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Lodi business organization faces dissent

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Posted: Friday, October 24, 2003 10:00 pm

In December 1997, the City Council created the Downtown Lodi Business Partnership - that's when the trouble started.

Like choosing a dinner at a Chinese restaurant, the City Council picked some rules from law "A" and some from law "B" to create an organization that has spent nearly $1 million over the last five years.

And since the DLBP's creation, there have been troubling undercurrents of dissent among the district's merchants. The discontent may be the result of the muddle of conflicting laws which were used to create the organization.

Recently, a small number of merchants have refused to pay their assessment fees to the city. And as a result, Lodi Police officers have issued criminal misdemeanor citations to some - but not all - of the merchants who refuse to pay.

For the second time in the organization's history, a petition has been circulated among the district's merchants seeking the votes to disband the DLBP altogether.

One downtown business owner, who did not want to be identified out of concern for retribution, said the petition had been pulled back to give Pamela Hayn, the DLBP's new executive director, a chance to pull the group together.

Tim Vallem, owner of Old Town Antiques, is a business owner who voted for the formation of the DLBP in 1997.

But he has long expressed dissatisfaction with the operation of the DLBP, and the way that the city has been collecting the assessment fees.

"If (the city wants) me to follow the law and pay my assessment, then (the city) has to follow the law in collecting and the way they spend the assessments," he said. "You can't enforce laws at random, and ignore laws that do apply."

Vallem also called for a "full and complete audit" of the DLBP's books.

He said the petition was created because of many merchants' concerns about the DLBP's handling of several issues, including the ouster of former Executive Director Lew Van Buskirk, the management of the Thursday night Farmer's Market, and with the misdemeanor citations issued for failure to pay assessment area fees.

The structure of the DLBP

The DLBP is a nonprofit organization responsible for promoting the downtown area, organizing seasonal marketing efforts like the Farmer's Market and the Parade of Lights. Businesses in the downtown area pay a yearly fee of between $50 and $500. The fees are collected by the city, and are included with the merchant's business tax bill. The city then turns the money over to the DLBP.

Businesses along a five-block corridor of School Street between Locust Street and Lodi Avenue are in "Zone A," and pay the highest fees. Businesses in the surrounding downtown area are in "Zone B," and are assessed a lesser fee.

Approximately 235 businesses are in the two zones of the business improvement area from which the assessed fees are collected. Annual DLBP fees range from $50 for some professional businesses to $500 for financial institutions, such as banks or savings and loans. Most downtown retailers pay between $200 and $400 a year.

Next month, the council takes its yearly look at the DLBP, and must decide whether to renew the DLBP's assessment district. Council members may also hear from the downtown merchants who want to disband the DLBP altogether.

In its five year history, the DLBP received substantial support from Lodi's taxpayers and the businesses that must pay their yearly assessment fees.

The city has contributed more than more than $300,000 to the DLBP since 1998, according to city documents.

By its own accounting, the DLBP has collected $176,000 in assessed fees, $246,500 in grants from the city, and $493,000 in income from events.

But the DLBP's own accounting is all there is - no audit has ever been conducted on the DLBP, according the Deputy City Manager Janet Keeter.

Two laws, one organization

One key to the muddled genesis of the DLBP lies in the distinction between California's two laws governing the creation of downtown business assessment districts.

First, in 1989, the Legislature created the "Parking and Business Improvement Area Law of 1989." This law lets city councils collect a yearly "benefit fee" (specifically not a tax), from businesses in the specified area.

The law requires a city council to appoint an "advisory board" to make recommendations about how to spend the money collected from the business owners. The law gives city councils authority to adopt, modify or reject recommendations made by the advisory board.

Then, in 1994, the state passed a second law, the "Property and Business Improvement District Law of 1994." This law collects the assessment from property owners instead of the business owners.

It also provides for a nonprofit merchants' association to run the marketing and other affairs of a business assessment district.

Then comes Lodi's version.

