Strapped for cash, the city of San Diego has drastically cut some basic neighborhood services that residents have come to expect. Things like tree trimming and graffiti cleanup.

So in more than 50 neighborhoods, property owners have voted to create special zones requiring them to pay extra taxes used for neighborhood maintenance. They’ve proliferated citywide, sometimes infuriating residents who don’t believe they should pay more for basic services.

But last week, a California appeals court ruled that San Diego had illegally formed one of those special zones, a major victory for a group of residents of Greater Golden Hill, which includes South Park. They argued the city manipulated a vote creating the zone in order to unload the burden of paying for basic services on property owners.

The court sided with the residents, raising questions about whether any other districts have been formed illegally. The ruling made it clear that San Diego must walk a fine line as it copes with budget deficits and tries to find new ways to pay for old services.

The decision means the regular graffiti removal and tree-trimming is likely to end in Golden Hill. Beth Murray, the city’s deputy economic development director, said she will ask the City Council to dissolve the neighborhood’s zone, which collected about $500,000 annually. She said there are no plans to try to get it re-established.

How They Work

Creating a maintenance assessment district like the one in Golden Hill can often be more art than science, depending on a formula that’s up for interpretation.

In order to create one, the city holds a vote by mail. All property owners within the zone who would be taxed can vote and majority support is needed for approval.

But not everyone’s vote is the same. Under the rules, property owners pay a higher tax if their property will get more of a benefit from the services. So those property owners’ votes are worth more. It’s up to the city to develop a formula to decide how much each property would benefit and how much weight each vote gets.

In 2007, Golden Hill property owners approved the special tax. But not long afterward, a group of residents sued the city, arguing that the city had given itself too much influence in the vote.

The city owns 95 parcels in the neighborhood, but almost all of them are canyon land. One parcel is the southeastern corner of Balboa Park.

In its formula, the city made those parcels worth more than four times as much as a single-family home, giving the special tax the votes it needed to pass. But it didn’t say why its parcels were worth so much more, something it’s required to do.

How Responsibility Shifted

When the tax passed, the city started collecting the money from property owners. The city itself paid $35,000 into the special fund for the 95 properties it owned. At trial, the city’s lawyers said those payments made it obvious the city wasn’t trying to skirt its obligations.

But for the court, the problem was clear.

The city, it said, “could view $35,000 in special assessment charges a small price to pay to shift over $400,000 in costs for improvements and services … to the property owners.”

State laws say the city also has to show how the taxes will give a special benefit to property owners. The court said the city had also failed to do that.

“This is the first time a neighborhood group has challenged the city’s long-standing procedures for forming MADs and won,” said John McNab, president of the Golden Hill Neighborhood Association, which challenged the district, also called a MAD for short. “Assuming that other MADs were formed in the same way, it has implications for existing MADs and for those on the drawing board.”

Murray, of the city’s economic development division, said the Golden Hill zone was the only one she knew of that had been challenged in court. She said the Golden Hill case and similar cases in other cities have taught the city about what is and is not acceptable when it’s trying to create special tax zones. It isn’t clear how many other maintenance assessment districts might face similar issues.

Her department oversees nine of them, while the city’s park department manages more than 40.

The special taxes can be controversial, but in places like Little Italy, they’ve been used to turn previously lackluster areas into bustling neighborhood centers. In many neighborhoods, residents see them as unfortunate but necessary funding tools for neighborhood upkeep, given the city’s dire financial picture.

But as San Diego makes deeper cuts to neighborhood services each year, residents have questioned whether their creation just gives the city a free pass and gives officials less of a sense of urgency to fix the financial problems that can make special taxes appealing.

That was a sentiment in North Park this year, when property owners voted to reject a new maintenance assessment district there. North Park already has one, and the vote would have created a second layer of special taxes in a subset of the neighborhood, including an area where bars and restaurants have proliferated in recent years.

Adrian Florido is a reporter for voiceofsandiego.org. He covers San Diego’s neighborhoods. What should he write about next?

Contact him directly at adrian.florido@voiceofsandiego.org or at 619.325.0528.

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Adrian Florido

Adrian Florido is a former staff writer for Voice of San Diego.

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