Agenda Item No: M.3
AGENDA REPORT
DATE: May 5, 2026
TO: Mayor and Council
FROM: David Gassaway, City Manager
SUBJECT: Continuation from April 21, 2026: Discussion and Direction Regarding the Future State of Landscaping and Lighting Maintenance Districts and Assessment Refunds
Funding Source: N/A
Contact: David Lim, (415) 421-8484
RECOMMENDED ACTION
Receive report, open discussion, and provide direction to staff.
LEGAL DISCLAIMER
On March 17, 2026, the content of this staff report was presented to the City Council in a Closed Session meeting to present confidential attorney -client communications to the council as the duly elected representatives of the City of Fairfield, a Municipal Corporation. The council has waived the attorney-client privilege on this matter and asked that this information be presented in an open meeting in the interest of public transparency.
To the degree this staff report provides legal analysis and legal opinion, this staff report does not purport to give legal advice to any person or entity other than the City of Fairfield, a municipal corporation. Members of the public should not rely on this report as legal advice. Any member of the public who has questions or concerns about the legal opinions expressed in this report should consult their own attorney. The city attorney of Fairfield represents the City of Fairfield, a Municipal Corporation, solely.
STATEMENT OF ISSUE
In the matter of Thacker v. City of Fairfield, the California Court of Appeal overturned a ruling in favor of the City of Fairfield (City) by the Solano County Superior Court, ruling that the assessments levied in Landscaping and Lighting Maintenance District (LLMD) No. 7 – Rolling Hills (LLMD No. 7) violated Article XIII D the California Constitution, also known as Proposition 218, because the rates were increased beyond the 1996 rates in effect upon the Propositio n 218 effective date. The City has other LLMDs that are in a similar posture to LLMD No. 7 and therefore
may be affected by the Thacker ruling. Staff requests for the council’s direction regarding the future state of these LLMD and assessment refunds.
DISCUSSION
Background
In August 2023, Mr. David Thacker filed a lawsuit (Thacker v. City of Fairfield) against the City in the Solano County Superior Court alleging that the assessments levied in LLMD No. 7 – Rolling Hills (LLMD No. 7) violated Proposition 218.
On July 5, 2024, a trial court in Solano County ruled in favor of the City, finding that the assessments did not violate Proposition 218.
On September 24, 2024, Mr. Thacker filed an appeal with the 1st District Court of Appeal against the ruling of the trial court. The court of appeal overturned the trial court ruling on August 28, 2025, and found that the assessments levied in LLMD No. 7 did violate Proposition 218 because the rates were increased beyond the 1996 rates in effect upon the Proposition 218 effective date.
The case was remanded back to the trial court for further proceedings.
On February 6, 2026, a Final Stipulated Judgment was issued by the Court in which the City was ordered to:
1. Refund the full fiscal year (FY) 2025 -2026 assessment levied pursuant to Resolution No. 2025-131 to each LLMD No. 7 – Rolling Hills property owner within 180 days of Judgment
2. Refund $1,800 to Mr. Thacker within 60 days of Judgment
3. Refund $1,800 to ten named property owners within 90 days of Judgment
4. Refrain fr om levying an assessment in LLMD No. 7 – Rolling Hills that exceeds the assessment amounts in effect prior to the Proposition 218 effective date, unless said assessment complies with the California Constitution, Article XIII D, Section 4 (“Section 4”).
The City coordinated with the Solano County Auditor -Controller’s Office to issue refunds for FY 2025-2026 assessments to Rolling Hills property owners, as described in Item No. 1 above.
Property owners have either received a cash refund or an amended FY 2025-2026 property tax bill.
Refunds to Mr. Thacker and the ten named property owners described in Item Nos. 2 and 3 above have been issued, and any future assessments levied will comply with Item No. 4 above.
Potential Impacts on Other LLMDs
The Court of Appeal ruling in Thacker has led to questions from residents regarding the impact of the ruling on other LLMDs in the City of Fairfield. On March 17, 2026, the council met in Closed Session to discuss this matter, then directed the city attorney to schedule this meeting to discuss this matter before the public. The council has specifically waived the attorney-client privilege to allow the city attorney to present information that he would otherwise be ethically compelled to keep confidential to the council.
Legal Posture of Other LLMDs Based on Thacker Ruling
The Court of Appeal decision in Thacker made no rulings or comments on other LLMDs in the City. Therefore, there is no legal basis that requires the City to take any action on any other LLMD in the City based on the Thacker ruling.
