Hill RHF Housing Partners, L.People v. City of Los Angeles ( 2021 )

IN THE SUPREME COURT OF
CALIFORNIA
HILL RHF HOUSING PARTNERS, L.P., et al.,
Plaintiffs and Appellants,
v.
CITY OF LOS ANGELES et al.,
Defendants and Respondents.
MESA RHF PARTNERS L.P.,
Plaintiff and Appellant,
v.
CITY OF LOS ANGELES et al.,
Defendants and Respondents.
S263734
Second Appellate District, Division One
B295181, B295315
Los Angeles County Superior Court
BS170127, BS170352
December 20, 2021
Chief Justice Cantil-Sakauye authored the opinion of the Court,
in which Justices Corrigan, Liu, Kruger, Groban, Jenkins, and
Haller, J.* concurred.
*
Associate Justice of the Court of Appeal, Fourth Appellate
District, Division One, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.
HILL RHF HOUSING PARTNERS, L.P. v.
CITY OF LOS ANGELES
S263734
Opinion of the Court by Cantil-Sakauye, C. J.
State law provides for the formation of business
improvement districts, or BIDs, through which services,
activities, and improvements may be funded by assessments
imposed on benefitted businesses or properties. When a BID is
subsidized by assessments upon real property, these levies must
comply with the Right to Vote on Taxes Act, an initiative
measure more commonly known as Proposition 218. The
question before us is whether courts will entertain arguments
that a BID’s assessment scheme violates certain provisions of
Proposition 218 when raised by a party who did not articulate
these objections at the noticed public hearing at which protests
regarding a BID are to be considered by lawmakers. (Cal.
Const., art. XIII D, § 4, subd. (e); see also Gov. Code, § 53753,
subd. (d).)1
In proceedings below, the Court of Appeal concluded that
petitioners’ failure to present their objections to BIDs at the
appropriate public hearings meant they had not exhausted their
extrajudicial remedies, a lapse that prevented the court from
deciding petitioners’ claims on the merits. We disagree. The
opportunity to comment on a proposed BID does not involve the
sort of “clearly defined machinery for the submission, evaluation
1
Unspecified references to “article” in this opinion refer to
articles of the California Constitution.
1
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
and resolution of complaints by aggrieved parties” (Rosenfield v.
Malcolm (1967) 65 Cal.2d 559, 566 (Rosenfield)) that has
allowed us to infer an exhaustion requirement in other contexts.
Furthermore, the Court of Appeal’s exhaustion analysis does not
find support in the policy rationales that inform the exhaustion
doctrine nor in the intentions behind Proposition 218. These
considerations lead us to hold that petitioners need not have
raised their specific objections to the BIDs at the public hearings
in order to subsequently advance these arguments in court. We
therefore reverse the judgment of the Court of Appeal.
I. FACTUAL AND PROCEDURAL BACKGROUND
Petitioners Mesa RHF Partners L.P. (Mesa), Hill RHF
Housing Partners, L.P. (Hill), and Olive RHF Housing Partners,
L.P. (Olive) (collectively, petitioners) are nonprofit providers of
housing and services to low-income seniors. Mesa owns real
property, known as Harbor Tower, in San Pedro. Hill owns a
property known as Angelus Plaza and Olive owns another
property, Angelus Plaza North, in downtown Los Angeles.
Harbor Tower is within the boundaries of the San Pedro Historic
Waterfront Property and Business Improvement District (the
San Pedro BID), and the Angelus Plaza and Angelus Plaza
North properties are within the Downtown Center Business
Improvement District (the Downtown Center BID).
These two BIDs were created pursuant to the Property
and Business Improvement District Law of 1994 (Sts. & Hy.
Code, § 36600 et seq., added by Stats. 1994, ch. 897, § 1;
hereinafter referred to as the PBID Law). The San Pedro BID
was originally established in 2012; the Downtown Center BID
in 1998. In 2012, petitioners brought legal challenges against
these BIDs. Those disputes were resolved through settlement
2
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
agreements, reached in 2013, in which it was determined that
the City of Los Angeles would reimburse petitioners for their
BID assessment payments.
In 2017 it was proposed that the San Pedro and Downtown
Center BIDs be renewed for ten-year terms. Each proposal
engaged the process for approving a BID, as set out in the PBID
Law, Proposition 218, and the Proposition 218 Omnibus
Implementation Act (Gov. Code, § 53750 et seq.; hereinafter
referred to as the Implementation Act). As part of this process,
the Los Angeles City Council (hereinafter sometimes referred to
as the City Council) adopted two ordinances, one for each BID,
expressing an intent to consider the establishment of the BID.
Each of these ordinances adopted and approved a detailed
management district plan and associated engineer’s report for
the relevant BID, provided a general description of the BID’s
boundaries, gave the total projected assessment for the BID over
its ten-year term as well as for its first year, identified the
number of assessed parcels in the proposed BID (804 parcels
owned by 270 stakeholders for the San Pedro BID; 2,865 parcels
owned by 1,710 stakeholders for the Downtown Center BID), and
summarized the improvements and activities to be undertaken
through the BID. For each BID, the appropriate ordinance also
announced the date, time, and place of a public hearing before
the City Council at which, per the ordinances, “all interested
persons will be permitted to present written or oral testimony,
and the City Council will consider all objections or protests to the
proposed assessment” used to fund the BID.
Mesa received written notice of the public hearing before
the Los Angeles City Council on the San Pedro BID; Hill and
Olive received notice of the public hearing before the City
Council on the Downtown Center BID. Each notice stated that
3
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
at the designated hearing, “the City Council will hear all
interested persons for or against establishment of the District,
the extent of the District, and the furnishing of specified types
of improvements or activities and may correct minor defects in
the proceedings.” The notices explained that no assessment for
the BID would be imposed if there was a majority protest. Each
notice was accompanied by a ballot for voting on the BID, along
with instructions regarding how to return it. Also enclosed with
each notice was a summary of the BID’s management district
plan, containing information including the reasons for the
assessment, a breakdown of the BID’s proposed activities, the
total amount of the assessment chargeable to the district, the
basis upon which the assessment had been calculated, a
description of the BID’s boundaries, and a list of the parcels
included in the BID.
Petitioners’ authorized representative voted against the
San Pedro BID and the Downtown Center BID. Petitioners did
not raise any specific challenges to the BIDs at the public
hearings before the City Council. Nor is there any indication in
the administrative records that any legal arguments against the
BIDs were presented by anyone else at these sessions.
Meanwhile, on the same day as the hearing on the San Pedro
BID (which took place three weeks after the hearing on the
Downtown Center BID), a City of Los Angeles representative
advised petitioners’ counsel that due to differences between the
BIDs as formerly constituted and as renewed, the previously
negotiated 2013 settlement agreements — which by their terms
applied for so long as the earlier-established BIDs “continue[d]
in [their] current formulation[s]” — were no longer in effect.
When all ballots were counted, petitioners were
substantially outvoted; there was no majority protest against
4
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
either BID. Shortly after each tabulation, the City Council
adopted an ordinance regarding the relevant BID, announcing
in each instance that the City Council had “heard all testimony
and received all evidence concerning the establishment of the
District and desires to establish the District.”
Petitioners then initiated two actions, each within the 30-
day time frame prescribed by section 36633 of the Streets and
Highways Code,2 with Mesa challenging the San Pedro BID and
Hill and Olive attacking the Downtown Center BID. The
verified pleadings contain similar allegations, with each
averring that the BID in question violates Proposition 218.
Boiled down, petitioners assert that the assessments imposed
for the BIDs contravene the initiative because they are premised
on an incorrect and inadequately supported understanding of
the “special” versus “general” benefits that will accrue from each
BID’s activities — treating as “special” what petitioners contend
are in fact “general” benefits, a distinction that will be explained
later in this opinion — and because the assessments imposed on
petitioners exceed the reasonable cost of the proportional special
benefits conferred on their parcels. Petitioners seek various
forms of relief that would remove any obligation that they pay
assessments for the BIDs.3
2
This section of the PBID Law provides, “The validity of an
assessment levied under this part shall not be contested in an
action or proceeding unless the action or proceeding is
commenced within 30 days after the resolution levying the
assessment is adopted . . . .” (Sts. & Hy. Code, § 36633.)