In September 1997, the city provided downtown merchants with a "Business Improvement Area Informational Package," that explained the concept and the specifics of the proposed assessment district. The informational package referred to the creation of an advisory board.

In December 1997, the city used the 1989 state law to create a downtown business assessment area, and collect money from downtown merchants for the marketing and promotion of Lodi's soon-to-be revitalized downtown.

But when the council passed the ordinance creating the assessment district, it directed the creation of "a board of directors … to administer the affairs of the area." In other words, the Downtown Lodi Business Partnership.

The DLBP was incorporated as a nonprofit organization in March 1998.

However, the DLBP is not an advisory board - instead, it is the kind of organization described in the 1994 law; a nonprofit owner's association, under contract with the city to "administer or implement activities" in the assessment district.

The DLBP has taken over the responsibilities of the 1989 law's advisory board, Lodi City Attorney Randy Hays said.

But no one seems to be able to explain how an organization created under one law somehow switched to operating under another law.

Distinctions between the 1989 and 1994 laws are significant - and were once the subject of a lawsuit that resulted in revisions to the 1994 law.

In 2001, following a lawsuit brought by a business owner who was denied access to the meetings of a business improvement district board in Hollywood, the 1994 law was changed to specifically say that nonprofit groups like the DLBP are covered by the "sunshine" requirements of the Ralph M. Brown Act.

The Brown Act requires that all public boards and commissions operate in the open and, with only limited exceptions, must make their records available for public inspection. (Advisory boards, like the one envisioned by the 1989 law, are automatically covered by the state's sunshine laws.)

The 1994 law also states that the nonprofit group that runs an assessment district has to file a detailed five-year management district plan with its city council, detailing the activities and funding sources of the group.

However, the DLBP has never filed such a plan with the Lodi City Council, according to the City Clerk's Office.

And there is another difference - the 1989 law appears to allow city councils to disband the assessment district after a public hearing and a vote.

The 1994 law, however, is more specific, and restrictive.

It says that to disband the assessment district, a city council must find a reason, such as "misappropriation of funds, malfeasance, or violation of the law." Or business owners in the assessment district must use their voting power, figured at one vote per dollar of yearly assessment, to vote to disband the district.

Those are the requirements for disbanding the DLBP and the assessment district, Hays said.

So, if the DLBP does not follow the rules of either law, what sort of organization is it? No one seems quite sure.

Hays said the DLBP is a private, nonprofit organization, comparing it to the Elks Lodge or the Boys and Girls Club - private nonprofit organizations that can keep their meetings and financial records secret.

"They are a pretty autonomous group," Hays said in an interview last week. However, on Friday he acknowledged that the DLBP is subject to the rules of the Brown Act.

First Amendment attorneys Terry Franke of the First Amendment Coalition, and Jim Ewert of the California Newspaper Publishers Association, both agree.

"No matter which law was used to create the organization, it is covered by the Brown Act," Franke said.

The DLBP has generally followed the state's sunshine rules - but that leaves unanswered the question: If the DLBP was not created by the City Council and is an autonomous, private business owners' association, then why must it abide by sunshine law rules?

Effective despite dissent

The DLBP remains the driving force behind the marketing efforts of Lodi's newly revitalized downtown. And no matter how it was drawn up, by most accounts the DLBP has done a reasonably good job of promoting the downtown and creating special events that have drawn thousands of people to the city's center.

Peter Westbrook, DLBP president, acknowledged there may be discrepancies in the way the city's ordinance creating the assessment district was written.

"They used the best codes they could find to do it," he said. "If it's not perfect, then it's like everything else."

Westbrook called examination of the laws establishing the DLBP and the assessment district a "red herring," and said factions in the DLBP are trying to tear it down.

"You can make arguments about anything," he said.

But Old Town Antique's Tim Vallem has an idea for a way the council can resolve issues some merchants have with the DLBP.

"It's time they recognize the inconsistencies in the city code," he said. "It's time they re-write the city code and follow it."

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