The Checkered History Of Streets And Highways Code §36612 — How The California Court Of Appeals Made BIDs Cry By Holding That They Were Subject To The Brown Act And The Public Records Act — And How Bad BIDmother Jackie Goldberg Soothed Their Hurt Feelings By Passing A Law Stating That They Weren’t Public Officials — Is It Constitutional? — It Hasn’t Been Adjudicated So Who Knows?!

The only reason that this blog even exists is that business improvement districts in California are subject to the California Public Records Act. And the first part of the story of how this came to be is fairly well known. In 1998 Hollywood property owner Aaron Epstein wanted to attend meetings of the Hollywood Property Owners’ Alliance1 and Kerry Morrison, who then as now would willingly brook no interference in her proprietary demesne, told him to go pound sand.

Instead of slapping the silica, though, Epstein filed suit against the BID, and the process culminated in the lovely holding, in Epstein v. Hollywood Entertainment District BID, that BIDs2 were subject to the Brown Act and the CPRA. This ushered anti-BID activists into a paradise from which we are unlikely to be expelled. Kerry Morrison didn’t take this outcome with any grace whatsoever and has been pissing and moaning about it from the outset all the way to the present day.

But that opinion isn’t the only authority that subjects BIDs to transparency laws. There is also the famous §36612 of the PBID Law of 1994, which states in no uncertain terms that BIDs are subject to both the Brown Act and the CPRA.3 It also states explicitly (and ominously) that BID board members and staff are not public officials. Obviously this section was added by the legislature after the Epstein ruling, but I never took the time to investigate the history.

Until now, that is. And what an obvious-after-the-fact surprise it was to find that the bill that added that section was written by none other than Jackie Goldberg, who as CD13 Councilmember during the formation of the Hollywood Entertainment District BID was known to have a great deal of blood on her hands already.4 But by March 2001, when Epstein was finally decided, Goldberg was in the Assembly, so naturally it was to her that the BIDdies, emotionally traumatized by the court’s decision,5 went running for comfort.

And in response to their pleas Goldberg introduced AB 1021 (2001) to coat the bitter pill of Epstein with some soothing syrup and to codify these changes in §36612 of the PBID law even while acknowledging that the legislature wasn’t going to be able to change the court’s holding 6 And I recently obtained a copy of the bill analysis prepared at the time for the Assembly’s Committee on Local Government to help them understand what they were voting for.7 Therein are laid out not only the provisions of the new law, but the complaints of the BIDdies, so the connection is perfectly clear.

The main concessions to the BIDdie agenda found in the code section are the explicit statement that BIDs are private corporations and that neither BID boards nor staff can be considered public officials for any reason. This last bit is tied in to the BIDs’ fear that board members might be subject to California’s political reform act and to Government Code §1090 and therefore to various ethics restrictions and financial disclosure requirements, although it’s not really clear to me that the language has that effect. I’m no kind of expert, though.

Another sop to the BIDdies provided here by Goldberg was the authorization of 10 year renewals. Previously BIDs could only renew for up to five years. In any case, turn the page for more detail, more non-expert discussion and, as always, a transcription of the document.

The most interesting parts of this analysis are found in the analyst’s comments. And among these, comment 7 is the most interesting of all. We’ll take it in increments, with commentary following each excerpt.

Meetings and discussions between the sponsor, plaintiff, BIDs. other opponents, and legislative staff were held to find common ground.

On the one hand I guess it’s good that legislators listen to all sides before making decisions, but on the other hand I guess I’d also like them to consider the interests of the people of California. In matters like this one there are implicated interests beyond the particularized time-bound interests of the parties to the suit.

The sponsor’s main argument was that subjection to the red tape that results from being considered a public entity would delay actions on activities.

This argument is so upsetting and yet so commonly used by BIDdies. They actually think it’s reasonable to claim that they will be too bogged down by the requirements of laws if they’re forced to follow them. Who thinks this is reasonable? “Yes, officer, I know murder is against the law but if I had to comply I would be too bogged down to continue to do good deeds.”

BIDs just won’t admit, or maybe actually don’t understand, that they’re required to comply with all these laws purely because the coercive power of the state is used to collect assessments involuntarily. If they would just forgo the coercion they wouldn’t be subject to any of these laws. It’s their voluntary choice to subject themselves to transparency laws, and they make it so they can take money from property owners by force of law.

Therefore why should anyone care if they’re unhappy about fulfilling the requirements that go along with that benefit? And yet the legislature seems to take the argument seriously, as does the Los Angeles City Council. Which I guess is not surprising given the cosmic levels of influence and campaign contributions to be found amongst the BIDdies.

Additionally, persons working for the BID were not willing to disclose financial information for what they considered to be volunteer work and would result in their resignations.