3
Both pleadings also allege two causes of action that
petitioners did not pursue in proceedings below, and for that
reason are no longer of concern to us. The first such claim
asserted that the assessments for the San Pedro and Downtown
5
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
Petitioners allege in their pleadings that they exhausted
their administrative remedies. Respondents (the City of Los
Angeles and the San Pedro Property Owners Alliance in the
action brought by Mesa; the City and the Downtown Center
Business Improvement District Management Corporation in the
action brought by Hill and Olive) disagree, asserting a failure to
exhaust in their answers. At the hearing before the superior
court on the petitions, the court opined that petitioners had
satisfied whatever exhaustion requirement might apply to them
by casting ballots against the BIDs. Consistent with this view,
the court’s order following the hearing did not discuss
exhaustion. The order instead reached the merits of petitioners’
claims, ultimately denying the petitions in full.
The Court of Appeal saw the exhaustion issue differently.
It declined to address petitioners’ claims on the merits because,
the appellate court concluded, petitioners had failed to exhaust
their extrajudicial remedies. (Hill RHF Housing Partners, L.P.
v. City of Los Angeles (2020) 51 Cal.App.5th 621, 627 (Hill
RHF).) Looking to our decision in Williams & Fickett v. County
of Fresno (2017) 2 Cal.5th 1258 (Williams & Fickett) for
guidance, the Court of Appeal reasoned that “[t]he PBID Law’s
Center BIDs violate section 36632, subdivision (a) of the Streets
and Highways Code, which provides in relevant part that
assessments levied on real property pursuant to the PBID Law
“shall be levied on the basis of the estimated benefit to the real
property within the property and business improvement
district.” Petitioners did not press this argument as a distinct
theory in their briefing before the superior court or the Court of
Appeal. The second claim, which was dismissed prior to the trial
court’s hearing on the petitions, sought declarations that the
2013 settlement agreements, including their reimbursement
provisions, applied to the BIDs as renewed.
6
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
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
[the BID approval] process. [Citation.] 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.’ ” (Hill RHF, at p. 632, quoting Williams & Fickett, at
p. 1271.)
The Court of Appeal determined that with this framework
in place, petitioners could not be heard to raise their arguments
in court without first having presented these objections at the
appropriate public hearing. (Hill RHF, supra, 51 Cal.App.5th
at pp. 627, 634.) In reaching this result, the Court of Appeal
rejected petitioners’ assertion that they had exhausted their
administrative remedies by voting against the BIDs. The court
explained, “[e]xhaustion 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.” (Id., at p. 634, italics added.)
We granted review.
II. DISCUSSION
The discussion below begins by surveying the relevant
provisions of Proposition 218, the PBID Law, and the
Implementation Act. The analysis then turns to the exhaustion
doctrine, explicating this rule before considering whether
7
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
petitioners had to present their specific objections to the BIDs
at the appropriate public hearings for these arguments to later
be heard on the merits in court. We conclude that petitioners
were not required to take this step before instituting these
actions.
A. Constitutional and Statutory Framework
1. Proposition 218
We have in prior decisions described the origins and aims
of Proposition 218. This measure, “approved by voters in 1996,
is one of a series of voter initiatives restricting the ability of
state and local governments to impose taxes and fees.
[Citation.] The first of these measures was Proposition 13,
adopted in 1978, which limited ad valorem property taxes to
1 percent of a property’s assessed valuation and limited annual
increases in valuation to 2 percent without a change in
ownership. [Citations.] To prevent local governments from
increasing special taxes to offset restrictions on ad valorem
property taxes, Proposition 13 prohibited counties, cities, and
special districts from imposing special taxes without a two-
thirds vote of the electorate. [Citations.] But local governments
were able to circumvent Proposition 13’s limitations by relying
on Knox v. City of Orland (1992) 4 Cal.4th 132, 141 . . . , which
held a ‘special assessment’ was not a ‘special tax’ within the
meaning of Proposition 13. [Citation.] Consequently, without
voter approval, local governments were able to increase rates for
services by labeling them fees, charges, or assessments rather
than taxes. [Citation.] [¶] To address these and related
concerns, voters approved Proposition 218, known as the ‘Right
to Vote on Taxes Act,’ which added articles XIII C and XIII D to
the California Constitution. [Citation.] Article XIII C concerns
voter approval for many types of local taxes other than property
8
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
taxes. Article XIII D addresses property-based taxes and fees.
[¶] Article XIII D allows only four types of local property taxes:
(1) an ad valorem tax, (2) a special tax, (3) an assessment, and
(4) a property-related fee. (Art. XIII D, § 3, subd. (a).)
Proposition 218 supplements Proposition 13’s limitations on ad
valorem and special taxes by placing similar restrictions on
assessments and property-related fees.” (Plantier v. Ramona
Municipal Water Dist. (2019) 7 Cal.5th 372, 380–381, fn. omitted
(Plantier).)
Section 4 of Proposition 218 (art. XIII D, § 4) is specifically
concerned with assessments. Regarding these levies,
Proposition 218 “was designed to: constrain local governments’
ability to impose assessments; place extensive requirements on
local governments charging assessments; shift the burden of
demonstrating assessments’ legality to local government; make
it easier for taxpayers to win lawsuits; and limit the methods by
which local governments exact revenue from taxpayers without
their consent.” (Silicon Valley Taxpayers’ Assn., Inc. v. Santa
Clara County Open Space Authority (2008) 44 Cal.4th 431, 448
(Silicon Valley Taxpayers’ Assn.).)
Proposition 218 has both substantive and procedural
ramifications for assessments. Substantively, it “restricts
government’s ability to impose assessments in several
important ways. First, it tightens the definition of the two key
findings necessary to support an assessment: special benefit and
proportionality. An assessment can be imposed only for a
‘special benefit’ conferred on a particular property. (Art. XIII D,
§§ 2, subd. (b), 4, subd. (a).) 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.’
(Art. XIII D, § 2, subd. (i).) The definition specifically provides
9
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
that ‘[g]eneral enhancement of property value does not
constitute “special benefit.” ’ (Ibid.) Further, an assessment on
any given parcel must be in proportion to the special benefit
conferred on that parcel: ‘No assessment shall be imposed on
any parcel which exceeds the reasonable cost of the proportional
special benefit conferred on that parcel.’ (Art. XIII D, § 4,
subd. (a).) . . . Because only special benefits are assessable, and
public improvements often provide both general benefits to the
community and special benefits to a particular property, the
assessing agency must first ‘separate the general benefits from
the special benefits conferred on a parcel’ and impose the
assessment only for the special benefits. ([Ibid.].)” (Silicon
Valley Taxpayers’ Assn., supra, 44 Cal.4th at p. 443.)4
Procedurally, all assessments captured by Proposition 218
“shall be supported by a detailed engineer’s report prepared by
a registered,” state-certified professional engineer. (Art. XIII D,
§ 4, subd. (b).) Also, before an assessment is imposed, “[t]he
amount of the proposed assessment for each identified parcel
shall be calculated and the record owner of each parcel shall 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.” (Id., subd. (c).) This
hearing is to occur “not less than 45 days after mailing the notice
4
For purposes of Proposition 218, an “agency” means “any
county, city, city and county, including a charter city or county,
any special district, or any other local or regional governmental
entity.” (Art. XIII C, § 1, subd. (b); art. XIII D, § 2, subd. (a).)
