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Effects of Proposition 218 Proposition 218, commonly referred to as the "Fox Initiative" or "Right to Vote on Taxes Act," was passed by the voters on November 5, 1996. The Proposition amends the State's Constitution by adding Articles XIII(C) and XIII(D) to do the following: Limit the authority of local governments (including cities, counties, special districts, school districts, and redevelopment agencies) to impose taxes and property related assessments, fees, and charges. Establish procedures for implementing annual assessments which includes benefit assessments, special assessments, and maintenance assessments, etc. The procedures include a requirement that the City develop an engineering report which identifies the benefit that will accrue to each individual property as a result of the assessment. Further, subject to certain exceptions, it establishes that the majority of the property owners in the assessment district must vote in favor of the assessment for it to be implemented each year. Fees or charges for sewer, water, and refuse collection services are exempted from the Proposition. Further, general tax assessments for police, fire, and emergency medical programs are prohibited. If the District was formed prior to Proposition 218 and pursuant to a petition signed by the property owner(s) of all the parcels subject to the assessment, the District is exempt from the requirement that a majority of the property owners must vote each year in favor of the assessment. All the existing Lighting and Landscape Assessment Districts were formed pursuant to such a petition. Accordingly, as none of the assessments are proposed to be increased, no vote is required of the current property owners. Four of the existing districts, (Bonde Ranch, Windsor, Oak Tree Farm and Moller Ranch), have a cost-of-living increase provision which allows for an annual increase in the assessment. If there is an increase in the annual assessment which is less than what is allowed by this cost escalator, the district is subject to the notice requirements stated in Street and Highways Code §22626 when the assessment is increased from the previous year. This code states that the City is required to send notices to each property owner whenever there is an increase from the previous year's assessment. However, if the annual assessment should ever be increased in excess of the cost escalator, the district would be subject to the requirements of Proposition 218, and the increased assessments would be required to have approval of a majority vote. Existing assessment districts must also comply with Proposition 218's requirement that only special benefits, not general benefits, may be assessed when evaluating lighting and landscape maintenance districts. The definition of a special benefit is "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." To the extent an assessment provides both general benefits and special benefits, the City must separate the general benefits from the special benefits and pay for the general benefits out of another revenue source, typically the City's General Fund. Page 3 of 6