Opinion
The Hollywood Entertainment District II Business Improvement District (BID II) is a special assessment district in the City of Los Angeles (City). The Hollywood Entertainment District Property Owners Association (the POA), a 26 United States Code section 501(c)(6) nonprofit corporation, administers the funds City raises through assessments on businesses within BID IPs boundaries. 1 The money is used to contract for such things, as security patrols, maintenance, street and alley cleaning, and a newsletter.
Aaron Epstein (plaintiff), who owns property zoned for business purposes within BID II, sued defendants to establish that the POA was required to comply with the Ralph M. Brown Act (the Brown Act or the Act) (Gov. Code, § 54950 et seq.) 2 by holding noticed, open meetings and posting its agenda in advance. His motion for a prehminary injunction was denied after the superior court concluded that the Brown Act did not apply because (1) the POA had not been created by City, and (2) the POA had preexisted the creation of BID II by at least two years.
Plaintiff filed timely notice of appeal. We reverse. The facts of this case come within the parameters of our holding in
International Longshoremen’s & Warehousemen’s Union
v.
Los Angeles Export Terminal, Inc.
(1999)
The Property and Business Improvement District Law of 1994 (Sts. & Hy. Code, § 36600 et seq.) authorizes cities to establish property and business improvement districts (BID’s) in order to levy assessments on real property for certain purposes. Those purposes include acquiring, constructing, installing, or maintaining improvements (Sts. & Hy. Code, § 36606), which include such things as parks, street changes, ramps, sidewalks and pedestrian malls. (Sts. & Hy. Code, § 36610, subds. (f), (i), & (k).) A prerequisite to the creation of such a BID is a petition filed by property owners who will pay more than 50 percent of the total amount of assessments to be levied. (Sts. & Hy. Code, § 36621, subd. (a).)
On September 3, 1996, City adopted ordinance No. 171273 (the first Ordinance) to create the Hollywood Entertainment District Business Improvement District (BID I). The first Ordinance incorporated by reference a “Management District Plan,” which contained information required by Streets and Highways Code section 36622. 4 The Management District Plan included a “Proposed Annual Program,” which included security, maintenance, marketing, streetscape and administration components. It also included a section on “Governance,” which provided, in relevant part, “The Property and Business Improvement District programs will be governed by a non-profit association. Following is a partial summary of the management and operation of the proposed association.” (Italics added.) The section on Governance made it clear that the nonprofit association, which would govern BID I, was not yet in existence. 5
Articles of incorporation of the POA, the nonprofit association that did take over governance of BID I, were filed with the California Secretary of State on September 25, 1996. These articles of incorporation were dated September 5, 1996. The POA was a nonprofit mutual benefit corporation, whose specific and primary purpose was “to develop and restore the public areas of the historic core of Hollywood, California, in order to make it a more attractive and popular destination for tourists, shoppers, businesspeople and persons interested in culture and the arts.”
The Management District Plan for BID II also included a “Program and Budget,” which included security, maintenance, marketing and promotion, and administration components. It also included a section on “Governance,” which provided, in relevant part, “The Property and Business Improvement District programs will be governed by the Hollywood Entertainment District Property Owners Association, a 501(c)(6) non-profit corporation which was formed in 1996 to govern Phase I. Following is a summary of the management and operation of the Association as it relates to Phase II.” (Italics added.) In addition, unlike the Management District Plan for BID I, the Management District Plan for BID II included the “Amended and Restated Bylaws” of the POA—which were quite detailed. And, although the POA was to manage and operate the BID, City, by law, retained the power to “modify the improvements and activities to be funded with the revenue derived from the levy of the assessments by adopting a resolution determining to make the modifications after holding a public hearing on the proposed modifications.” (Sts. & Hy. Code, § 36642.)
The POA’s monthly meetings were not open to the public, much to the distress of plaintiff, who owns property subject to assessment in favor of BID II. Furthermore, according to plaintiff, the POA’s bylaws allow it to do other things that would be prohibited by the Brown Act if it were applicable to the POA. For example, the bylaws allow meetings to take place anywhere, not solely within the POA’s jurisdiction, and to take place without posting notice 72 hours in advance.
Accordingly, on March 18, 1999, plaintiff filed a complaint for declaratory and injunctive relief against defendants, seeking, among other things, a declaration that the Brown Act does apply to the POA and that, in fact, the POA’s meetings are required to be open and noticed as required by the
Contentions on Appeal
Plaintiff contends that the trial court erred by concluding that the POA was not a legislative body under the Brown Act. He further contends that because the POA is a legislative body within the meaning of the Act, and can only exercise the powers that City could delegate to it, it cannot enter into contracts without complying with the city charter’s requirement of competitive bidding. Finally, he contends the trial court erred by denying him injunctive relief against the POA. Defendants dispute these contentions.