10
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
of the proposed assessment to record owners of each identified
parcel.” (Id., subd. (e).) “Each notice shall also include, in a
conspicuous place thereon, a summary of the procedures
applicable to the completion, return, and tabulation of” a ballot
that is to be provided to the parcel owner, on which “the owner
may indicate his or her name, reasonable identification of the
parcel, and his or her support or opposition to the proposed
assessment.” (Id., subds. (c), (d).) At the public hearing on an
assessment, “the agency shall consider all protests against the
proposed assessment and tabulate the ballots.” (Id., subd. (e).)
An assessment shall not be imposed by an agency if there is a
majority protest, which “exists if, upon the conclusion of the
hearing, ballots submitted in opposition to the assessment
exceed the ballots submitted in favor of the assessment.” (Ibid.)
“In tabulating the ballots, the ballots shall be weighted
according to the proportional financial obligation of the affected
property.” (Ibid.)
Proposition 218 also includes a provision addressing
judicial review of assessments. “[T]o make it more difficult for
an assessment to be validated in a court proceeding” (Silicon
Valley Taxpayers’ Assn., supra, 44 Cal.4th at p. 445), the
measure provides that “[i]n any legal action contesting the
validity of any assessment, the burden shall be on the agency to
demonstrate that the property or properties in question receive
a special benefit over and above the benefits conferred on the
public at large and that the amount of any contested assessment
is proportional to, and no greater than, the benefits conferred on
the property or properties in question.” (Art. XIII D, § 4, subd.
(f).) We have determined that, consistent with the proposition’s
stated intent that its provisions “shall be liberally construed to
effectuate its purposes of limiting local government revenue and
11
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
enhancing taxpayer consent” (Ballot Pamp., Gen. Elec. (Nov. 5,
1996) text of Prop. 218, § 5, p. 109) and other indicia of the
measure’s purpose found within relevant ballot materials (e.g.,
id., analysis of Prop. 218 by Legis. Analyst, p. 73 [“This measure
would constrain local governments’ ability to impose fees,
assessments, and taxes”]), “courts should exercise their
independent judgment in reviewing whether assessments that
local agencies impose violate article XIII D” (Silicon Valley
Taxpayers’ Assn., at p. 450), instead of a deferential standard of
review.
2. The PBID Law and Implementation Act
The PBID Law provides a framework for the
establishment and operation of BIDs in this state. The statute
reflects and furthers the Legislature’s view that “[i]t is of
particular local benefit to allow business districts to fund
business related improvements, maintenance, and activities
through the levy of assessments upon the businesses or real
property that receive benefits from those improvements.” (Sts.
& Hy. Code, § 36601, subd. (c).) The “activities” contemplated
by the PBID Law include, but are not limited to, the
“[p]romotion of public events” and tourism within a district,
“[f]urnishing of music in any public place,” “[m]arketing and
economic development,” and “[p]roviding security, sanitation,
graffiti removal, street and sidewalk cleaning, and other
municipal services supplemental to those normally provided by
the municipality.” (Sts. & Hy. Code, § 36606, subds. (a), (b), (d),
(e).) The “improvements” referenced by the law include, but
again are not limited to, parking facilities, benches and kiosks,
trash receptacles and public restrooms, lighting and heating
facilities, decorations, parks, fountains, and planting areas.
(Sts. & Hy. Code, § 36610.)
12
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
The process set out in the PBID Law for creating a BID
begins with the submission of a written petition signed by
property or business owners in the proposed district who would
pay more than 50 percent of the assessments to be levied. (Sts.
& Hy. Code, § 36621, subd. (a).) This petition must include a
summary of the proposed BID’s management district plan and
an advisement explaining how the complete plan can be
obtained. (Id., subd. (b).) The full management district plan
must contain information such as a description of the proposed
BID’s boundaries (Sts. & Hy. Code, § 36622, subd. (c)); the
improvements, maintenance, and activities to be performed
through the BID (id., subd. (d)); the total amount proposed to be
expended for these services for each year of the BID’s operations
(id., subd. (e)); “[t]he proposed source or sources of financing [of
the BID], including the proposed method and basis of levying
the assessment in sufficient detail to allow each property or
business owner to calculate the amount of the assessment to be
levied against his or her property or business” (id., subd. (f));
and “[a] list of the properties or businesses to be assessed,
including the assessor’s parcel numbers for properties to be
assessed, and a statement of the method or methods by which
the expenses of a district will be imposed upon benefited real
property or businesses, in proportion to the benefit received by
the property or business, to defray the cost thereof” (id., subd.
(k)(1)), among other details.
Upon receipt of this petition, a city council may adopt a
resolution expressing an intention to form a BID. (Sts. & Hy.
Code, § 36621, subd. (a).) This resolution is to contain
information concerning the BID proposal that is sufficient to
“enable an owner to generally identify the nature and extent of
the improvements, maintenance, and activities [of the BID], and
13
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
the location and extent of the proposed district.” (Id., subd.
(c)(1).)
The PBID Law provides for a noticed hearing on a BID
proposal, the time and place of which are to be provided in the
resolution described above. (Sts. & Hy. Code, § 36621, subd.
(c)(2).) Section 36623, subdivision (a) of this statute provides
that when a BID proposal involves a new or increased property
assessment, the prehearing and hearing procedures set out in
the Implementation Act (Gov. Code, § 53753) come into play.
Many of these procedures elaborate upon Proposition 218’s
specifications, including the Implementation Act’s requirement
of individualized advanced notice to those who would be subject
to a proposed assessment and its description of the information
and instructions this notice and the accompanying ballot are to
provide. (Gov. Code, § 53753, subds. (b), (c).) Section 53753,
subdivision (d) of the Government Code states further that at
the public hearing on a proposed assessment, “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.”
The PBID Law explains what is to follow: “At the
conclusion of the public hearing to establish the district, the city
council may adopt, revise, change, reduce, or modify the
proposed assessment or the type or types of improvements,
maintenance, and activities to be funded with the revenues from
the assessments. Proposed assessments may only be revised by
reducing any or all of them. At the public hearing, the city
council may only make changes in, to, or from the boundaries of
the proposed property and business improvement district that
will exclude territory that will not benefit from the proposed
14
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
improvements, maintenance, and activities.” (Sts. & Hy. Code,
§ 36624.) “If the city council, following the public hearing,
decides to establish a proposed property and business
improvement district, the city council shall adopt a resolution of
formation that shall include, but is not limited to” (Sts. & Hy.
Code, § 36625, subd. (a)) information such as “[a] brief
description of the proposed improvements, maintenance, and
activities, the amount of the proposed assessment, a statement
as to whether the assessment will be levied on property,
businesses, or both within the district, a statement on whether
bonds will be issued, and a description of the exterior boundaries
of the proposed district” (id., subd. (a)(1)). The city must also
render “[a] determination regarding any protests received,” and
“shall not establish the district or levy assessments if a majority
protest was received.” (Id., subd. (a)(4).)
B. Exhaustion of Remedies
1. General Principles
As a general rule, “ ‘a party must exhaust administrative
remedies before resorting to the courts. [Citations.] Under this
rule, an administrative remedy is exhausted only upon
“termination of all available, nonduplicative administrative
review procedures.” ’ ” (Plantier, supra, 7 Cal.5th at p. 382.) An
exhaustion rule is perhaps most closely associated with quasi-
adjudicative actions taken by administrative agencies, but the
doctrine is not strictly limited to that context.5
5
A quasi-adjudicative or quasi-judicial act by a nonjudicial
entity has been described as an act that “ ‘involve[s] the
determination and application of facts peculiar to an individual
case,’ ” whereas a legislative or quasi-legislative act “ ‘involve[s]
the adoption of rules of general application on the basis of broad
15
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
Some statutes expressly require the exhaustion of an
extrajudicial procedure as a prerequisite to presenting a claim
in court. (E.g., Gov. Code, § 65009, subd. (b)(1) [exhaustion
requirement for challenges to zoning decisions]; Pub. Resources
Code, § 21177, subd. (a) [exhaustion requirement under the
California Environmental Quality Act]; Sts. & Hy. Code, § 5366
[exhaustion requirement under the Improvement Act of 1911];
cf. Lubbers, Fail to Comment at Your Own Risk: Does Issue
Exhaustion Have a Place in Judicial Review of Rules? (2018)
70 Admin. L.Rev. 109, 114–118 (Lubbers) [listing federal
statutes requiring exhaustion].)
