Crystal Crag Lodge owner Derek Johnson has retained legal counsel to look at and potentially challenge the formation of a proposed Tourism BID (Business Improvement District).
The attorney, Geoffrey Stover, won a case last month in L.A. successfully overturning an Arts District BID.
In Mammoth, the formation of a TBID, spearheaded by Mammoth Lakes Tourism Executive Director John Urdi and promoted by several prominent local business leaders, seeks to raise nearly $5 million annually for the purpose of enhanced marketing.
Local restaurant, retail and lodging businesses have proposed self-assessments to pay for the marketing. Restaurants and retail would pay 1.5% on gross sales, with lodging paying 1%.
Mammoth Mountain would pay 2% on ski and bike lift tickets.
Mammoth’s decision to move forward on the TBID has been influenced by the success of Napa Valley’s TBID. Napa used its TBID to more than quintuple its marketing budget, and Napa’s Clay Gregory told The Sheet this week that “It’s been a tremendous success … and a huge boon to Napa Valley’s economy.”
Napa’s TBID imposes a 2% assessment on approximately 150 lodging properties.
But the questions being asked by Derek Johnson and others are both simple and direct: Is Napa’s success replicable here, and … is Mammoth’s proposed TBID legal?
The case in L.A. involved a BID formed in 2006. It raised $1.3 million annually from area property owners, the bulk of which was spent on street cleaning and safety to make the district more inviting to visitors.
According to a news article by Ryan Vaillancourt which appeared in L.A.’s Downtown News, Judge Robert H. O’Brien had no issue with money spent on the above items, which he found represented a special benefit to the area.
He ruled, however, that the District’s economic development efforts did not represent special benefit.
As Vaillancourt writes, “State law says that cities can only use assessment districts to pay for services that constitute special benefits for the people who pay the taxes. Services that benefit the general public, or those that function generally to raise property values, are not covered … it is unclear whether O’Brien meant to bar special assessments for economic development in general, or only as it applies to the Arts District case.”
Via email, The Sheet contacted John Lambeth, an attorney and principal in Civitas Advisors, the consulting firm which has been retained to help Mammoth form its TBID. When The Sheet asked Lambeth about the L.A. case, this was his reply:
“The L.A. case did not involve a TBID. The Arts district was a PBID and different rules apply. The requirement to separate special benefits from general benefits is a property assessment requirement. It is not applicable to TBIDs.”
As Lambeth went on to explain, Proposition 218 governs BIDs related to property assessments, while the Property and Business Improvement District Law of 1994 governs TBIDs (which assess based upon gross revenue).
While Geoffrey Stover acknowledged that Proposition 218 may not apply procedurally, Stover maintains that there is no real difference between a TBID and any other type of assessment. “A BID’s a BID,” he says. “And if it benefits everybody [generally within a district], you have to pass it as a tax.”
While Stover acknowledges that the L.A. case does not set legal precedent (that would require the Court of Appeals hearing a case and publishing an opinion), he does predict more challenges to BIDs. “They’ve gotten away from their original intent,” he says. “It’s a cottage industry [establishing BIDs].”
John Lambeth, for example, will make a cool $30,000 plus expenses to set up Mammoth’s TBID. And Civitas Advisors has aided in the formation of 58 TBIDS to date in California.
In the L.A. case, Stover said the downfall of the Arts District BID was in its disparate constituency.
“Some liked the improvements, but the other non-retail folks didn’t care. And some, who were already part of an HOA (homeowners association) felt like they were paying twice for the same service.”
“You’ve got to either widen the net or narrow the focus … if everyone is asking for an exemption [In Mammoth, if you can show that more than half your business is local, you can be classified as a “Type 2” business and pay a flat $500 annual fee], what does it say about the enthusiasm [for the TBID]?” asked Stover rhetorically.
When informed about the challenge to the TBID, Mammoth Mayor Matthew Lehman said, “That’ll happen I guess. It’s unfortunate. What do you do? Paralyze yourself [and not move forward]? … I don’t doubt he’s [Johnson] lawyered up, and I imagine others might do so as well.”
Lehman said he believes the Town Attorney (the law firm of Best, Best and Krieger) has done its homework and that the Town stands on solid legal ground.
For his part, Johnson circles again and again back to the same point – how can Mammoth Mountain control 40% of the vote in a race to 51? “The deck shouldn’t be stacked so much in favor of one company,” he said.