Court Opinion

ID: 4545007
Source: CourtListenerOpinion
Date Created: 2020-06-29 23:01:49.362342+00
Date Added: 2024-06-11T12:50:17.792998
License: Public Domain

Filed 6/29/20
                CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                 SECOND APPELLATE DISTRICT

                           DIVISION ONE

 HILL RHF HOUSING
 PARTNERS, L.P., et al.,            B295181

         Petitioners and            (Los Angeles County
         Appellants,                Super. Ct. No. BS170127)

         v.

 CITY OF LOS ANGELES, et
 al.,

         Objectors and
         Respondents.

 MESA RHF PARTNERS, L.P.,           B295315

         Petitioner and             (Los Angeles County
         Appellant,                 Super. Ct. No. BS170352)

         v.

 CITY OF LOS ANGELES, et
 al.,

         Objectors and
         Respondents.
       APPEALS from judgments of the Superior Court of Los
Angeles County, Mitchell L. Beckloff, Judge. Affirmed.
       Reuben Raucher & Blum, Timothy D. Reuben and Stephen
L. Raucher for Petitioners and Appellants.
       Michael N. Feuer, City Attorney, Beverly A. Cook,
Assistant City Attorney, and Daniel M. Whitley, Deputy City
Attorney, for Objector and Respondent City of Los Angeles.
       Colantuono, Highsmith & Whatley, Michael G. Colantuono,
Holly O. Whatley, and Pamela K. Graham for Objectors and
Respondents Downtown Center Business Improvement District
Management Corporation and San Pedro Property Owners
Alliance.
                      ____________________________
       Hill RHF Housing Partners, L.P. (Hill), Hill Olive Housing
Partners, L.P. (Olive), and Mesa RHF Partners, L.P. (Mesa)
appeal from judgments entered after the trial court denied
petitions for writ of mandate and related declaratory and
injunctive relief challenging the City of Los Angeles’s June 2017
establishment of the Downtown Center Business Improvement
District (DCBID) and the San Pedro Historic Waterfront
Business Improvement District (SPBID) (collectively, the BIDs).
       “The Property and Business Improvement District Law of
1994 (Sts. & Hy. Code, §§ 36600 et seq.) [PBID Law] authorizes
cities to establish property and business improvement
districts . . . in order to levy assessments on real property . . . .” 1
(Epstein v. Hollywood Entertainment Dist. II Business

      1The assessments are intended, among other things, to
“promote the economic revitalization and physical maintenance of
business districts in order to create jobs, attract new businesses,

                                   2
Improvement Dist. (2001) 87 Cal. App. 4th 862, 865.) Proposition
218 added article XIII D to the California Constitution in part to
restrict cities’ abilities to levy these and other assessments.
(Apartment Ass’n of Los Angeles County, Inc. v. City of Los
Angeles (2001) 24 Cal. 4th 831, 837.)
       Together, article XIII D and the PBID Law establish a
comprehensive procedure cities must follow to create a business
improvement district. 2 That procedure includes opportunities for
property owners in proposed assessment districts to state their
objections to proposed assessments, and a requirement that those
objections be considered before levying an assessment. Hill,
Olive, and Mesa opposed the establishment of the BIDs, but did
not avail themselves of any of the opportunities they had to
create a record of the reasons for their objection. They then
challenged the establishment of the BIDs in court by filing
petitions for writ of mandate and complaints for injunctive and
declaratory relief. The City and the BIDs opposed Hill, Olive,
and Mesa’s petitions on the merits, but also argued that Hill,
Olive, and Mesa failed to exhaust their administrative remedies
before seeking judicial intervention.
       The trial court denied Hill, Olive, and Mesa’s petitions on
the merits. We view exhaustion of administrative remedies,
however, as a threshold question. Because we agree with the
City and the BIDs that Hill, Olive, and Mesa were required to
exhaust administrative remedies before seeking judicial

and prevent the erosion of the business districts.” (Sts. & Hy.
Code, § 36601, subd. (b).)
      2Unspecified references to “article” refer to articles of the
California Constitution.

