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BACKGROUND The Landscaping and Lighting Act of 1972 (the "Act") authorizes local agencies to impose an annual assessment on real property benefiting from project-specific improvements in order to pay for the construction and maintenance of landscaping and lighting improvements that benefit those parcels. The assessments are collected by Alameda County as part of the annual property tax bill. For the formation of each new Landscape Maintenance District, the City follows procedures set forth in Division 15, Part 2, Chapter 2, Sections 22585 et. seq. of the Streets and Highways Code. Effects of Proposition 218 Proposition 218, commonly referred to as the "Right to Vote on Taxes Act," was passed by California voters in November 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 and school districts) to impose taxes and property-related assessments, fees, and charges. • Establishes procedures for implementing annual assessments which include benefit assessments, special assessments, maintenance assessments, etc. For landscaping and lighting maintenance districts, procedures include a requirement that the City develop an Engineer's report which identifies the special benefits that will accrue to each 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 any proposed increase in an assessment for it to be implemented. If an assessment district was formed prior to the passage of Proposition 218 and pursuant to a petition signed by the property owners of all the parcels subject to the assessment, the district is exempt from the requirement that a majority of the property owners must vote in favor of the assessment. The original Lighting and Landscape Maintenance District was formed pursuant to such a petition prior to the passage of Proposition 218, but this new district formation would require a majority of the property owners to vote in favor of the district. Maintenance Districts must comply with Proposition 218's requirement that only special benefits, not general benefits, may be assessed when evaluating the 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 a "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 the City is to pay for the general benefits out of another revenue source, typically the City's General Fund. Page 2 of 5