In appropriate circumstances, we also have inferred an
exhaustion requirement in statutory and regulatory schemes
that do not contain any express command that available
administrative procedures be engaged before relief may be
sought in court. (E.g., Flores v. Los Angeles Turf Club (1961)
55 Cal.2d 736, 746–747 (Flores).) In deciding whether to draw
such an inference, we give due consideration to the extrajudicial
procedures involved and to whether recognition of an exhaustion
requirement “would comport with the statutory scheme and
advance the general purposes served by the exhaustion rule.”
public policy.’ ” (Nasha v. City of Los Angeles (2004)
125 Cal.App.4th 470, 482; see also San Diego Bldg. Contractors
Assn. v. City Council (1974) 13 Cal.3d 205, 212 & fn. 5
[discussing legislative and adjudicative acts, and providing
examples of both]; Howard v. County of San Diego (2010)
184 Cal.App.4th 1422, 1431–1432 (Howard) [describing
“[l]egislative actions” as “political in nature, ‘declar[ing] a public
purpose and mak[ing] provisions for the ways and means of its
accomplishment,’ ” as contrasted with “administrative or
adjudicative actions,” which “apply law that already exists to
determine ‘specific rights based upon specific facts ascertained
from evidence adduced at a hearing’ ”].)
16
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
(Williams & Fickett, supra, 2 Cal.5th at p. 1274; see also Flores,
at pp. 746–747.) This analysis also must recognize that when
the Legislature has provided for an adequate remedy, “absent a
clear indication of legislative intent, we should refrain from
inferring a statutory exemption from our settled rule requiring
exhaustion of administrative remedies.” (Campbell v. Regents
of University of California (2005) 35 Cal.4th 311, 333
(Campbell).)
Several rationales exist for requiring exhaustion of an
available administrative remedy even in the absence of an
explicit directive that this process be completed prior to the
commencement of a judicial proceeding. Requiring initial resort
to an administrative procedure in such situations can be
understood as vindicating legislative intent to provide another
avenue for resolving disputes, which might be frustrated if that
mechanism could be routinely avoided. The exhaustion doctrine
also recognizes and gives due respect to the autonomy of the
executive and legislative branches, and can secure the benefit of
agency expertise, mitigate damages, relieve burdens that might
otherwise be imposed on the court system, and promote the
development of a robust record conducive to meaningful judicial
review. (See Plantier, supra, 7 Cal.5th at p. 383; Williams &
Fickett, supra, 2 Cal.5th at p. 1268; Farmers Ins. Exchange v.
Superior Court (1992) 2 Cal.4th 377, 391; Rojo v. Kliger (1990)
52 Cal.3d 65, 86 (Rojo); Westlake Community Hosp. v. Superior
Court (1976) 17 Cal.3d 465, 476 (Westlake Community Hosp.).)
Additionally, absent an exhaustion rule, a litigant might have
an incentive to “sandbag” — in other words, to “avoid securing
an agency decision that might later be afforded deference” by
sidestepping an available administrative remedy. (Plantier, at
p. 383.)
17
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
In concluding that petitioners’ votes against the BIDs
were insufficient to preserve their arguments regarding the
invalidity of the assessments (Hill RHF, supra, 51 Cal.App.5th
at p. 634), the Court of Appeal applied a branch of the
exhaustion doctrine known as issue exhaustion. Issue
exhaustion means 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, italics added (Sierra Club).) This doctrine bears some
resemblance to the judicial rule that an argument that was not
presented to a lower tribunal will not be entertained by a
reviewing court. (See Sims v. Apfel (2000) 530 U.S. 103, 108–
109 (plur. opn. of Thomas, J.).) When it applies, an issue
exhaustion requirement advances the general purposes of the
exhaustion rule by, among other things, discouraging the
presentation of skimpy “ ‘skeleton’ ” arguments to an
administrative agency. (Dare v. Bd. of Medical Examiners
(1943) 21 Cal.2d 790, 799.)
There are important limits to the exhaustion doctrine.
Among them, we have declined to impose an exhaustion
requirement when a purported administrative remedy did not
incorporate “clearly defined machinery for the submission,
evaluation and resolution of complaints by aggrieved parties.”
(Rosenfield, supra, 65 Cal.2d at p. 566; see also Endler v.
Schutzbank (1968) 68 Cal.2d 162, 168.) In other words, unless
there is clear legislative direction to the contrary, a process
proffered as an administrative remedy does not have to be
exhausted when its dispute resolution procedures are so meager
that it cannot fairly be regarded as a remedy at all. (But cf.
18
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
Campbell, supra, 35 Cal.4th at pp. 323, 333 [requiring
exhaustion notwithstanding the unavailability of money
damages through an administrative remedy]; Westlake
Community Hosp., supra, 17 Cal.3d at p. 476.) When the
relevant extrajudicial procedures are so clearly wanting, the
exhaustion rule does not come into play because it has been
determined there is no genuine remedy to exhaust.
There are also several true exceptions to the exhaustion
rule. (Williams & Fickett, supra, 2 Cal.5th at p. 1274.) We have
described these exceptions as “flexible.” (Campbell, supra,35 Cal.4th at p. 322; see also Sail’er Inn, Inc. v. Kirby (1971)
5 Cal.3d 1, 7 [declining to require exhaustion due to
“extraordinary circumstances”].) One exception applies when
the claimed remedy might involve “clearly defined machinery
for the submission, evaluation and resolution” of at least some
“complaints by aggrieved parties” (Rosenfield, supra, 65 Cal.2d
at p. 566), but these procedures are deemed inadequate in
relation to the specific claim or claims being advanced in a
particular case. (See Plantier, supra, 7 Cal.5th at pp. 384, 387.)
This analytical path is narrower than a finding of categorical
deficiency. A court may regard a given extrajudicial procedure
as insufficient to justify application of the exhaustion rule in a
particular case, or class of cases, without going further and
determining whether the process can ever be regarded as an
administrative remedy. Our recent decision in Plantier, which
will be discussed in the next portion of this opinion, provides an
example of this approach. (Plantier, at pp. 383–387.)
19
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
2. The Exhaustion Doctrine and Opportunities to
Comment
Our prior case law has noted exhaustion issues similar to
the question presented here, only to leave them for another day.
In a matter decided prior to Proposition 218, we assumed for
sake of argument that a judicial action challenging a property
assessment as invalid under Proposition 13 was not foreclosed
by the petitioners’ failure to raise their objections at an earlier
public hearing convened by the city (the exhaustion issue not
having been addressed by the courts below). (Knox v. City of
Orland (1992) 4 Cal.4th 132, 148 & fn. 22 (Knox), superseded by
constitutional amendment as noted in Silicon Valley Taxpayers’
Assn., supra, 44 Cal.4th at p. 446.) More recently, in Plantier,
supra, 7 Cal.5th 372, we assumed for purposes of our analysis
that a local water district’s rate hearing under section 6 of
Proposition 218 (art. XIII D, § 6) was an administrative remedy,
because that was how the parties and the lower courts had
framed the issue presented for our review. (Plantier, at pp. 383–
384.) But in determining in Plantier that a courtroom challenge
to the methodology through which user fees were calculated by
a water district was not barred by the exhaustion doctrine for
failure to raise this objection at a public hearing convened to
consider only a proposed increase in existing rates (id., at
pp. 384–387), we made it clear that we were not deciding the
“broader question of whether, when, and under what
circumstances a public comment process may be considered an
administrative remedy” (id., at p. 384).6
6
It is also not firmly established how issue exhaustion
relates to the opportunity to comment on proposed regulations
that are subject to the provisions of the Administrative
20
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
Outside of the assessment context, some decisions by the
Courts of Appeal have rejected arguments that an issue or
objection had to be articulated during a public comment session
to be preserved for presentation in a subsequent judicial
proceeding. The respondent in Lindelli v. Town of San Anselmo
(2003) 111 Cal.App.4th 1099 (Lindelli), for example, asserted
that the petitioners had failed to exhaust their administrative
remedies because they did not raise their objection to a proposed
municipal contract at the city council’s public hearing on the
agreement. (Id., at p. 1105.) The Court of Appeal determined
that the exhaustion doctrine did not apply to the circumstances
before it, concluding instead that “[t]he opportunity to
participate in a public hearing prior to a legislative action does
not constitute an administrative remedy subject to exhaustion.”