                                  3
intervention and that they failed to do so, we affirm the trial
court’s judgments on that ground and decline to reach Hill, Olive,
and Mesa’s arguments on the merits.
                         BACKGROUND
        In April and May 2017, the City of Los Angeles adopted
ordinances declaring its intent to create the DCBID and the
SPBID based on engineers’ reports and management district
plans referenced in the ordinances. 3 Hill and Olive own
residential rental property for low-income seniors located in the
district boundaries of the DCBID. Mesa owns residential rental
property for low-income seniors inside the boundaries of the
SPBID.
       The City mailed notices to owners of property inside the
BIDs of the public hearings at which it intended to consider the
establishment of the BIDs. The notices included summaries of
the management district plans for each BID, assessment ballots,
and summaries of procedures for completing, returning, and
tabulation of assessment ballots. Hill and Olive returned ballots
to the City opposing the establishment of the DCBID, and Mesa
returned a ballot opposing the establishment of the SPBID. 4

      DCBID consists of “approximately 65 blocks of the west,
      3

northwestern and central downtown area of Los Angeles . . . .”
SPBID consists of “approximately 30 blocks of primarily
commercial property in central downtown San Pedro . . . .”
      4 The prescribed administrative process for establishment
of a BID allows property owners to submit votes either in favor of
or opposing the establishment of the BID. (Cal. Const., art. XIII
D, § 4, subd. (c); Gov. Code, § 53753, subd. (b).) If the “ballots
submitted in opposition to the assessment exceed the ballots
submitted in favor of the assessment,” that is considered a
“majority protest,” and no assessment may be imposed. (Cal.

                                4
       The City held the noticed public hearings—on June 7, 2017
for the DCBID and June 27, 2017 for the SPBID. For the
DCBID, there were no “valid written protests received,” and four
speaker cards received. For SPBID, there were no written
protests received, and two speaker cards. 5
       Based on the public hearings and the ballots tabulated
after those hearings, the City created by ordinance the DCBID
and the SPBID for terms to begin January 1, 2018. The DCBID’s
assessments were to fund three components: (1) “Clean and Safe
Programs,” (2) economic development and marketing programs,
and (3) BID management. The SPBID’s assessments were to
fund four components: (1) visitor, “Ambassador,” and security
services, (2) sanitation, beautification, and capital improvements,
(3) marketing and special events, and (4) BID management.
       On July 3, 2017, Hill and Olive filed a petition for writ of
mandate and complaint for declaratory and injunctive relief

Const., art. XIII D, § 4, subd. (e).) The administrative process
also requires that the agency hold a public hearing, at which “any
person shall be permitted to present written or oral testimony.”
(Gov. Code, § 53753, subd. (d).) When documenting the hearing,
the City referred to ballots as either “supporting” or “opposing,”
and referred to the “written . . . testimony” contemplated by
Government Code section 53753, subdivision (d) as “written
protest.”
      5The record contains no evidence regarding the identity of
the speakers at the DCBID hearing. According to the speaker
cards submitted for the SPBID hearing, neither of the speakers
represented Mesa. The record is silent regarding the content of
the speakers’ presentations. Neither Hill, Olive, nor Mesa allege
they submitted written protests or had representatives speak at
the public hearings regarding the BIDs’ establishment.

