaya said. But it could call into question the role of MADs citywide as the city is forced to define more specifically what actually constitutes a special benefit in Golden Hill, and by extension, in other communities.

“I believe many of them have similar engineer’s reports and items, and whatever decision is made here could potentially be precedent for others,” Anaya said.

Though there are few disagreements over the expenditure of MAD funds in other communities, the ruling could require a reassessment of the special financing mechanisms at a time when the city’s financial troubles are rendering it increasingly unable to provide basic city services.

“Let’s just say, hypothetically all MADs were affected,” Anaya said. “Coupled with this budget deficit, what does that mean for these communities? If we don’t have these basic city services or self elected MADs, who’s going to provide services?”

In Golden Hill, Anaya said, the MAD paid for more than 148,000 square feet of graffiti abatement in the last year alone.

Though the judge’s tentative ruling said the current uses of MAD money did not qualify as special benefits, it did not offer guidance on what would be permissible under state law requirements.

The court case is one of the first to seek greater clarification in what types of services qualify as conferring special benefits to property within the districts.

Last year, a Santa Clara case set precedent when taxpayers there challenged the local government’s assertion that the services paid for through a countywide special assessment to improve open space conferred special benefits on real property as required under state law.

The court ruled in favor of the taxpayers.

“Before that decision, the courts generally deferred to the cities’ findings of special benefit, as long as there was no obvious fraud,” said Vladimir Kogan, a University of California, San Diego doctoral student with an expertise in special assessment financing. “The 2008 decision increased the threshold, but provided few helpful details about what criteria should be used.”

What the case did establish, Kogan said, was that “the courts won’t be taking the city’s word anymore on the question of special benefits.”

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