Discussion
1. Public Policy Favors Conducting the Public’s Business in Open Meetings
It is clearly the public policy of this state that the proceedings of public agencies, and the conduct of the public’s business, shall take place at open meetings, and that the deliberative process by which decisions related to the public’s business are made shall be conducted in full view of the public. This policy is expressed in (1) the Bagley-Keene Open Meeting Act (§ 11120 et seq.), which applies to certain enumerated “state bodies” (§§ 11121, 11121.2), (2) the Grunsky-Burton Open Meeting Act (§§ 9027-9032), which applies to state agencies provided for in article IV of the California Constitution, and (3) the Brown Act (§ 54950 et seq.), which applies to districts or other local agencies, including cities. Under these various laws related to open meetings, a wide variety of even the most arcane entities must give notice of their meetings, and make such meetings open to the public. 6
The Brown Act, the open meeting law applicable here, is intended to ensure the public’s right to attend the meetings of public agencies.
(Freedom Newspapers, Inc. v. Orange County Employees Retirement System
(1993)
The Brown Act specifically dictates that “[a]ll 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 in this chapter.” (§ 54953, subd. (a), italics added.) The term “legislative body” has numerous definitions, grouped together in section 54952. The definition that arguably may apply to the POA is found in subdivision (c)(1)(A) of section 54952. This portion of the Brown Act states, in relevant part: “As used in this chapter, ‘legislative body’ means: [f] . . . [H] (c)(1) A board, commission, committee, or other multimember body that governs a private corporation or entity that. . . : [U] (A) Is
created
by the elected legislative body in order to exercise authority that may lawfully be delegated by the elected governing body to a private corporation or entity.” (§ 54952, subd. (c)(1)(A), italics added.) Thus, the question before us here, as a matter of law, is whether the POA’s board of
In answering this question, we are mindful, as we noted in
International Longshoremen’s,
that the Brown Act is a remedial statute that must be construed liberally so as to accomplish its purpose.
(International Longshoremen’s, supra,
3. The POA’s Board of Directors Is a Legislative Body Within the Meaning of the Brown Act
a. City Can Be Said to Have “Created” the POA Within the Meaning of the Brown Act
Here, just as in International Longshoremen’s, the pivotal issue is whether City, an elected legislative body, “created” the POA in order to exercise authority that City could lawfully delegate. Therefore, we discuss in some detail the facts of International Longshoreman’s.
In the International Longshoremen’s case, the Los Angeles Export Terminal, Inc. (LAXT) was a private, for-profit corporation organized to design, construct and operate a facility for the export of coal. The facility would be on land leased from the harbor department of City, and the harbor department was to be a 15 percent shareholder in LAXT. The shareholders’ agreement by which LAXT was set up gave the harbor department the right to appoint three of LAXT’s 19 board members, plus veto power, over the coal facility project. The lease of the harbor department’s land was also something that had to be, and was, approved by the city council.
Thereafter, LAXT’s board of directors authorized LAXT to enter into a terminal operating agreement with Pacific Carbon Services Corporation (PCS). This decision was made at a meeting that did not comply with the requirements of the Brown Act. The International Longshoremen’s and Warehousemen’s Union (ILWU) sued to nullify the agreement with PCS, and for an injunction, contending that LAXT was required to comply with the Brown Act.
The trial court agreed with the union, nullified the PCS agreement, and enjoined LAXT from making decisions without complying with the Brown
We disagreed. Although section 54952, subdivision (c)(1)(A), did not, and does not, define what is meant by the term “created by,” we relied on the ordinary definition of “to create,” which is “ ‘to bring into existence.’ ”
(International Longshoremen’s, supra,
Here, as discussed in more detail below, we conclude that City was “involved in bringing into existence” the POA to exercise delegated governmental authority, that City also retained the authority to overturn the POA’s actions, and that it could have removed, and can still remove, the POA as the entity managing the BID.
1. City “Was Involved in Bringing the POA into Existence” to Exercise Some Governmental Authority over BID I, and BID II Was Just an Extension of BID I
In the case here, the issue is whether the POA is a private corporation or entity that was created by City, the elected legislative body, to exercise some authority that City could lawfully delegate to a private corporation or entity. We conclude that here, just as in International Longshoremen’s, the private entity, the POA, was “created” by City to exercise governmental authority over BID I, authority that City otherwise could exercise.
' The POA was, in fact, “created” by City, because City “played a role in bringing” the POA “into existence.”
(International Longshoremen’s, supra,
Defendants, however, would prefer that we ignore the POA’s history vis-a-vis BID I, and concentrate instead on the POA’s relationship to BID II. This is because the POA’s existence preceded the creation of BID II. Defendants would have us look at the POA as simply a “preexisting corporation” that just “happened” to be available to administer the funds for BID II, apparently in reliance on footnote 5 of
International Longshoremen’s.