                                 5
against the City challenging the establishment of the DCBID.
On July 26, 2017, Mesa filed a petition for writ of mandate and
complaint for declaratory and injunctive relief against the City
challenging the establishment of the SPBID. Hill, Olive, and
Mesa’s contentions center largely on the definition of “special
benefit” as distinct from “general benefit” as those terms are used
and defined in the PBID Law and article XIII D, as clarified by
the Supreme Court in Silicon Valley Taxpayers’ Assn., Inc. v.
Santa Clara County Open Space Authority (2008) 44 Cal. 4th 431
(Silicon Valley). Among other arguments, Hill, Olive, and Mesa
raised facial challenges to the constitutionality of amendments to
the PBID Law the Legislature made after Silicon Valley. Hill,
Olive, and Mesa also argued that if the benefits the BIDs
conveyed were special benefits, the City improperly failed to
consider and account for unique characteristics about their
properties (separate and apart from each other parcel in each
BID) that would affect the value to the parcel of the benefit
conveyed. Finally, Hill, Olive, and Mesa challenged the BIDs’
quantification methods, alleging that attributions between
special and general benefits were based on evidence that was not
solid and credible. Each of the petitions alleges exhaustion of
administrative remedies. Each of the City’s answers alleges
“failure to exhaust administrative remedies and/or identify issues
of dispute prior to bringing suit in Superior Court” as an
affirmative defense. And the City and BIDs briefed exhaustion of
administrative remedies in their trial briefs.
       On September 19, 2018, the trial court heard argument on
the petitions. The trial court inquired about—and the parties
argued—exhaustion of administrative remedies during the
hearing.

                                 6
       The trial court issued orders on October 30, 2018 (Hill and
Olive) and October 31, 2018 (Mesa) denying the petitions and the
requested injunctive and declaratory relief on the merits.
Neither of the orders mentions exhaustion of administrative
remedies.
       The trial court entered judgments on December 3, 2018
(Hill and Olive) and December 19, 2018 (Mesa) based on its
orders. Hill, Olive, and Mesa filed timely notices of appeal.
                             DISCUSSION
    A. Relevant BID Procedural Requirements
       Article XIII D requires that the record owner of a parcel in
a proposed business improvement district “be given written
notice by mail of the proposed assessment, the total amount
thereof chargeable to the entire district, the amount chargeable
to the owner’s particular parcel, the duration of the payments,
the reason for the assessment and the basis upon which the
amount of the proposed assessment was calculated, together with
the date, time, and location of a public hearing on the proposed
assessment. Each notice shall also include, in a conspicuous
place thereon, a summary of the procedures applicable to the
completion, return, and tabulation of the ballots . . . , including a
disclosure statement that the existence of a majority protest . . .
will result in the assessment not being imposed.” (Cal. Const.,
art. XIII D, § 4, subd. (c).)
       The Constitution requires that the agency proposing to levy
the assessment “conduct a public hearing upon the proposed
assessment not less than 45 days after mailing the notice of the
proposed assessment to record owners of each identified parcel.
At the public hearing, the agency shall consider all protests
against the proposed assessment and tabulate the ballots. The

                                  7
agency shall not impose an assessment if there is a majority
protest. A majority protest exists if, upon the conclusion of the
hearing, ballots submitted in opposition to the assessment exceed
the ballots submitted in favor of the assessment. In tabulating
the ballots, the ballots shall be weighted according to the
proportional financial obligation of the affected property.” (Cal.
Const., art. XIII D, § 4, subd. (e).)
       The PBID Law also imposes a host of administrative
requirements on an agency considering levying an assessment.
Specifically, for a new or increased property assessment, the
PBID Law requires a “notice and protest and hearing procedure
[that] compl[ies] with Section 53753 of the Government Code.”
(Sts. & Hy. Code, § 36623, subd. (a).)
       Government Code section 53753 requires the agency to
“give notice by mail to the record owner of each identified parcel.
Each notice shall include the total amount of the proposed
assessment . . . and the basis upon which the amount of the
proposed assessment was calculated, and the date, time, and
location of a public hearing on the proposed assessment. Each
notice shall also include, in a conspicuous place thereon, a
summary of the procedures for the completion, return, and
tabulation of the assessment ballots required . . . , including a
statement that the assessment shall not be imposed if the ballots
submitted in opposition to the assessment exceed the ballots
submitted in favor of the assessment, with ballots weighted
according to the proportional financial obligation of the affected
property. An agency shall give notice by mail at least 45 days
prior to the date of the public hearing upon the proposed
assessment.” (Gov. Code, § 53753, subd. (b).)