However, a common sense analysis of the Thacker ruling shows that there are other LLMDs that are in a similar posture to LLMD No. 7, and therefore may be affected by the Thacker ruling.
Five LLMDs Potentially Affected by Thacker Ruling
The five LLMDs listed below are in a similar posture to LLMD No. 7 because their current rates were increased beyond the 1996 rates in effect when Proposition 218 was enacted. It is therefore likely that any legal challenge to t hose rates would be deemed similar to LLMD No. 7 and therefore bound by the Thacker decision. The five LLMDs and their formation date (Pre - Proposition 218) are:
LLMD No. 3 (Waterman Heights) - Formed 08/05/1986
LLMD No. 6 (Peppertree Drive) - Formed 07/07/1987
LLMD No. 8 (Kolob) - Formed 06/20/1989
LLMD No. 12 (Downtown Business District) - Formed 7/16/1991 LLMD No. 13 (North Cordelia) - Formed 6/19/1990
In 2023, the City went back to voters to attempt to increase the LLMD rates for all of the above LLMDs. On June 7, 2023, the voters for each LLMD rejected a rate increase that would bring these LLMDs into compliance with Proposition 218.
Two LLMDs Potentially Partially Affected by Thacker Ruling
The two LLMDs listed below are partially affected by the T hacker ruling because while homeowners approved formation of a new LLMD in 2023, the assessments from 2022 -2023 might still be subject to the Thacker decision. These two LLMDs are:
• LLMD No. 1 (Gateway) - Created new LLMD 2023-1 on 6/7/2023 • LLMD No. 11 (Paradise Valley North) - Created new LLMD 2023-11 on 6/7/2023 As of 2023, services in the Gateway and Paradise Valley areas are now provided by LLMD No. 2023-1 and LLMD No. 2023 -11, respectively. LLMD No. 1 and LLMD No. 11 exist only to repay General Fund loans that were issued in 2022. Since the new LLMDs were passed under Prop. 218, Thacker no longer applies to these LLMDs, except for assessments collected in 2022-2023.
LLMDs Not Affected by Thacker Ruling
The following LLMDs are not subject to the Thacker decision because they were either formed after Proposition 218 went into effect, or their voters approved rate increases through a lawful Proposition 218 vote:
• LLMD No. 5 (Smith Ranch; aka Rancho Solano) - Approved rate increase 5/18/1999 • LLMD No. 10 (Southbrook) - Approved rate increase 5/18/1999 • LLMD No. 14 (Woodlake) - Formed 7/3/2001
• LLMD No. 15 (Gold Ridge) - Formed 7/3/2001
• LLMD No. 16 (Creekside) - Formed 7/15/2003
• LLMD No. 17 (Chadbourne-Beck-Cordelia) - Formed 7/1/2003 • LLMD No. 18 (Gold Ridge Park) - Formed 2/5/2008
• LLMD No. 19 (Corporate Commons) - Formed 11/16/2010
• LLMD No. 2023-1 (Gateway) – Formed 6/7/2023
• LLMD No. 2023-11 (Paradise Valley) – Formed 6/7/2023
For the ten LLMDs listed above, the Thacker decision does not affect them, and no action is recommended on these LLMDs.
Options for Future State of LLMDs No. 1, 3, 6, 7, 8, 11, 12 and 13 Based on Thacker Ruling
The Court of Appeal Ruling found that increases to assessmen t rates after November 1996 in LLMD No. 7 – Rolling Hills were in violation of Proposition 218 because the City did not comply with the procedures set forth in California Constitution, Article XIII D, Section 4.
While the Court of Appeal ruling and the Fi nal Stipulated Judgment applies only to LLMD No. 7, LLMDs No. 1, No. 3, No. 6, No. 8, No. 11, No. 12, and No. 13 are in a similar posture to LLMD No. 7, so that the Thacker decision would likely apply to them in any Court challenge. It is recommended that the City take action to limit legal exposure in all eight LLMDs. To accomplish this, council must determine the objective for the future state of these eight LLMDs.
Staff have prepared two options for consideration. The council may select either option, o r a completely different option of their choosing. Because of the threat of continued litigation, the safest legal approach would be Option No. 2.