You know, fuck them. Let them resign. As I said, no one is making a BID be a BID. They could just as well be a damn chamber of commerce, forgo coercive collection of assessment, and just rely on voluntary dues. Then they wouldn’t be subject to any kind of disclosure beyond what’s required of any 501(c)(6) corporation, which is very, very, very little indeed.

This argument is akin to the commonly heard argument made by police officers to the effect that if they’re required to operate constitutionally they’ll quit and society won’t be able to find people willing to do the job. Maybe it’s true that society won’t be able to find people like the ones we’ve found to do the job now, but, you know, maybe we’re sick of being policed by those people, maybe we’re sick not only of the way they do the job but even the job they’re doing.

Maybe we want different people who can do a different job. And it’s the same with BIDdies. If they can’t follow the damn laws we can find other people who will. And if no one wants to do the job in accordance with the law, maybe the job is not worth doing. It’s possible we’ll find out, both with BIDdies and with cops.

Oh, and that bit about the board members not being willing to disclose financial information? That has to do with a statement in the new section of the law that says that BID board members are not “public officials.” What’s at stake here are the applicability of various state laws governing the conduct of public officials. Just for instance there’s Government Code §1090, which states that:

Members of the Legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members.

It’s the inclusion of “district” there that was worrying the BIDdies. Section 1090 defines “district” like this:

As used in this article, “district” means any agency of the state formed pursuant to general law or special act, for the local performance of governmental or proprietary functions within limited boundaries.

It sure does sound like BIDs are districts, no? Another question is whether BID board members are subject to the various provisions of the Political Reform Act, which applies to public officials. This is the law which requires certain public officers to disclose information about their finances. Note that for many officials the determination of whether or not they have to disclose is done locally.

The details are too complex to get into here,8 but it’s absolutely true that the language of §36612 does not in fact relieve BID board members of the duty to disclose. If it does anything it makes it so that disclosure isn’t mandatory. But there are cities in California which do require their BID board members and staff to file financial disclosures, for instance the City of Fortuna.

Take a look at their conflict of interest code, which explicitly requires both board members and their BID’s executive director to file form 700s, so it must not be prohibited. Furthermore, the Fair Political Practices Commission, which administers the Political Reform Act, issued an opinion in 2005 stating that BIDs were subject to that law. Since §36612 was passed in 2001, the FPPC was clearly taking it into account in its opinion. Thus it’s likely that the language stating that BIDdies aren’t public officials has no force. But as far as I know it hasn’t been tested in court, so it’s not possible to say definitively.

And that, friends, is what I’ve learned about how §36612 came to be added to the PBID law! To close, here is a transcription of the legislative analysis from 2001:


California Bill Analysis, Assembly Committee, 2001-2002 Regular Session, Assembly Bill 1021

May 2.2001
California Assembly
2001-2002 Regular Session

Date of Hearing: May 2. 2001

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Patricia Wiggins, Chair

AB 1021 (Goldberg) – As Amended: May 7. 2001
SUBJECT : Parking and business improvement areas: benefit assessments.

SUMMARY : States that the owners association is a private entity, but subject to the provisions of the Ralph M. Brown Act. Specifically, this bill :

1) Defines a non-profit association (NPA) for purposes of the law’ as an “owners association.”

2) States that an owners association is a private entity, and not to be considered a public entity, nor its members public officials.

3) States that although the owners association is a private entity that it will comply with the provisions under the Ralph M. Brown Act (Brown Act) at all times when matters relating to the business improvement district (BID) are considered.

4) Eliminates the advisory board as a part of the BID.

5) Requires that all delinquent payments for assessments levied shall be charged interest and penalties.

6) Permits the renewal of any district previously established whose term has expired, by following specified procedures, with a term not to exceed 10 years.

EXISTING LAW :

1) States, according to the Property and Business Improvement District Act of 1994, that businesses can form BIDs in order to improve the esthetic value of their surroundings to attract or revitalize business.

2) Defines a “public official” to mean every member, officer, employee or consultant of a state or local government agency.

3) Dcfines a “local government agency” to mean a county, city or district of any kind including school district, or any other local or regional political subdivision, or any department, division, bureau, office, board, commission or other agency of the foregoing.

4) Provides that members of the Legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members.

5) Requires that all meetings of the legislative body of a local agency shall be open and public, and all persons shall be permitted to attend any meeting of the legislative body of a local agency, except as otherwise provided.

FISCAL EFFECT : None

COMMENTS :

I )The Property and Business Improvement District Law permits a city or county upon the request of property owners to establish a BID. BIDs are created because property owners in a specified area determine that their properties will benefit by revitalizing buildings, promoting public events, hiring police protection, and cleaning streets – to list a few of their activities.

