DOWNTOWN LOS ANGELES - A group of property owners fighting a" target="_blank">proposed five-year renewal and expansion of the Arts District Business Improvement District has secured a temporary restraining order blocking the city from considering a vote on the plan. The vote was slated to take place July 26.

Los Angeles Superior Court Judge Ann I. Jones issued the order on July 22, four days before the City Council had been scheduled to consider the BID plan. Jones ordered the city to appear in court on Aug. 10 to show why the BID vote should proceed.

The move comes after the homeowners associations for the Biscuit Company and Toy Factory lofts, along with the owner of the Seventh Place-based furniture company Modernica, filed a legal challenge to the plan last week. The suit alleges that the BID violated state laws in preparing its plan for city certification and district-wide vote.

The Arts District BID is due to expire in December, but the organization is seeking a five-year renewal with slightly expanded boundaries. The larger area would encompass the residential buildings for the first time. Modernica is within the original borders.

Current operations for the BID, where the $1.2 million annual budget covers street cleaning, security and other services to the community, will continue as normal, said Estela Lopez, executive director of the Central City East Association, which manages the Arts District BID.

"BID operations are not affected and our services continue uninterrupted," Lopez said in an emailed statement. She declined to comment further on the situation because of the litigation.

The suit claims that, in order to qualify the plan for a vote, the BID relied on "rubber-stamped" support from public property owners in the area who do not benefit from the BID services. In particular, it questions property owned by the Metropolitan Transportation Authority.

For a BID to be established or renewed, property owners representing a majority of the land must vote in favor of the self-assessments. In May, the Arts District BID secured signatures accounting for 50.66% of the land in the area. According to the lawsuit, 17.5% of it is government owned.

To Yuval Bar-Zemer, whose firm Linear City developed the Biscuit Co. and Toy Factory lofts, that split means the BID is supported by private property owners who control only about 33% of the land.

According to the suit, Metro, whose various sites in the district account for 8% of the 50.66% of property owner support in the BID's May petition, did not actually authorize its support of the plan. The legal challenge maintains that the BID's petition was signed by Velma Marshall, the agency's deputy director for real estate, rather than Metro's board of directors. Marshall is also a BID board member. It is not clear whether she was authorized to sign the petition on behalf of the agency.

Deputy City Attorney Christy Numano-Hirua, who is handling the case for the city and is still investigating claims in the lawsuit, said it is unclear whether public agencies must act through their legislative bodies to formally support the formation of a special assessment district.

"That's the million dollar question," she said. "That's what we're researching."

Metro's board of directors voted in favor of the Arts District BID when it was forming in 2005, and did so based on a staff report and recommendation prepared by Marshall, according to Metro documents. Marshall, through a Metro spokesman, declined to comment because of the ongoing litigation.

Public Private Problem

In May, Lopez told Los Angeles Downtown News that BID staff stopped collecting signatures in support of a renewal once they hit the 50.66% mark.

"We could have collected more petitions to get a higher percentage, but after you reach that point it becomes moot," Lopez said at the time. "It's a matter of resources."

The BID's proposed new map, which seeks to add the west side of Mateo Street and additional portions of East Seventh Street, was created by an engineer who verified that the "benefit provided to each parcel equals the assessment amount the parcel pays," Lopez said in a May email.

While public property is not exempt from BID assessments under state law, agencies can oppose assessment districts if their sites do not benefit from the corresponding special services. The city of Los Angeles and the Department of Water and Power also own properties in the district, among them a city truck maintenance facility and a DWP transformer yard. Both entities supported the BID's petition for a new five-year term.

The lawsuit argues that the BID provides no real benefit to the government sites in the area.

"The City has done nothing to evaluate whether the proposed BID provides any special benefits to the taxpayer-owned properties," the suit argues.

Lopez said in her statement this week that CCEA lawyers and the City Attorney are reviewing the complaint, and that she expects the matter to be resolved "in the next two or three weeks."

If the vote proceeds and property owners ultimately approve the BID, condo owners in the Toy Factory and Biscuit Co. buildings would pay approximately $100-$300 per year, depending on the size of their units. According to the lawsuit, Modernica would owe about $11,000 per year.

Contact Ryan Vaillancourt at

page 6, 08/01/2011

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