In that footnote, we opined that if LAXT, the private corporation in question there, had been a “preexisting” entity “which simply entered into a contractual arrangement” to exercise authority that the government entity could have exercised, then the private entity “would not have been a creation of the City Council” and the private entity’s board of directors would not be subject to the Brown Act.
(International Longshoremen’s, supra,
There is no reason to ignore the history behind the POA, and, in fact, because the issue is the “creation” of the entity whose governing board now wields governmental authority, we
must
look at the circumstances surrounding the POA’s birth. The record shows that the POA was formed and structured for the sole purpose of taking over City’s administrative functions as to BID I. Therefore, under the Brown Act, as interpreted by us in
International Longshoremen’s, supra,
Thereafter, the boundaries of BID I were extended, the new BID was called BID II, and the POA simply continued to administer the assessments collected from property owners in the enlarged district. Obviously, the fact that the POA was already in existence and ready to take over City’s legislative functions vis-á-vis BID II cannot change the result we would have reached if this case had been presented after BID I was created and before BID II had come into existence. And the connection between BID I and BID II rationally cannot be ignored in any determination of when and
Under these circumstances, we would improperly elevate form over substance if we were to treat the POA as a “pre-existing” private entity with which City just “happened” to decide to do business when it turned governance of BID II over to the POA. To turn a blind eye to such a subterfuge would allow City (and, potentially, other elected legislative bodies in the future) to circumvent the requirements of the Brown Act, a statutory scheme designed to protect the public’s interest in open government. This we will not do.
(Plumbing, etc., Employers Council v. Quillin
(1976)
In order to avoid the conclusion that the Brown Act applies, defendants characterize our treatment of the POA as a legislative body within the meaning of the Brown Act as being “contrary to the evidence produced in the trial court and unfair to the businessmen trying to improve their local community.” They contend that there is no evidence that City ever “handled” the administrative functions of any BID, and that, to the contrary, the BID’S and the POA were structured by the local property owners themselves from the outset to be administered by a nonprofit organization formed by the owners themselves.
This contention, however, misses the point. The fact that local property owners who wanted City to create a BID were involved in the structuring of
2. City Retained the Authority to Overturn the POA’s Actions
Furthermore, just as in
International Longshoremen’s, supra, 69
Cal.App.4th at page 296, City, the elected legislative body with ultimate accountability to the voters, retained plenary decisionmaking authority over the BID’s activities. (Sts. & Hy. Code, § 36642.) Street and Highways Code section 36642 provides, in relevant part, that a city council “may modify the improvements and activities to be funded with the revenue derived from the levy of the assessments by adopting a resolution determining to make the modifications after holding a public hearing on the proposed modifications.” This retention of power over the POA is not only provided for by section 36642, but it is required by well-established law, which provides that a public body may only delegate the performance of its administrative functions to a private entity if it retains ultimate control over administration so that it may safeguard the public interest.
(International Longshoremen’s, supra, 69
Cal.App.4th at pp. 297-298 and cases cited there.) And a nonprofit corporation to which such administrative functions are delegated
must comply with the same laws and regulations as the public entity that is delegating its authority. (International Longshoremen’s, supra, 69
Cal.App.4th at p. 300;
b. There Is No Legal Reason to Exempt the POA from the Operation of the Brown Act
1. The “Unfairness” and “Interference with Business” Argument
As noted above, City and the BID contend that our decision that the POA must comply with the same laws as would City, for example, the Brown Act,
Given these differences, defendants’ pleas that the result we reach here is somehow “unfair” to businesspeople are simply not persuasive. When an individual business owner’s money can be taken without his or her individual consent, when it can be taken through use of the government’s power to tax and assess, and when it can be used to benefit others’ property through the provision of services (whether or not such services include such traditional municipal services as street and sidewalk improvements), it is clearly not “unfair” for such individual business owners to expect to have an opportunity to participate in the decisionmaking process by which one benefit or another is actually conferred. Nor is it unfair for us, given the language of the Brown Act and the rules of interpretation related to it, to validate that expectation.