(Ibid.) In regarding the opportunity to offer public comment
before lawmakers as an insufficient premise for inferring an
exhaustion requirement, the Lindelli court emphasized that the
“city council was not required to do anything in response to [this]
participation.” (Id., at p. 1106; see also Howard, supra,
Procedure Act (Gov. Code, § 11340 et seq.). (See Gov. Code,
§§ 11346.5, subd. (a)(15), (17), 11346.8, 11346.9, subd. (a)(3);
Coastside Fishing Club v. California Fish & Game Com. (2013)
215 Cal.App.4th 397, 415 [“We have found no authority for the
proposition that the public comment and response-to-comment
requirements of the [Administrative Procedure Act] constitute
an administrative remedy that must be exhausted before
challenging the validity of an administrative regulation in a
judicial action or proceeding”]; Asimow et al., Cal. Practice
Guide: Administrative Law (The Rutter Group 2020) ¶ 15.540;
cf. Lubbers, supra, 70 Admin. L.Rev. at pp. 136–142, 144–149
[discussing the application of the issue exhaustion doctrine in
challenges to federal regulations brought in federal court].) We
express no opinion here regarding this distinct issue.
21
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
184 Cal.App.4th at p. 1432; Hoffman Street, LLC v. City of West
Hollywood (2009) 179 Cal.App.4th 754, 769, fn. 8; City of
Coachella v. Riverside County Airport Land Use Com. (1989)
210 Cal.App.3d 1277, 1287 (City of Coachella) [“An
administrative remedy is provided only in those instances where
the administrative body is required to actually accept, evaluate
and resolve disputes or complaints”].)
C. Issue Exhaustion Does Not Apply Here
This matter concerns an assessment rather than a fee, but
otherwise picks up where our decision in Plantier left off.
Although Plantier involved a related exhaustion issue, its
analysis is not determinative of the outcome here. There was a
clear misfit between the procedure in Plantier and the
arguments being advanced by the petitioner in that case. Here,
it seems possible that had the City Council heard petitioners’
objections to the BIDs at the appropriate public hearings, that
body could have removed their properties from the districts,
decided not to renew the BIDs, maintained the arrangements
provided for in the 2013 settlement agreements, or otherwise
afforded petitioners relief that might have averted these
proceedings. Our analysis therefore must proceed on a
somewhat different plane from the one on which Plantier was
decided.
1. Provision of an Opportunity to Comment on a BID
Does Not Convey an Issue Exhaustion Requirement
We begin our assessment of the constitutional and
statutory scheme by recognizing that the relevant provisions of
Proposition 218 and the surrounding statutes do not explicitly
limit judicial actions to issues previously presented to an agency
in the same way that certain other laws do. But, again, the
22
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
absence of such language is not determinative of the exhaustion
question. If there is a viable remedy, we may infer an
exhaustion requirement not appearing on the face of a statute
upon appropriate consideration of whether such an inference
“would comport with the statutory scheme and advance the
general purposes served by the exhaustion rule.” (Williams &
Fickett, supra, 2 Cal.5th at p. 1274.)
We therefore focus, first, upon the basic nature of the
purported remedy — a noticed opportunity to participate in a
public comment session concerning a proposed legislative act
under consideration by local officials. If this chance to comment
amounts to “clearly defined machinery for the submission,
evaluation and resolution of complaints” (Rosenfield, supra,
65 Cal.2d at p. 566), it could convey (as the Court of Appeal
below found) an implied intent that objections be presented to
the relevant agency before they can be advanced in court. But
as we will explain, it is difficult to assign such significance to the
modest “machinery” (ibid.) that is involved here.
The “machinery” associated with the public comment
process before us is not as suggestive of a scheme purposed for
“the submission, evaluation and resolution of complaints”
(Rosenfield, supra, 65 Cal.2d at p. 566) as were the procedures
in prior cases in which we have recognized an intent to require
exhaustion. In Williams & Fickett, supra, 2 Cal.5th 1258, for
example, the assessment appeal process could include an
evidentiary hearing, exchanges of information between the
taxpayer and the government, examinations under oath, and
the collection and introduction of evidence. (Id., at p. 1269,
citing Rev. & Tax. Code, §§ 1603, 1605.4, 1605.6, 1606, 1607,
1609, 1609.4, 1609.5, 1610.2.) These relatively robust
procedures, together with another aspect of the statutory
23
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
scheme (to wit, an administrative stipulation process)
communicating an expectation that claims such as the ones we
addressed had to be presented to the administrative body in the
first instance, supported our conclusion that an exhaustion
requirement was intended. (Williams & Fickett, 2 Cal.5th at pp.
1269–1272; see also Flores, supra, 55 Cal.2d at p. 746 [inferring
an intent to require exhaustion from a “pervasive . . . system of
administrative procedure”]; San Joaquin etc. Irr. Co. v.
Stanislaus (1908) 155 Cal. 21, 26–29 [inferring an exhaustion
requirement from a statutory petition process that, when
initiated, would trigger renewed ratemaking].) The full array of
procedures involved in Williams & Fickett may not all be
necessary to find that a remedy exists and must be exhausted
prior to suit. But the significant gap between the procedures
involved here and those present in Williams & Fickett and other
cases in which an exhaustion requirement has been inferred
provides an indication that the public comment process we are
concerned with was not intended to give rise to a broad issue
exhaustion requirement, and should not be regarded as having
that effect.
Perhaps most notably, a public comment session
concerning a proposed legislative act, without more, is not
obviously geared toward the “resolution” of objections such as
those raised by petitioners. (Rosenfield, supra, 65 Cal.2d at
p. 566.) In arguing the opposite, respondents assert that the
requirement within Proposition 218 that an agency consider all
“protests” (art. XIII D, § 4, subd. (e)) provides sufficient
assurance that objections to BIDs will be resolved through the
application of agency expertise. Their argument proceeds from
the position that although the proposition refers only to
“protests,” the consideration requirement naturally extends to
24
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
objections that may be articulated at the hearing, too, as more
clearly captured by Implementation Act’s specification that at
the hearing on a BID, “any person shall be permitted to present
written or oral testimony” and the agency “shall consider all
objections or protests, if any, to the proposed assessment.” (Gov.
Code, § 53753, subd. (d).)
As a threshold matter, we agree with respondents’
interpretation of section 4 of Proposition 218 and section 53753,
subdivision (d) of the Government Code as requiring
consideration of both protest votes and any oral and written
objections presented at the hearing on an assessment. This
construction is in harmony with our interpretation of section 6
of Proposition 218 in Plantier, supra, 7 Cal.5th 372. There, we
determined that “[t]he requirement to ‘consider all protests’ (art.
XIII D, § 6, subd. (a)(2)) at a Proposition 218 hearing compels an
agency to not only receive written protests and hear oral ones,
but to take all protests into account when deciding whether to
approve the proposed fee, even if the written protesters do not
constitute a majority.” (Plantier, at p. 386.)
