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Golden Hill's flirtation with city maintenance districts

"Why are they not following the rules?"

Members of the Greater Golden Hill Community Development Corporation recently discovered a ruse that might help them overcome opposition to assessing their fellow citizens nearly $489,000 in increased taxes. Heretofore the development corporation has not been able to muster enough support from property owners to bring the matter to a vote. Thirty percent of owners in the proposed district are needed. But Scott Kessler, deputy director of San Diego's Economic Development Division, is now saying that the interest of 30 percent of the citizens is not required for a vote to go forward. That's because the development corporation, he says, didn't apply for City money to help the process get started.

What the private, nonprofit development corporation wants is a "maintenance assessment district," a device that has become popular in recent years to finance local community improvements. Under California law, a maintenance assessment district (MAD) must confer special benefits on its citizens' real property above and beyond the general benefits the City already provides. Examples might be several trash pickups per month beyond regular trash collection or putting streetlights in dark neighborhoods.

According to retired attorney Hal Tyvoll, who was on the development corporation's board in 2000, the effort to establish a maintenance assessment district in Greater Golden Hill began back then. The area includes Golden Hill, South Park, Brooklyn Heights, Orange Park, Morse, Seaman, and Choates. "The organizing center at that time," Tyvoll tells me, "was the 25th Street and 28th Street corridors in Golden Hill, especially where they cross Broadway. The services they wanted were more appropriately provided by a 'business improvement district,' though they weren't using that term. The problem they had, however, was that the businesses in the area didn't want to pay for the services. So [the development corporation] looked for ways to expand the revenue base outward."

Tyvoll shows me the development corporation's meeting minutes from July 26, 2000. Its chairman was none other than Golden Hill resident Scott Kessler, and one of its board members was Golden Hill businessman Rob Fanella, the organization's current chairman. A subcommittee had the responsibility of studying the maintenance assessment district. The subcommittee, called the Golden Hill Commercial Revitalization and Economic Development, seemed devoted to economic interests in Golden Hill exclusively.

The meeting minutes show that members discussed "the Proposal for Organization of Golden Hill Property Owners into a Community Maintenance Assessment District submitted by Marco LiMandri of New City America." LiMandri was a consultant to the group. His company, New City America, specializes in setting up business improvement districts and maintenance assessment districts.

The biggest problem the development corporation was facing that night was how to raise enough money to proceed. The meeting minutes record the following: "Everyone felt that the proposed district should include the entire [Greater Golden Hill] Planning Area as it was unlikely there was enough mass to fund a MAD without including all the households in Golden Hill."

Eventually, in 2002, the development corporation sent out a survey to the over 3500 Greater Golden Hill property owners to see how many would support the maintenance assessment district. The positive response was approximately 14 percent, nowhere near the 30 percent the City requires. And that was the end of the effort -- for the time being.

"In the meantime," claims Tyvoll, "Marco LiMandri managed to insinuate himself into the legislative process." Tyvoll shows me a September 30, 2002 letter LiMandri wrote to a City Land Use and Housing Committee criticizing the limitations of maintenance assessment districts. Legislation governing them, wrote LiMandri, "is not responsive to the growing needs of San Diego. The Maintenance Assessment District ordinance adopted by the City Council in 1998 does not provide for the funding of...economic development or marketing and promotional activities....

"The one group that is geared to coordinate such activities, the City's [Business Improvement District Council], does not make provision for property owners' inclusion in their membership....

"Finally, BIDs...only assess business license holders." At the end of his letter, LiMandri indicated several sources for his thinking. "I took [some of my] wording," he wrote, "from the existing BID legislation and [property-based] BID legislation from the Streets and Highway Codes."

Tyvoll maintains that reasoning like LiMandri's subtly pushes maintenance assessment districts, which are intended to help neighborhoods, toward improving local business, the goal of business improvement districts. In fact, the San Diego Municipal Code discussion of maintenance assessment districts, amended less than eight months after LiMandri wrote his letter, urges that the understanding of maintenance "improvements be interpreted liberally."