                                 8
        “At the time, date, and place stated in the notice mailed
pursuant to subdivision (b), the agency shall conduct a public
hearing upon the proposed assessment. At the public hearing, the
agency shall consider all objections or protests, if any, to the
proposed assessment. At the public hearing, any person shall be
permitted to present written or oral testimony. The public hearing
may be continued from time to time.” (Gov. Code, § 53753, subd.
(d), italics added.)
       “At the conclusion of the public hearing . . . , an impartial
person designated by the agency who does not have a vested
interest in the outcome of the proposed assessment shall tabulate
the assessment ballots submitted, and not withdrawn, in support
of or opposition to the proposed assessment. . . .” (Gov. Code, §
53753, subd. (e)(1).) “A majority protest exists if the assessment
ballots submitted, and not withdrawn, in opposition to the
proposed assessment exceed the assessment ballots submitted,
and not withdrawn, in its favor, weighting those assessment
ballots by the amount of the proposed assessment to be imposed
upon the identified parcel for which each assessment ballot was
submitted. [¶] . . . If there is a majority protest against the
imposition of a new assessment, or the extension of an existing
assessment, or an increase in an existing assessment, the agency
shall not impose, extend, or increase the assessment.” (Gov. Code,
§ 53753, subd. (e)(4) & (5), italics added.) 6

      6 Neither the record nor the parties’ arguments contain any
allegation that the City failed to comply with the procedural
requirements set forth in section 4 of article XIII D, Streets and
Highways Code section 36623, and Government Code section
53753.

                                 9
   B. Exhaustion of Administrative Remedies
      “The question whether the doctrine of exhaustion of
administrative remedies applies in a given case raises legal
issues, which we review de novo.” (Evans v. City of San Jose
(2005) 128 Cal. App. 4th 1123, 1136.)
      “Generally, ‘a party must exhaust administrative remedies
before resorting to the courts. . . .’ ” (Plantier v. Ramona
Municipal Water Dist. (2019) 7 Cal. 5th 372, 382.) The Supreme
Court has “inferred an exhaustion requirement even within
statutory schemes that ‘ “do not make the exhaustion of the
[administrative] remedy a condition of the right to resort to the
courts.” ’ ” (Williams & Fickett v. County of Fresno (2017) 2
Cal. 5th 1258, 1271 (Williams & Fickett).) “The general rule of
exhaustion ‘forbids a judicial action when administrative
remedies have not been exhausted, even as to constitutional
challenges . . . .’ ” (Bockover v. Perko (1994) 28 Cal. App. 4th 479,
486.)
      “[I]n California a requirement that administrative
remedies be exhausted is jurisdictional.” 7 (California

      7 “ ‘The concept of jurisdiction embraces a large number of
ideas of similar character, some fundamental to the nature of any
judicial system, some derived from the requirement of due
process, some determined by the constitutional or statutory
structure of a particular court, and some based upon mere
procedural rules originally devised for convenience and efficiency,
and by precedent made mandatory and jurisdictional.’ ” (Mokler
v. County of Orange (2007) 157 Cal. App. 4th 121, 134, quoting
Abelleira v. District Court of Appeal, Third Dist. (1941) 17 Cal. 2d
280, 293.) In the exhaustion context, “jurisdictional” does not
implicate subject matter or personal jurisdiction. Rather, it is “ ‘a
fundamental rule of procedure laid down by courts of last resort,

