California's Prop. 13 is responsible for the super controversial 1978 constitutional amendment that more or less capped property taxes (they can only go up two percent a year until the property is reassessed when it sells), and it's been a pretty big mess for the state ever since. For one thing, "large corporate property owners have been among the law's biggest beneficiaries," according to the LA Times--they tell the story of one particular loophole that's allowed computer magnate Michael Dell to save a bundle on his Fairmont Miramar Hotel in Santa Monica. (There are plans for a big redevelopment at the hotel that would add, among other things, a 21-story tower.) What Dell figured out when he bought the hotel in 2006 was that "the law allows businesses to sidestep reassessment if no one acquires a majority stake in a company that owns the property"; he split the sale up with his wife and a couple investment advisors so that no one owned more than 49 percent of the property.
And: "With no change in ownership, it continued to be taxed based on the 1999 property value of $86 million." The group paid $200 million and are now saving about $1 million a year in taxes. The LA County assessors office called bullshit on the move and raised taxes anyway, but a Superior Court judge found a few months ago that Dell was in the right (the County has now appealed).
With these kinds of shenanigans afoot, LA County homeowners now shoulder 57 percent of the property tax burden, up from 40 percent pre-Prop. 13 in 1975. Democrats in the state legislature have been trying to fix the situation and have introduced eight different measures to adjust the rules just this session (all "long shots").
· Prop. 13 loophole gives edge to big players [LAT]
· SaMo's Fairmont Miramar Reno Could Include 21-Story Tower [Curbed LA]
Loading comments...