Irvine Co. Agrees to Portion of Valuation
The Irvine Co., which is embroiled in a battle with the Orange County assessor over how much taxes it should pay on its vast landholdings, said Thursday that it has tentatively agreed with the county on the value of most of its developed properties.
The agreement covers 464 of the 2,100 parcels owned by the Irvine Co. and values them at $1.02 billion. The company said the properties covered include Fashion Island in Newport Beach and other retail centers owned by the firm, as well as all the apartments, office buildings and marinas it owns.
If approved by the Assessment Appeals Board, the agreement would probably boost the company’s tax bill on all its property well over the approximately $14 million it paid in 1983, when its holdings were assessed at $1.1 billion by the county.
No Simple Calculation
Gary Hunt, company vice president and assistant to Chairman Donald Bren, cautioned, however, that there was no simple arithmetic to calculate how much the Irvine Co. might wind up paying in taxes. The company, by far the largest private landowner in the county with holdings of about 68,000 acres, is disputing the reassessment of its property and the valuation on individual parcels set by the county.
County Assessor Bradley L. Jacobs, the leading combatant in the battle on behalf of the county, was reported out of his office and unavailable for comment.
Hunt said the agreement could be changed if the company wins its argument that the sale of the company in 1983 should not have triggered a reassessment, and that the value of the company is what it sold for--about $1.4 billion.
The county last year raised its assessment of the company’s landholdings to more than $3 billion, thereby nearly tripling the Irvine Co.'s total property tax bill, to about $51 million.
The company appealed to the Assessment Appeals Board, whose members are appointed by county supervisors, and in the meantime paid the full, disputed amount under protest into an impound account.
Because of the magnitude and complexity of the case, the supervisors have hired outside lawyers and have thus far authorized payments of $780,000 to the attorneys.
Hunt said the tentative agreement was “certainly a step in the right direction” to solve the dispute. But he said both sides are now looking “at the values of undeveloped properties and we are obviously significantly far apart on those values.”
“Our own in-house analyses indicate that the assessor’s total estimated value for the 464 parcels in 1983 was close enough to their true market worth to warrant the agreement,” Hunt said in a statement.
Hunt said the county and the company have asked the appeals board to postpone consideration of the agreement until after Jan. 1 so that Irvine Co. can explain the pact to its commercial tenants and lessees.
Hunt said some of these tenants have leases that call for them to pay taxes directly to the county. He said many of those tenants have filed their own appeals on the county’s valuation of their property and that those appeals would not be affected by the company’s agreement with the county.
Although company officials knew for more than a year that the county was reassessing the land, they did not learn until the tax bills went out in July, 1984, what the final figures were.
The company agreed to pay 100% of the tax increase for its tenants the first year, 75% this year, 50% in 1986 and 25% in 1987, after which the tenant would be obliged to pay the entire increase.
The county reassessment was triggered by Bren’s purchase in 1983 of a 51% interest in the company for more than $500 million. The purchase increased Bren’s share of ownership to more than 80%. He has since bought out most of the minority shareholders.
The county contended that Bren’s purchase constituted a change of ownership of the land owned by the company and thus made Irvine Co. holdings subject to a reassessment under the provisions of Proposition 13, the property tax-cutting initiative passed by California voters in 1978.
Robert E. Currie, an Irvine Co. lawyer involved in the dispute with the county, said in an interview two months ago that Bren’s stock purchase “simply was a case of a shareholder increasing his holdings in the company” and should not prompt a reassessment. Proposition 13 limits increases in assessed valuations to 2% a year, plus the value of any major improvements, unless a change of ownership has taken place.
Currie also contended that even if a change of ownership did occur, there was a question of whether the assessor should “revalue the entire asset or just the (part) affected by the change in control.”
And if the assessor did persuade the appeals board that the entire asset should be reassessed, the question remained of how much was it worth. Currie said the tax bill should probably be less than half what Jacobs wanted.
Hunt said Thursday that the company still argues that the 1983 stock transaction “should not have triggered a reassessment. Our contention is that it was a sale of stock, not a sale of property. We will continue to seek to make that point through the appropriate avenues.”
If the company loses its case at the appeals board level, it could go into Superior Court to continue its fight against the assessor.