                                 10
Correctional Peace Officers Assn. v. State Personnel Board (1995)
10 Cal. 4th 1133, 1151.) “The rule ‘is not a matter of judicial
discretion, but is a fundamental rule of procedure . . . binding
upon all courts.’ ” (Campbell v. Regents of University of
California (2005) 35 Cal. 4th 311, 321.)
        The general rule is that “[a]dministrative agencies must be
given the opportunity to reach a reasoned and final conclusion on
each and every issue upon which they have jurisdiction to act
before those issues are raised in a judicial forum.” (Sierra Club v.
San Joaquin Local Agency Formation Com. (1999) 21 Cal. 4th
489, 510.) “The exhaustion doctrine is principally grounded on
concerns favoring administrative autonomy (i.e., courts should
not interfere with an agency determination until the agency has
reached a final decision) and judicial efficiency (i.e., overworked
courts should decline to intervene in an administrative dispute
unless absolutely necessary).” (Farmers Ins. Exchange v.
Superior Court (1992) 2 Cal. 4th 377, 391.) “Even where the
administrative remedy may not resolve all issues or provide the
precise relief requested by a plaintiff, the exhaustion doctrine is
still viewed with favor ‘because it facilitates the development of a
complete record that draws on administrative expertise and
promotes judicial efficiency.’ [Citation.] It can serve as a
preliminary administrative sifting process [citation], unearthing
the relevant evidence and providing a record which the court may
review.” (Yamaha Motor Corp. v. Superior Court (1986) 185
Cal. App. 3d 1232, 1240.)
        Hill, Olive, and Mesa posit that exhaustion is not required
in the BID assessment context and alternately that they

followed under the doctrine of stare decisis, and binding upon all
courts.’ ” (Ibid.)

                                11
exhausted their administrative remedies by submitting ballots
opposing the City’s proposed BID assessments. 8 We disagree
with both assertions.
       As we have noted, the Supreme Court has “inferred an
exhaustion requirement even within statutory schemes that ‘ “do
not make the exhaustion of the [administrative] remedy a
condition of the right to resort to the courts.” ’ ” (Williams &
Fickett, supra, 2 Cal.5th at p. 1271.) The PBID Law’s detailed
administrative procedural requirements “provide affirmative
indications of the Legislature’s desire” that agencies be allowed to
consider in the first instance issues raised during that process.
(Ibid.) As in Williams & Fickett, we conclude that the procedure
outlined in the PBID Law “bespeaks a legislative determination
that the [City] should, in the first instance, pass on” the
questions Hill, Olive, and Mesa present in their petitions, “or
decide that it need not do so.” (Ibid.)
       Neither are we persuaded that voting against the
assessments without availing themselves of the PBID Law’s
comprehensive protest and hearing process constituted
“exhaustion” of that process. At argument, counsel for Hill,
Olive, and Mesa contended that the Supreme Court through
Williams & Fickett requires exhaustion only in circumstances
where the statutory or constitutional provision creating an
administrative process does not expressly articulate what
behavior constitutes exhaustion. Because the Constitution and
statutes applicable here allow property owners to submit a ballot,

      8 Hill, Olive, and Mesa’s contention that no exhaustion was
required here is undermined by headings and allegations in each
of their petitions that they had exhausted administrative
remedies.

                                12
counsel argued, submitting a ballot opposing the establishment of
the BID exhausts administrative remedies. Williams & Fickett
does not support that contention.
      In Williams & Fickett, the Supreme Court considered
whether a taxpayer who asserted that they did not own a
particular property must exhaust administrative remedies (that
the statutory scheme detailed) or whether that requirement was
obviated by the nullity exception—the exception to the
exhaustion doctrine “where a tax assessment is ‘a nullity as a
matter of law.’ ” (Williams & Fickett, supra, 2 Cal.5th at p. 1264.)
The administrative process at issue in that case—a property tax
assessment appeal—did articulate the procedures a taxpayer
needed to exhaust before invoking judicial process. (Ibid.) The
taxpayer’s argument was that it did not need to exhaust
administrative remedies because doing so would not serve the
exhaustion doctrine’s purposes. (Id. at p. 1267.) The Supreme
Court rejected the taxpayer’s argument in Williams & Fickett,
and explained that even where the taxpayer’s challenge was not a
question of valuation that implicated the local board’s expertise,
exhaustion was still required because the question presented was
within the jurisdiction of the local board. (Id. at pp. 1268, 1270.)
      The facts here present an even more compelling rationale
for exhaustion. For just a “no” vote in the context of the remedies
the statute provides to constitute exhaustion would frustrate the
purpose of the exhaustion doctrine. “The doctrine of exhaustion
of administrative remedies limits the scope of issues subject to
judicial review to those that the administrative agency has had
the opportunity to consider.” (Evans v. City of San Jose (2005)
128 Cal. App. 4th 1123, 1130 (Evans).) The doctrine “affords the
public agency an ‘opportunity to receive and respond to

