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Background <br />The Modified Downtown Santa Ana CMD is a property -based special assessment district being modified for the <br />remaining three years of a five year District established in December 2008 pursuant to Article XX Chapter 13 of the <br />Santa Ana Municipal Code (the "Code ") fashioned after Section 36600 et seq. of the California Streets and Highways <br />Code, known as the Property and Business Improvement District Law of 1994 (the "Act "). To satisfy the <br />constitutional requirements for assessments on property imposed by Proposition 218, the costs of the services, <br />activities and improvements in the district to be funded by assessments ( "district programs ") are to be distributed <br />amongst all the identified properties based on the proportional benefit each parcel is expected to derive from the <br />district programs. Within the Code, the Act, Proposition 218 and the Proposition 218 Omnibus Implementation Act, <br />frequent references are made to the relative "special benefits" received from the district programs versus the amount <br />of the assessment levied, which incorporate the concepts of "nexus" and "proportionality" that are required to levy <br />assessments on property within a special assessment district. "Nexus" requires that only those properties expected to <br />derive special benefits from the district programs may be assessed. "Proportionality" requires that, for each assessed <br />property, the assessment be only in an amount proportional to that parcel's share of the reasonable costs of providing <br />the relative special benefits expected to be conferred on that parcel. <br />The method used to determine special benefits derived by each identified property within a CMD begins with the <br />selection of a suitable and tangible basic benefit unit. For property related services, such as those proposed in the <br />Modified Downtown Santa Ana CMD, the benefit unit may be measured in quantities such as linear feet of primary <br />street frontage or parcel size in square feet or building size in square feet, or any combination of these factors. <br />Quantity takeoffs for each parcel are then measured or otherwise ascertained. From these figures, the amount of <br />benefit units to be assigned to each property can be calculated. Special circumstances such as unique geography, land <br />uses, development constraints etc. are carefully reviewed relative to specific programs and improvements to be <br />funded by the District in order to determine any levels of diminished benefit which may apply on a parcel -by- parcel <br />or categorical basis. <br />Based on the factors described above such as geography and nature of programs and activities proposed, an <br />assessment formula is developed which is derived from a singular or composite basic benefit unit factor or factors. <br />Within the assessment formula, different factors may be assigned different "weights" or percentage of values based <br />on their relationship to programs /services to be funded. <br />Next, all program and activity costs, including incidental costs, District administration and ancillary program costs, <br />are estimated. It is noted, as stipulated in Proposition 218, and now required of all property based assessment <br />Districts, indirect or general benefits may not be incorporated into the assessment formula and levied on the District <br />properties; only direct or "special" benefits and costs may be considered. Indirect or general benefit costs, if any, must <br />be identified and, if quantifiable, calculated and factored out of the assessment cost basis to produce a "net" cost <br />3 <br />