Yet even if respondents are correct in this one respect, that
does not settle the more fundamental question of whether the
process here had to be exhausted through the presentation of
specific objections at the appropriate public hearing. On this
issue, we find it significant that a requirement that objections
be considered, by itself, places no legal obligation upon an
agency to actually respond to whatever comments it might
receive. (See Lindelli, supra, 111 Cal.App.4th at p. 1106; City of
Coachella, supra, 210 Cal.App.3d at p. 1287.) And as we
explained in Plantier, supra, 7 Cal.5th at page 386, “nothing in
Proposition 218 or the legislation implementing it defines what
level of consideration must be given” to these protests. (Italics
25
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
added.) If anything, Proposition 218’s specification that protests
are to be considered “[a]t the public hearing” (art. XIII D, § 4,
subd. (e)) suggests that the voters did not expect especially
careful parsing of any detailed critiques that might be presented
in that setting. (See Plantier, at p. 386.) Lacking more, the
requirement within the constitutional and statutory scheme
that objections to a BID be considered by an agency at the
appropriate hearing does not involve “clearly defined
machinery” conducive to the “resolution of complaints”
(Rosenfield, supra, 65 Cal.2d at p. 566) comparable to that
which has in other instances provided a sufficient basis for
recognizing an exhaustion requirement.7
Nor is there good reason to infer that the electorate and
lawmakers regarded the noticed opportunity to participate in a
public comment session regarding a proposed BID as a
procedure that must be exhausted, notwithstanding this
7
As has been observed, the PBID Law provides that a city
must make “[a] determination regarding any protests received”
at the conclusion of the public hearing on a BID, and further
specifies that “[t]he city shall not establish the district or levy
assessments if a majority protest was received.” (Sts. & Hy.
Code, § 36625, subd. (a)(4).) We read this provision, which was
added to the PBID Law in response to Proposition 218 (Stats.
1999, ch. 871, § 6, p. 6237) as requiring a finding concerning the
existence or absence of a majority protest — the “protests”
referred to in the subdivision’s first clause being the ballots that
could sum to a majority protest, as referenced in the provision’s
second clause — not a response to any specific objections that
may be raised incident to the public hearing on a BID. This
language differs from the phrasing within Proposition 218 (art.
XIII D, §§ 4, subd. (e), 6, subd. (a)(2)), in which the requirement
that an agency “consider” all protests carries meaning above and
beyond a tabulation requirement. (See Plantier, supra,
7 Cal.5th at pp. 385–386.)
26
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
process’s limitations as an avenue for the “submission,
evaluation and resolution of complaints.” (Rosenfield, supra,
65 Cal.2d at p. 566.) Unlike the situation in Williams & Fickett,
supra, 2 Cal.5th 1258, the constitutional and statutory scheme
we address here includes nothing that implicitly conveys an
expectation that exhaustion must occur. Nor is there any
shared understanding that the opportunity to appear before
decisionmakers as an interested member of the public to praise
and encourage — or critique and condemn — a proposed
legislative act, a basic feature of representative democracy in
this state (see, e.g., Gov. Code, § 54954.3), inherently carries a
preclusive edge and must in the normal course be fully exploited
in order to preserve objections for a later lawsuit.
It follows from the above that we cannot readily infer an
intent that the public comment process set out in Proposition
218 and the relevant statutes should give rise to an issue
exhaustion requirement. If anything, the limited nature of the
procedures involved here points toward the opposite conclusion:
that objections to a BID proposal such as those raised by
petitioners need not be articulated at the appropriate public
hearing as a prerequisite to their becoming the subjects of suit.
And if we were to assume this appraisal of the public comment
process is not by itself determinative of the question before us,
as will be explained next, the pertinent circumstances cement
the outcome insofar as they provide no compelling policy
arguments for imposing an issue exhaustion rule in this context.
2. The Policy Rationales for Requiring Issue
Exhaustion Are Not Compelling Here
We now consider whether recognition of an issue
exhaustion requirement here would “advance the general
27
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
purposes served by the exhaustion rule.” (Williams & Fickett,
supra, 2 Cal.5th at p. 1274.) We conclude that the limitations of
the procedures we are concerned with, as well as other relevant
circumstances, reduce the potency of various policy
justifications for requiring exhaustion, so that these arguments
carry less force than they have in other situations in which an
exhaustion requirement has been inferred.
Specifically, we have explained that exhaustion of an
administrative remedy can promote the development of a record
suitable for judicial review. (E.g., Westlake Community Hosp.,
supra, 17 Cal.3d at p. 476.) With or without public comments,
however, as previously discussed the PBID Law requires the
preparation of a comprehensive management district plan (Sts.
& Hy. Code, § 36622) and Proposition 218 directs that all
assessments covered by the initiative also “be supported by a
detailed engineer’s report” (art. XIII D, § 4, subd. (b); see also
Sts. & Hy. Code, § 36622, subd. (n)). These documents may by
themselves provide a substantial record for purposes of judicial
review. Meanwhile, the absence of any requirement that an
agency actually respond to objections articulated at a public
hearing on a BID proposal calls into question whether an
exhaustion rule would routinely lead to better developed records
and the application of agency expertise (see Rojo, supra,
52 Cal.3d at p. 86; Westlake Community Hosp., at p. 476), and
likely reduces the comment process’s effectiveness as a vehicle
for resolving disputes short of judicial involvement (see
Friendly, “Some Kind of Hearing” (1975) 123 U.Pa. L.Rev. 1267,
1292 [discussing how statements of reasons may alleviate
concerns regarding a decision or ruling]).
Other circumstances relevant to these proceedings also
function to blunt policy arguments that have in other situations
28
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
supported recognition of an exhaustion requirement. Although
the exhaustion rule can serve to mitigate damages and
disruption by requiring the prompt presentation of objections to
an agency (Westlake Community Hosp., supra, 17 Cal.3d at
p. 476), the 30-day deadline for challenging an assessment set
out in section 36633 of the Streets and Highways Code, which
petitioners complied with, can have a similar effect.
Furthermore, when it is alleged that an agency has not met its
burdens under section 4, subdivision (f) of the initiative (art.
XIII D, § 4, subd. (f)), the application of an independent
judgment standard of review to such claims (Silicon Valley
Taxpayers’ Assn., supra, 44 Cal.4th at p. 450) mitigates the
common concern that a litigant will avoid an administrative
remedy so as not to elicit a factual finding that would receive
deference upon judicial review.
All this is not to say that a rule requiring the presentation
of specific objections regarding a BID to an agency at the
appropriate public hearing certainly would have no value
whatsoever as applied to disputes such as those at bar. As
respondents argue, the precise articulation of concerns
regarding a BID proposal at that juncture could lead to fixes,
compromises, or explanations that might avoid, expedite, or
enhance subsequent litigation. But the exhaustion doctrine
does not apply in every situation in which an abstract possibility
exists that an objection lodged through some channel will alter
or otherwise affect an agency action. (See Sierra Club, supra,21 Cal.4th at p. 502 [exhaustion does not require a petition
seeking reconsideration of a decision by an administrative
agency, even though a petition might give an agency an
opportunity to address a prior error]; Rosenfield, supra,
65 Cal.2d at p. 566 [observing that an agency’s possession of
29
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
ongoing supervisory or investigatory power does not on its own
trigger an exhaustion requirement].) Whatever likelihood there
may be that an exhaustion requirement could avert litigation
such as that before us, or have other useful consequences, it is
more significant to the legal question we address that the overall
array of benefits likely to flow from such a directive here is both
more modest and more speculative than has ordinarily been the
case in situations in which we have foreclosed a claim or lawsuit
due to a party’s failure to exploit an extrajudicial remedy.
3. Not Requiring Exhaustion Comports with
Proposition 218
Although this matter might be resolved on the basis of the
foregoing considerations, we also observe that a conclusion that
issue exhaustion does not apply here is in synch with our
previously articulated understanding of Proposition 218’s aims.