2) The formation of a BID is initiated with a written petition signed by property owners and submitted to the city council. Along with the petition, the property owners must outline the boundaries of the district, a description of the activities and improvements, and the amount of the assessment. An advisory board is then established to make recommendations to the city council on expenditure of revenues from the assessment. If all goes well, the city council consents to the creation of the proposed BID by resolution and w ithin 90 days a hearing is held.

3) A BID consists of three entities: the city council, the advisory board and the NPA. The city council approves the BID. the advisory board provides oversight monitoring by approving budgets and reporting back to the council, and the NPA. is a non-profit entity charged with administrating the day-to-day activities of the BID.

4) Since its inception in 1994. the BID Act has given way to approximately 65 BIDs. Graffiti has been removed, farmers’ markets have appeared and police protection presence has been felt in urhan areas-all activities that encourage patronage to businesses that otherwise would have been less appealing to visit. Although BIDs have been conducting positive changes in their respective districts, a few have been experiencing turmoil within their ranks.

5) A property owner in a BID in Southern California brought forth a lawsuit against the BID to which he belonged. According to the plaintiff, he was not allowed to attend a meeting of his own NPA. The plaintiff believed the NPA to be a public entity, subject to the Brown Act and as such giving him the right to attend the meetings. However, the NPA believed itself to be a private, non-profit body not subject to open meeting laws and denied access to the plaintiff. The BID Act is not clear on this point.

6) ln the first ruling of the lawsuit, the court ruled against the plaintiff stating that the property owners association was not subject to the Brown Act because it was not a creation of the city and that it had pre-existed the BID by two years. However. on appeal, the court reversed the first decision. The appellate court stated that because the city played a role in bringing the NPA into existence that it was a public entity.

7) Meetings and discussions between the sponsor, plaintiff, BIDs. other opponents, and legislative staff were held to find common ground. The sponsor’s main argument was that subjection to the red tape that results from being considered a public entity would delay actions on activities. Additionally, persons working for the BID were not willing to disclose financial information for what they considered to be volunteer work and would result in their resignations. On the other hand, the plaintiff and fellow opponents of the bill wanted the NPAs to be deemed public entities so that they would be subject to open meeting laws in order that they would have access to the NPA board activities. In the end. a compromise that was struck did not appease either side completely. However, this bill satisfies the NPAs’ need to be considered private entities and the opposition is content because the NPAs are subject to the open meetings laws under the Brown Act — such is a compromise.

8) This bill also repeals the section that provides for an advisory board. According to both parties involved with the bill, the advisory board did not serve its purpose as the oversight mechanism that is was created to be. Although, subject to the Brown Act. the board seldom met. did not submit their annual reports to city council and often consisted of the same members of the NPA. This bill eliminates the advisory board and substitutes the owners associations.

9) PROPOSED AMENDMENT: The Committee may wish to consider amending the bill to subject the “owners associations”, in addition to the Ralph M. Brown, to the Public Records Act.

REGISTERED SUPPORT / OPPOSITION:

Support

CA Business Improvement District Coalition (SPONSOR)

California Newspaper Publishers Association CNPA Services. Inc.

Opposition

Howard Jarvis Taxpayers Association

Analysis Prepared by : Frances Chacon / L. GOV. / (916) 319-3958

CA B An.. A.B 1021 Assem.. 5/02/2001


Image of Jackie Goldberg is ©2019 MichaelKohlhaas.Org and here’s its origin story!

  1. Or whatever it was called at the time.
  2. Technically their property owners’ associations.
  3. Actually the property owners’ associations are, as I said. This is a technicality that’s important sometimes but not right at this point.
  4. You can read an interesting selection of records having to do with this fascinating, horrifying era in the history of Hollywood here on Archive.Org.
  5. Back when she was still speaking to me, Kerry Morrison told me that the justices on the Court of Appeals “just didn’t get what we were about.” It seems more likely to me that the justices got perfectly well what they were about while Kerry Morrison’s blinkered Amour-propre won’t let her admit, not even to herself, what she and her BID buddies are about. But that’s a story for another post entirely.
  6. When the bill was passed the new section was numbered §36614.5, but this was later changed to &#36612. I don’t think there’s any benefit in using the old number, though.
  7. As always, there’s a transcription at the end of this post.
  8. I mean too complex to get into in this post given how long it already is. I certainly don’t mean too complex for you, dear reader! By the way, this is going to be the topic of one or more posts in the future, but not the near future. That is to say how the Political Reform Act apportions some control over its enforcement to local agencies, how that works in Los Angeles in general, and how it applies to BIDs in particular. I really believe that it’s possible, even if it’s not going to be easy, to get BIDs required to file financial disclosures. This is an extremely long term project right now if only because I have so much else to do. If it seems interesting and/or important to you, though, please get in touch with me at mike@michaelkohlhaas.org and maybe we can collaborate.
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