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An important exception, however, to Proposition 218's requirement that the property owners be given the opportunity annually to vote on the assessments occurs when: (1) the district was formed by the vote of all the property owners then owning land in the proposed district; and (2) the proposed annual assessment is not higher than the previous year's assessment other than increases due to an inflation factor, such as a construction cost index. The Oak Tree Farm, Moller Ranch, Laurel Creek Estates (The Preserve) and Lemoine Ranch Estates GHADs conform to the two exceptions described above. In addition, Oak Hill Estates and Kolb Ranch Estates were annexed into the Laurel Creek Estates GRAD by a vote of all the property owners then owning land in the proposed areas of annexation. Accordingly, no vote of the current property owners is required to levy this year's assessments. Existing assessment districts must also comply with Proposition 218's requirement that only special benefits may be assessed and not general benefits. 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. Here, however, the area being maintained under each District is of specific benefit to the property owners within each District, and the CHAD provides the most efficient and effective means for maintenance to be assured. THIS YEAR'S ASSESSMENTS Oak Tree Farm An Engineer's Report for the Oak Tree Farm CHAD has been prepared. It provides that funding is needed for the following: cleaning of retention basins, site inspection, erosion stabilization, preparation of the Engineer's Report, and City administrative costs. This year, the parcel assessment has been increased 7.7 percent for inflation (based on the Engineering News Record Construction Cost Index for the San Francisco Bay Area), from $239 to $257, including the City-owned sanitary sewer pump station within the District. (Under Proposition 218, publicly owned property that benefits from the program is required to pay its fair share.) With 42 properties within the District, including the City- owned sanitary sewer pump station; this year's budget will be $10,794. Currently, the Oak Tree Farm CHAD has a fund balance of $25,624; the majority of the reserve funds were used over the last several years to complete erosion repairs along the fire trail within the covered area. Page 5 of 7