With the initiative having the goal of facilitating challenges to
assessments, this would be odd terrain in which to expand the
exhaustion doctrine by regarding a public comment process such
as the one before us as an adequate remedy that must be
exhausted prior to suit, especially when there are no especially
compelling policy justifications for doing so. 8
As we explained in Silicon Valley Taxpayers’ Assn., supra,
44 Cal.4th 431, “[i]n passing Proposition 218, the voters clearly
sought to limit local government’s ability to exact revenue under
the rubric of special assessments” (id., at p. 446), and toward
this end, the proposition was intended to make it “more difficult
8
Given the other considerations behind our holding, we
need not decide whether an exhaustion requirement of some
kind could be reconciled with Proposition 218 under materially
different circumstances.
30
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
for an assessment to be validated in a court proceeding” (id., at
p. 445). (See also id., at p. 448.) And as previously described in
this opinion, we held in Silicon Valley Taxpayers’ Assn. that to
stay true to the proposition’s intent, courts must apply their
independent judgment when determining whether an agency
has met the burdens assigned to it by section 4, subdivision (f)
of the initiative (art. XIII D, § 4, subd. (f)) — a substantially less
deferential standard than the one we had applied in Knox,
supra, 4 Cal.4th at pages 146–149. (Silicon Valley Taxpayers’
Assn., at p. 450.)
Having so construed the measure, it would be somewhat
curious for us to now adopt an expansive view of issue
exhaustion in this context. Such a rule would resolve an issue
we left open in Knox, supra, 4 Cal.4th at page 148 — a decision
the proposition countermanded because of the deference it
extended to assessment schemes — in a manner adverse to
challenges to assessments covered by the initiative. An
insistence on issue exhaustion here could have important
consequences, too. We question the Court of Appeal’s
downplaying of the burdens attendant to “submitting a ballot
opposing the assessment and presenting to the agency at the
designated public hearing the specific reasons for [an] 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.” (Hill RHF, supra, 51 Cal.App.5th at p. 634.) The
development and presentation of “specific reasons for [an]
31
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
objection” (ibid.) at the appropriate hearing may be far easier
said than done. 9
4. Conclusion
To summarize, the opportunity to participate in a public
comment session regarding a BID proposal does not involve
procedures conducive to the “submission, evaluation,” and
especially the “resolution” of disputes (Rosenfield, supra,
65 Cal.2d at p. 566) comparable to those that are commonly
found in administrative remedies that must be exhausted; the
policy arguments for recognizing an exhaustion requirement do
not carry great force here; and declining to require exhaustion
creates no tension with our previously articulated
understanding of Proposition 218’s goals. The purported
remedy here is just too thin, and the policy justifications for
demanding exhaustion too weak, to insist that petitioners have
presented their objections as public comments in order to secure
their evaluation in court. We therefore conclude that the Court
of Appeal erred in rejecting petitioners’ appeal on the ground
they had not exhausted their administrative remedies.
9
Respondents contend it would be consistent with the
intent behind Proposition 218 to require exhaustion here.
Respondents assert that enforcement of an exhaustion
requirement would enhance public discussions of assessments
and afford those who support a levy an expanded opportunity to
address objections voiced at these hearings. Without entirely
gainsaying these objectives, as guideposts for discerning and
implementing the electorate’s intent they do not carry the same
weight as the proposition’s provisions and its goal of limiting
assessments, as detailed in the main text.
32
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
D. Other Arguments Advanced by Respondents and
Amici Curiae Do Not Justify an Exhaustion
Requirement
Respondents and their supporting amici curiae (the
League of California Cities, the Association of California Water
Agencies, the California State Association of Counties, and the
California Special Districts Association) advance other reasons
why issue exhaustion should apply here, but none of these
arguments supplies a persuasive basis for adopting their
position.
Beginning with the text of Proposition 218 and the
Implementation Act, respondents argue that it would give short
shrift to the provisions therein that protests and objections may
be raised and shall be “consider[ed]” (art. XIII D, § 4, subd. (e);
Gov. Code, § 53753, subd. (d)) at the public hearing on a BID if
objectors could just ignore the hearing and proceed directly to
court if the BID is approved. But our holding does not transform
these provisions into nullities. There are good reasons why
property owners might raise their complaints at the appropriate
hearings, and why agencies are bound to consider these
objections when made, even if the articulation of issues at these
forums is not an absolute prerequisite for their subsequent
presentation in court. As has been acknowledged, such
engagement conceivably could secure protesters relief and
resolve a brewing dispute, and for that reason and others might
be encouraged and facilitated under the law even if exhaustion
is not required. Notably, some objections to a BID may not lend
themselves to a courtroom challenge, meaning they may gain
traction only at the public hearing. Testimony that proposed
assessments would be financially onerous to property owners,
for instance, might persuade an agency to reject or revise a BID
33
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
proposal even if these same arguments would not provide a
viable basis for attacking the BID as unlawful.
Next, respondents and their supporting amici curiae
assert that an issue exhaustion requirement must apply here
because that is the only way to adhere to the rule that judicial
review is generally limited to the administrative record in
mandate proceedings brought to challenge a quasi-legislative
action by an agency. (Western States Petroleum Assn. v.
Superior Court (1995) 9 Cal.4th 559, 573 (Western States); Ford
Dealers Assn. v. Department of Motor Vehicles (1982) 32 Cal.3d
347, 365, fn. 11.) If parties could sue upon unexhausted
objections to an assessment, the argument goes, they would
have to rely on facts outside the record to develop their claims,
and the agency named as a respondent would have to do likewise
to rebut these contentions.
We do not find this argument persuasive. There may be
additional grounds upon which to critique respondents’
assertion (see Malott v. Summerland Sanitary Dist. (2020)
55 Cal.App.5th 1102, 1110–1111 [allowing the plaintiff in an
administrative mandamus challenge to an assessment under
Proposition 218 to submit evidence not previously presented to
the responsible agency]), but it suffices here to observe, first,
that there is no necessary congruence between issue exhaustion
and a rule limiting judicial review to evidence in the
administrative record. In Knox, supra, 4 Cal.4th at pages 147–
148, for example, we entertained arguments that were not
known to have been presented to the respondent government
entity, but in doing so, we considered only evidence found in the
administrative record, as well as judicially noticeable facts.
What is more, Western States, supra, 9 Cal.4th 559 addressed
challenges to agency action as either unsupported by
34
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
substantial evidence in the record, an abuse of discretion, or
arbitrary and capricious; we concluded that to allow extra-
record evidence in support of such claims would be contrary to
the deference associated with these standards of review. (Id., at
pp. 573, 574, 576.) Under Proposition 218, in contrast, as we
have already emphasized in this opinion the agency must
“demonstrate that the property or properties in question receive
a special benefit over and above the benefits conferred on the
public at large and that the amount of any contested assessment
is proportional to, and no greater than, the benefits conferred on
the property or properties in question” (art. XIII D, § 4, subd.
(f)), and courts are to exercise their independent judgment in
determining whether this demonstration has been made
(Silicon Valley Taxpayers’ Assn., supra, 44 Cal.4th at p. 450).
The interest in extending due deference to agency
determinations that informed the analysis in Western States
does not carry the same weight with regard to these kinds of
claims under the proposition.
Respondents and amici curiae also rely upon cases in
which the seizure of an opportunity to raise objections at a
public hearing was regarded as necessary to preserve an issue
for judicial review. Those cases are distinguishable, however,
with only three meriting significant discussion. In Wallich’s
Ranch Co. v. Kern County Citrus Pest Control Dist. (2001)
87 Cal.App.4th 878 (Wallich’s Ranch), the Court of Appeal
construed the Citrus Pest District Control Law (Food & Agr.
Code, § 8401 et seq.; hereinafter referred to as the Pest Control
Law), relevant provisions of which (1) allow for the presentation
of protests against a pest district’s annual budget “or any item
in it” at the hearing of the district’s board of directors at which
the budget is presented for consideration and approval (id.,
35
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
§ 8564), and (2) specify that “[a]t the time set for hearing
protests [regarding the budget], the board shall proceed to hear
and pass upon all protests so made and its decision on the
protests shall be final and conclusive” (id., § 8565). Addressing
a grower’s challenge to assessments imposed over a three-year
span, which contributed to the district’s budget over this period,
the court in Wallich’s Ranch determined that these objections
should have been presented at the appropriate budget hearings,
and the grower’s failure to so object barred it from later
challenging the assessments in court. (Wallich’s Ranch, at
pp. 884–885.)