Option No. 1 – Preserve and Maintain LLMDs No. 1, No. 3, No. 6, No. 7, No. 8, No. 11, No. 12, and No. 13
To preserve and maintain LLMDs, the Council must make four key decisions:
1. The amount the City will refund to LLMD property owners.
a. Full assessments collected for the four prior years to all property owners b. Full assessments collected for the four prior years when requested by property owners
c. Full assessments collected for FY 2025-2026 only
d. Difference between 1996 rates and current rates for the four prior years e. Difference between 1996 rates and current rates for FY 2025-2026 only f. No refunds
2. The source funds that will be used to issue refunds. It should be noted that because the LLMDs are not standalone Districts under law, the General Fund must be used to pay for any shortfalls in funding to issue refunds.
a. LLMD funds only (some LLMDs may not have enough reserves to support this) b. LLMD funds plus General Fund loan (requires reduction of services) c. LLMD funds plus General Fund contribution
d. General Fund only
3. The amount the City will levy in future fiscal years. a. The 1996 assessment rate in effect prior to the Proposition 218 effective date b. $0; No levy
4. The level of services to be provided in future fiscal years and source funding. a. Services reduced and funded only with available assessment revenue and regular general benefit contributions
b. Services reduced and funded with General Fund only
c. Services maintained at current levels and funded with available assessment revenue, regular general benefit contributions, and supplemental General Fund contributions
d. Services maintained at current levels and fun ded only with regular and supplemental General Fund contributions
Option No. 2 – Dissolve LLMDs No. 1, No. 3, No. 6, No. 7, No. 8, No. 11, No. 12, and No. 13 to Prevent Future Claims
To dissolve the LLMDs to prevent future claims, Council must make three key decisions:
1. The amount the City will refund to LLMD property owners.
a. Full assessments collected for the four prior years when requested by property owners
b. Full assessments collected for FY 2025-2026 only
c. Difference between 1996 rates and current rates for the four prior years d. Difference between 1996 rates and current rates for FY 2025-2026 only e. No refunds
2. The source funds that will be used to issue refunds.
a. LLMD funds only (some LLMDs may not have enough reserves to support this) b. LLMD funds plus General Fund contribution
c. General Fund only
3. The level of services to be provided by the General Fund in future fiscal years.
a. Services reduced to a level determined by council
b. Services maintained at current
FINANCIAL IMPACT
The financial impact to the City in this matter cannot be understated. If full refunds for all four years for all districts are the option selected by council, the City will pay more than $5 million from the General Fund. This is a significant impact given the FY 2025-2026 budgeted structural deficit of $11.1 million.
As the council knows, even prior to the Thacker decision, the existing LLMDs No. 7, 11, and 13 were underfunded for the level of service expected by residents. The attempt to increase rates in 2023 was to try and bring funding up to the necessary levels to provide expected service levels for residents. The 2023 rejection of these rate increa ses for LLMD No. 7 and No. 13 left these LLMDs severely underfunded.
To fill that gap, on May 3, 2022, the council (anticipating a Proposition 218 rate increase in 2023), approved loans using General Fund money for LLMDs No. 1, 3, 6, 7, 11, 12, and 13 in the amount of $997,000. The loan was to be repaid starting in 2023 upon passage of a new LLMD. Residents did not approve the new LLMDs for No. 7 and 13, leaving insufficient assessments to pay back the loan to the General Fund.
It is critical to note that assessment revenues collected for all prior years have been spent on services received by rate payors. Repayment by the General Fund means that all taxpayers are refunding LLMD rate payors for special benefits they paid for and received.
Therefore, if residents in LLMDs No. 1, No. 3, No. 6, No. 7, No. 8, No. 11, No. 12, and No. 13 seek refunds, those refunds will be paid through General Fund money. While the City could attempt to shield the General Fund for repayment of LLMD assessments, legal analysis shows that attempt would be dubious at best.
The anticipated amount of General Fund money necessary to cover a full refund to residents in LLMDs No. 1, No. 3, No. 6, No. 7, No. 8, No. 11, No. 12, and No. 13 for the past four years would be slightly more than $5 million dollars.
PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION
N/A
ALTERNATIVE ACTION
The council make take any action it deems appropriate, and is not bound by the recommendation of City staff.
COORDINATED WITH
Public Works Department
STAFF CONTACT
David Lim, City Attorney
(415) 421-8484
[email protected]
Chris Lewis, Sr. Management Analyst
(707) 428-7089
[email protected]
ATTACHMENTS
N/A