                                13
articulated factual issues and legal theories before its actions are
subjected to judicial review.’ [Citation.] Thus, by presenting the
issue to the administrative body, the agency ‘will have had an
opportunity to act and render the litigation unnecessary’
[citation]; and, in so doing, ‘lighten the burden of overworked
courts in cases where administrative remedies are available and
are as likely as the judicial remedy to provide the desired
relief. . . .’ [Citation.] Finally, the doctrine ‘ . . . facilitates the
development of a complete record that draws on administrative
expertise and promotes judicial efficiency.’ ” (Leff v. City of
Monterey Park (1990) 218 Cal. App. 3d 674, 681.)
       Exhaustion of administrative remedies is not a pro forma
exercise. “The purposes of the doctrine are not satisfied if the
objections are not sufficiently specific so as to allow the [a]gency
the opportunity to evaluate and respond to them. [Citation.]
‘The essence of the exhaustion doctrine is the public agency’s
opportunity to receive and respond to articulated factual issues
and legal theories before its actions are subjected to judicial
review.’ ” (Evans, supra, 128 Cal.App.4th at p. 1138.)
       The BID assessment process provides property owners at
least 45 days’ notice of the public hearing the PBID Law requires.
At that hearing, the city is required to “consider all objections or
protests,” and at that hearing, “any person shall be permitted to
present written or oral testimony.” (Gov. Code, § 53753, subd.
(d).) If a property owner presents factual issues or legal theories
for the city’s consideration that require more research,
investigation, or development, “[t]he public hearing may be
continued from time to time.” (Ibid.)
       While the process mandates that an assessment fail if there
exists a majority protest, the process gives the city discretion to

                                  14
pass or decline an assessment even if property owners’ votes are
sufficient to sustain the assessment. (Cal. Const., art. XIII D, § 4,
subd. (e) [“[t]he agency shall not impose an assessment if there is
a majority protest”]; Gov. Code, § 53753, subd. (e)(5) [“[i]f there is
a majority protest . . . , the agency shall not impose . . . the
assessment”].) If the agency’s decision is to be challenged in
court, the agency—the City in this context—is entitled to the
benefit of the opportunity to either address the specific issues a
property owner raises or to pass on the opportunity to do so and
allow the courts to make a decision based on an administrative
record that reflects a development of the disputed issues to the
extent the administrative process allows. (See Williams &
Fickett, supra, 2 Cal.5th at p. 1271.)
       Exhaustion of administrative remedies in this context
requires nothing more of a property owner than submitting a
ballot opposing the assessment and presenting to the agency at
the designated public hearing the specific reasons for its objection
to the establishment of a BID in a manner the agency can
consider and either incorporate into its decision or decline to act
on. The administrative procedure outlined in the Constitution
and the Government Code allows property owners to do that
either orally or in writing at a public hearing called for the
purpose of “consider[ing] all objections or protests . . . to the
proposed assessment” and tabulating ballots. (Gov. Code, §
53753, subd. (d).) Because we conclude that Hill, Olive, and Mesa
were required to exhaust administrative remedies before seeking
judicial intervention—a threshold question in this case—and did
not do so, we affirm the trial court’s denial of the petitions for
writs of mandate.

                                 15
                          DISPOSITION
      The judgments are affirmed. The respondents are entitled
to their costs on appeal.
      CERTIFIED FOR PUBLICATION

                                          CHANEY, J.

We concur:

             ROTHSCHILD, P. J.

             WHITE, J. *

      *Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.

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