The analysis in Wallich’s Ranch, supra, 87 Cal.App.4th
878 relied upon the reasoning in People ex rel. Lockyer v. Sun
Pacific Farming Co. (2000) 77 Cal.App.4th 619, 641–642 (Sun
Pacific), in which the Court of Appeal upheld a trial court’s
refusal to allow the defendant in a nuisance proceeding to
introduce evidence regarding the efficacy of a Pest Control Law
abatement program because the defendant had not previously
challenged the program at the appropriate annual budget
hearings. Sun Pacific found the exhaustion rule applicable
“[g]iven the public health and safety issues inherent in the Pest
Control Law, in addition to the policy of resolving disputes
expeditiously.” (Id., at p. 641.) This view was echoed by the
Wallich’s Ranch court (Wallich’s Ranch, at p. 884), which also
observed that raising appropriate objections to an assessment
at the designated budget hearing gives a district “an opportunity
to address the perceived problems and formulate a resolution”
(id., at p. 885).
In Plantier, supra, 7 Cal.5th 372, we found it unnecessary
to decide whether Wallich’s Ranch was correctly decided
because we regarded that case as distinguishable on several
36
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
grounds. (Plantier, at p. 389 & fn. 12.) The same is true here.
As we explained in Plantier, 7 Cal.5th at page 389, the statute
addressed in Wallich’s Ranch and Sun Pacific differs from the
statutory and constitutional scheme before us in that the Pest
Control Law directs local boards to “pass upon” objections (Food
& Agr. Code, § 8565), not just “consider” protests (art. XIII D,
§ 4, subd. (e); Gov. Code, § 53753, subd. (d)). Moreover, neither
Sun Pacific nor Wallich’s Ranch considered whether the
exhaustion requirement they read into the Pest Control Law
comported with Proposition 218, or whether the opportunity to
object under the Pest Control Law represented an adequate
remedy under the standard announced in Rosenfield, supra,
65 Cal.2d at page 566. In light of the distinguishing
characteristics of the statutory scheme addressed in Sun Pacific
and Wallich’s Ranch and the limited analysis within those
opinions, we need not determine the correctness of those
decisions in order to conclude that exhaustion through the
presentation of specific objections at the BID hearings was not
required here.
Finally, respondents also claim to find support for their
position in Roth v. City of Los Angeles (1975) 53 Cal.App.3d 679(Roth), but that case is likewise distinguishable. The plaintiffs
in Roth owned certain real property in Los Angeles County. (Id.,
at p. 682.) They were notified by authorities that vegetation on
their property violated the municipal code, and that if they did
not clear the brush themselves, penalties and other
consequences might result. (Ibid.) When the plaintiffs did not
respond, the Los Angeles City Council passed an ordinance
pursuant to Government Code sections 39561 through 39563,
declaring that weeds on specified properties, including the
plaintiffs’, constituted a public nuisance that the city intended
37
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
to abate. (Roth, at p. 682.) Notice of this ordinance and an
opportunity to object at an upcoming city council meeting was
sent to the plaintiffs. (Id., at p. 683.) The plaintiffs did not
attend the designated meeting, at which the city council was
required by statute not only to “hear and consider all objections
to the proposed removal” (Gov. Code, § 39568) but also to “[b]y
motion or resolution at the conclusion of the hearing . . . allow
or overrule any objections” (Gov. Code, § 39569) before
proceeding further. (Roth, at p. 683.) At the conclusion of this
hearing, the city council adopted another ordinance that ordered
the abatement of the nuisance on the plaintiffs’ property. (Ibid.)
After being assessed for the costs of the abatement, the plaintiffs
brought suit, alleging that the statutory procedure violated due
process. (Ibid.)
The Court of Appeal in Roth, supra, 53 Cal.App.3d 679determined that the plaintiffs’ “failure to exhaust their
administrative remedy through the city council hearing [was]
fatal to their attack on the abatement procedure.” (Id., at
p. 692.) Here again, we need not decide whether this conclusion
was correctly drawn, because aspects of the Roth case function
to distinguish it from the situation here. In particular, the
circumstances in Roth provided additional assurances that any
objections to specific nuisance determinations would be
evaluated and addressed by council members at the designated
meeting. This meeting was squarely attuned to and designed to
address these individualized objections, rather than being
concerned with a more fundamental policy decision.
Furthermore, similar to the Pest Control Law’s specification
that local boards are to “pass upon” protests (Food & Agr. Code,
§ 8565), the instruction within the statutory scheme involved in
Roth that lawmakers were to “allow or overrule any objections”
38
HILL RHF HOUSING PARTNERS, L.P. v. CITY OF LOS ANGELES
Opinion of the Court by Cantil-Sakauye, C. J.
(Gov. Code, § 39569) before ordering a nuisance abated
encouraged the resolution of disputes through the hearing
procedures and the development of an administrative record to
a greater degree than can be said of the process involved here,
which does not provide comparable direction to agencies.
III. DISPOSITION
Petitioners did not have to articulate their objections to
the BID assessment schemes at the public hearings before the
City Council to subsequently present their arguments in these
proceedings. We reverse the judgment below and remand for
further proceedings consistent with our decision.
CANTIL-SAKAUYE, C. J.
We Concur:
CORRIGAN, J.
LIU, J.
KRUGER, J.
GROBAN, J.
JENKINS, J.
HALLER, J.*
__________________________
* Associate Justice of the Court of Appeal, Fourth Appellate
District, Division One, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.
39
See next page for addresses and telephone numbers for counsel who
argued in Supreme Court.
Name of Opinion Hill RHF Housing Partners, L.P. v. City of Los
Angeles
__________________________________________________________
Procedural Posture (see XX below)
Original Appeal
Original Proceeding
Review Granted (published) XX 51 Cal.App.5th 621Review Granted (unpublished)
Rehearing Granted
__________________________________________________________
Opinion No. S263734
Date Filed: December 20, 2021
__________________________________________________________
Court: Superior
County: Los Angeles
Judge: Mitchell L. Beckloff
__________________________________________________________
Counsel:
Reuben Raucher & Blum, Timothy D. Reuben, Stephen L. Raucher and
Michael T. Gluk for Plaintiffs and Appellants.
Eric J. Benink and Vincent D. Slavens for Benink & Slavens, LLP, as
Amicus Curiae on behalf of Plaintiffs and Appellants.
Jonathan M. Coupal, Timothy A. Bittle and Laura E. Dougherty for
Howard Jarvis Taxpayers Association as Amicus Curiae on behalf of
Plaintiffs and Appellants.
Michael N. Feuer, City Attorney, Beverly A. Cook, Assistant City
Attorney, and Daniel M. Whitley, Deputy City Attorney, for Defendant
and Respondent City of Los Angeles.
Colantuono, Highsmith & Whatley, Michael G. Colantuono, Holly O.
Whatley and Pamela K. Graham for Defendants and Respondents
Downtown Center Business Improvement District Management
Corporation and San Pedro Property Owners Alliance.
Burke, Williams & Sorensen, Kevin D. Siegel and Tamar M. Burke for
League of California Cities, Association of California Water Agencies,
California State Association of Counties and California Special
Districts Association as Amici Curiae on behalf of Defendants and
Respondents.
Counsel who argued in Supreme Court (not intended for
publication with opinion):
Stephen L. Raucher
Reuben Raucher & Blum
12400 Wilshire Boulevard, Suite 800
Los Angeles, CA 90025
(310) 777-1990
Holly O. Whatley
Colantuono, Highsmith & Whatley
790 E. Colorado Boulevard, Suite 850
Pasadena, CA 91101
(213) 542-5704