The current appearance of the maintenance assessment district initiative in Greater Golden Hill began in April with a new property-owner survey. The results were almost identical to the first survey -- about a 14 percent positive response. But in May, District Eight councilman Ben Hueso gave the development corporation $45,000 in federal community development block grant funds to get the maintenance assessment district effort off the ground. Unlike the start-up funds loaned by the City for such projects, these monies do not have to be paid back.

Among the benefits that the new district would provide are high-pressure washing of sidewalks, daily graffiti cleanup, removing large abandoned items from the community, landscaping along streets, cleaning up canyons, placing and emptying trash cans on major streets, and providing community banners and street signage.

A number of these items, says Hal Tyvoll, do not qualify as benefits to real property. "They may, incidentally, increase property values," he says, "but that's not a goal of maintenance assessment districts. The problem we have is that not even city officials seem to understand the difference between maintenance assessment districts and business improvement districts. By California law, the two are totally different animals. Take community banners, for instance. They would be appropriately provided by a business improvement district, since that mechanism is a more open-ended way to generally enhance the business climate of an area. And it is not bound by the requirement to provide special benefits to real property. In the Greater Golden Hill plan, however, the two types of district are being mixed up."

Something that surprised local residents is that the area of the newly proposed maintenance assessment district has greatly expanded since 2002. That territory was based on the Greater Golden Hill Planning Area, which has the rough appearance of a backwards L-shape. This year's proposed district is bigger than that. The size seemingly grew from somebody drawing a straight line from the top of the L to its westward horizontal wing. The effect is to include in the new district the City-owned Balboa Park property on which parts of two golf courses sit.

Kathy Vandenheuvel, a development corporation board member, e-mails me that the Balboa Park land was included to address several concerns local residents had about it. Among other goals, proponents of the maintenance assessment district, says Vandenheuvel, want "to remove illegally dumped large items and debris from the hillsides overlooking [26th] Street, [which winds through the park]. These hillsides are City-owned and part of the park, but the MAD could not clean these hills of illegally dumped items unless they were included in [its] boundaries. Canyon beautification is part of [the district's] scope of services." Proponents also want the community to clean the park and canyons of "debris left by the transient population."

But opponents see a more sinister motivation. Every property parcel in the affected area gets a vote in the current election, and the votes are "weighted" according to the amount of the properties' assessments. If you and I have property in the district and yours is twice the size of mine, you will be assessed twice as much as me, and your vote will count twice as much.

The City's policy is always to vote in favor of creating new maintenance assessment districts. It already owned 93 voting parcels in the district before the addition of the Balboa Park property, which is one large parcel. The effect of including this huge new parcel, therefore, is to add enormous weight to the City's vote. A simple comparison of the Balboa Park parcel size with that of an average resident's property reveals a startling difference. The voting weight of this one city parcel would cancel out hundreds of residential parcels' votes against the maintenance assessment district.

On June 12, the development corporation talked the city council into authorizing a balloting process in Greater Golden Hill. Eighth District councilman Ben Hueso presented the motion in less than a minute, and the remaining councilmembers asked no questions. The City Clerk sent out ballots, and they will be counted after a final city council hearing on July 30. Approval of the new maintenance assessment district will require 50 percent, plus one vote, of the weighted vote. The development corporation's chances are good if the same property owners who participated in the survey are the ones who vote. Seventy-five percent of them, or 14 percent of the district's property owners, said they wanted a maintenance assessment district.

But wait. "Why," asks South Park resident Cindy Funkhouser, "are they not following the rules?" I meet with Funkhouser, a medical editor, and her husband Ed in the Los Reyes taco shop near 25th and Broadway. "This thing has turned my life upside down," she says. "I first learned we might be assessed for a maintenance district about three weeks ago, shortly after the June 12 city council hearing. Since then I've been studying everything I can get my hands on that's relevant to it."