2. The “Supplemental Services” Argument
Defendants also point to the “supplemental” nature of the services provided by this BID, as though this somehow obviates any need to comply with the Brown Act. Such an argument makes no sense. First, what is “supplemental” can become quite subjective. There is nothing to stop a city from proclaiming that
any
traditional municipal services, other than the most critical things such as fire and police protection, are “supplemental.” Thus, street sweeping, the trimming of street trees, and even the purchase of new library books could be characterized as “supplemental” services. Shall we
Second, focussing on the “supplemental” nature of the services is backwards—it is not the kinds of services, so much as the nature of the source of funding to be used for them, which is relevant to the issue on appeal. Are traditional legislative bodies exempt from the Brown Act merely because they act to disperse “bonus” federal funding for special, supplemental programs and services? If a private benefactor donates $10 million to a city to spend on “supplemental” services and programs, may the city council meet informally and secretly to decide upon the proper allocation of such funds? The obvious answer to both these questions is “No.” This is so because the funds involved constitute public money. The funds do not belong to the individual council members, they belong to the public, and the public has a right to participate in any decisions about how public funds should be expended. Very simply, the Brown Act contains no exemptions for decisions about expenditures of public funds for “supplemental services.”
3. The “Advisory Committee” Argument
Defendants also argue that the existence of “advisory committees” somehow obviates the need for application of the Brown Act’s rules to actions taken by the POA vis-a-vis the BID. Just as there is no exemption in the Brown Act for actions on “supplemental services” taken by statutorily-defined legislative bodies, so, too, there is no exemption for actions taken by bodies such as the POA which were “previewed” by an advisory committee.
True, Streets and Highways Code section 36631, subdivision (b) provides that advisory committees “shall” comply with the Brown Act. But, contrary to the arguments of the BID and the POA, that section does not also specify that any other entities involved in a BID are exempt from the Brown Act. When section 36631 is read in context with the Property and Business Improvement District Law of 1994 as a whole, it is apparent that the Legislature assumed the advisory committee would be making reports and recommendations about the BID to a city council (Sts. & Hy. Code, §§ 36631, subd. (a), 36633, 36640), which itself would then be taking legislative action to carry out the assessments, levies, boundary changes and improvements and activities to be funded. (See, e.g., Sts. & Hy. Code, §§ 36632, 36634, 36635, 36641, 36642, 36651.)
4. The “We Said We Didn’t ‘Create’ the POA, So You Can’t Decide We Did” Argument
Defendants urge that because City itself concluded that it did not “create” the POA, we are somehow bound by such a conclusion. Defendants characterize this determination as a finding of fact to which we must defer, citing
McCarthy
v.
City of Manhattan Beach
(1953)
Conclusion
The POA’s status as an entity originally “created” to take over City’s legislative functions was not somehow negated, annulled, or dissipated simply because its role subsequently was expanded by the geographic expansion of the area over which it exercised such functions. Nor do any of the reasons advanced by defendants justify exempting the POA from the same application of the Brown Act as would apply to City’s legislative body. We therefore conclude that the POA is a legislative body within the meaning of the Brown Act, that its actions must be taken in compliance with that Act, and that the trial erred by denying plaintiff’s motion for a preliminary injunction.
Disposition
The order denying plaintiff’s request for a preliminary injunction is reversed and remanded. The trial court is directed to enter a preliminary injunction in favor of plaintiff in accordance with the views expressed
Klein, P. J., and Aldrich, J., concurred.
Respondents’ petition for review by the Supreme Court was denied June 13, 2001.
Notes
BID II, City and POA may be referred to collectively as defendants in this opinion.
A11 further statutory references will be to the Government Code, except as otherwise noted.
We recite facts taken from the clerk’s transcript.
For example, Streets and Highways Code section 36622 requires a map showing each parcel of property within the district, the proposed district name, the improvements and activities proposed for each year of operation, the proposed amount to be spent to accomplish the activities and improvements each year, and the source of funding.
Streets and Highways Code section 36622 does not require the management district plan to contain information on governance or management. However, a city council may require the management district plan to contain other items not specifically required by the state law. (§ 36622, subd. (Q.)
See, e.g., Business and Professions Code sections 3325 (meetings of the Hearing Aid Dispensers Advisory Commission must be noticed and open), 7315 (meetings of the State Board of Barbering and Cosmetology must be noticed and open); Government Code section 8790.7 (meetings of the California Collider Commission must be noticed and open); Harbors and Navigation Code sections 1153 (meetings of the Board of Pilot Commissioners must be noticed and open), 1202 (meetings for the purpose of investigating pilotage rates shall be noticed and open); Health and Safety Code section 1179.3, subdivision (b) (meetings of the
The Brown Act’s statement of intent provides: “In enacting this chapter, the Legislature finds and declares that the public commissions, boards and councils and the other public agencies in this State exist to aid in the conduct of the people’s business. It is the intent of the law that their actions be taken openly and that their deliberations be conducted openly. HQ The people of this State do not yield their sovereignty to the agencies which serve them. The people, in delegating authority, do not give their public servants the right to decide what is good for the people to know and what is not good for them to know. The people insist on remaining informed so that they may retain control over the instruments they have created.” (§ 54950.)