Judge puts business district spending on hold
August 3, 2005
A judge cracked the door open Wednesday for plaintiffs to continue their civil case against the controversial city-spawned business improvement district to promote tourism.
El Dorado County Judge Suzanne Kingsbury ruled the city may collect the citywide BID fees due from 4,353 earmarked businesses, but she also ruled the estimated $350,000 that stands to be collected cannot be spent. The money would remain in a trust account of sorts until the matter is heard at length.
“Based upon the showing made, (the) plaintiffs appear to have an adequate remedy at law. The city may collect the assessment pursuant to the current BID assessment schedule, but those funds shall not be disbursed pending further order of the court,” Kingsbury wrote in her decision.
The ruling “does not constitute a determination on the merits of the validity of the ordinance or the merits of (the) plaintiff’s case,” she added.
Three South Lake Tahoe businessmen – Lou Pierini, John Cefalu and Dr. Patrick Martin – challenged the BID formation in a complaint filed with the court July 18, claiming it is illegal and unconstitutional.
“This is great news. We didn’t know what to expect. It’s rewarding to get something they did wrong in court and win,” Pierini said.
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He takes issue with the Park City consultant’s “boiler-plate version” of the assessment fee schedule, arguing that not all businesses are affected by tourism the same way. The BID was formed through an assessment schedule that charges businesses 25 to 65 cents per $1,000 in gross receipts. The amount ranges from $30 to $3,000 a year.
Pierini also brought up the ongoing sticking point of lodging – which arguably stands to benefit the most from tourism – getting out of paying into the BID coffers for the first year. The city agreed to kick in $70,000 as lodging’s share for the first year. Starting in October 2006, lodging is expected to pay $1.1 million into it through a pass-through tax it collects from hotel guests.
Amid outrage among some citizens at hearings and in letters sent to the Tahoe Daily Tribune, the city approved the formation of the BID via ordinance and resolution in February. It was brought forward in concept by the South Lake Tahoe Chamber of Commerce and Lodging Association as a means to compensate for a loss of marketing subsidies. Over the last few years, the cash-strapped city pulled back $753,000 in subsidies from the chamber and Lake Tahoe Visitors Authority.
A BID advisory group gave way to an 11-member, city-appointed board assigned to steer the district – of which Cefalu and Martin serve. The board will proceed until the court determines otherwise.
The court decision against the city that came down Wednesday means the burden of proof remains with the plaintiffs, but the case is still alive. At one point, the plaintiffs were considering naming the chamber and lodging association in the suit but decided against that.
“We believe the court understood the BID ordinance is flawed,” plaintiff attorney Dale Sare said.
He will now comb through the chamber- and city-paid consultant’s study and gather other information in the quest for a summary judgment that finds the BID illegal. Sare believes the judgment could come as early as October.
City Attorney Catherine DiCamillo wasn’t available for comment.