What Funkhouser discovered is that there's a clearly outlined procedure for establishing maintenance assessment districts in the city. Applicants for a district must apply through the San Diego Park and Recreation Department, which announces on its website the requirement that 30 percent of the property owners sign a petition supporting a district. The department also publishes what's commonly called the "MAD Formation Handout," which emphasizes the citizen participation guaranteed in the 30 percent requirement. In a parenthetical note, the handout states: "The formation of any proposed commercial MAD districts to be managed by a non-profit organization pursuant to San Diego Municipal Code...is handled by the Community and Economic Development Department" (italics added). That's Scott Kessler's office.

"But we are residential mixed use," Funkhouser writes me. "So the Golden Hill corporation should have gone through Park and Rec. Instead, they went straight to Scott Kessler, who handles commercial maintenance assessment and business improvement districts."

Funkhouser complained to Kessler, who on July 3 wrote her a long letter. Kessler based his response on a San Diego City Council policy called "Funding for Maintenance Assessment District Formation." That policy, he argued, "does...require a petition process necessitating a 30 [percent] showing of affected property owners favoring MAD formation, only if the district proponent wishes to borrow from a certain revolving loan fund the City set up specifically to fund formation campaigns.... The Park and Recreation Department's 'MAD Formation Handout'...also states that a 30 [percent] showing is required when an entity is seeking access specifically to the City's revolving loan fund."

A week later, Funkhouser wrote back, challenging Kessler's interpretation of city council policy. That policy "was written in September 2004 using the...MAD Formation Handout, which is the only and prevailing formation protocol.... The MAD Formation Handout does not state that the 30 percent-petition is only required for Fund users...."

One other claim in Kessler's July 3 letter is worth noting. "The...[development corporation]...had initiated this proposed formation as a 'self-managed' MAD. That is why it was assigned to my Department. The Park and Recreation Department...manages those districts that are managed by the City. Our Department deals only with the self-managed districts. (Incidentally, I joined the City in May of 2006 after the Golden Hill...campaign had already been initiated and assigned to the former Department's management.)"

But Funkhouser conceded nothing to Kessler. "In your Request for Council Action...," she wrote, "there is no reference to self-management. None at all. Further, self-management status isn't determined by the process of application; it is determined by vote, at the ballot stage." Indeed, an examination of the ballot reveals that after a person votes on the maintenance assessment district, the next choice is who shall manage the district, the City of San Diego or the Greater Golden Hill Community Development Corporation.

I ask Funkhouser if she believes Kessler has a conflict of interest in the case. "Probably," she says, "but I'm not fighting on that basis. All I want them to do is follow the rules. If they can get a maintenance assessment district that way, then fine. But when I bring up the rules, the whole City ignores me. I sent copies of all my correspondence to Kessler's superiors -- William Anderson, Jim Waring, the mayor -- and I got no answers. So it looks like they all support his approach. I ran across a funny legal term recently -- 'willful blindness.' That's what this is."

On Wednesday of last week, the Greater Golden Hill Community Development Corporation held a public information meeting at the Albert Einstein Academy in South Park. Councilman Hueso attended and answered most of the questions, which he requested be submitted ahead of time in writing. Cindy and Ed Funkhouser sat in the back row holding up signs expressing their point of view. As the meeting started, they shouted down the speakers until other attendees shouted them down.

The following day, I received an e-mail from Cindy Funkhouser. "I just didn't want the whole time...to be wasted on powerpoints and bureaucratic bull. So, I decided to go on the offensive immediately. My mamma didn't raise me that way, but sometimes you just have to shoot first.

"And, a lot of people haven't spent the kind of time I have spent becoming aware of the fraud, so I understand that they are open to the possibility that this might be fair and honest. It's too late for decorum, for me."

Meanwhile, Scott Kessler sent one more letter. He sympathized with Funkhouser as being "uninitiated" in the relevant laws. He then argued that the "MAD Formation Handout" "is not the Municipal Code or Council policy." But even the council policy Kessler uses to support his position directs a mixed-use or residential district start-up to follow the Park and Recreation protocol, which includes the 30 percent approval. The policy says that Kessler's Economic Development Division is to handle commercial districts.

According to attorney Hal Tyvoll, by processing a mixed-use or residential district, "Kessler is inventing his own policy, de facto, which omits all the spending restrictions and safeguards for public participation."

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