Supervisors Balk at Paying Higher Fees to Fight Irvine Co. Tax Dispute

County supervisors Tuesday balked at paying another round of legal fees that would push the price tag of their ongoing property tax battle with the Irvine Co. to more than $1 million.

The supervisors delayed for a week a request from county Tax Assessor Bradley L. Jacobs to pay another $435,000 to a law firm that has already received about $700,000 to represent the county in the tax battle. The supervisors also asked for a study of the county’s options.

“I’ve heard a lot of progress reports now, and I still don’t know any more than the day I walked in and started voting for expenditure of funds,” Supervisor Bruce Nestande said.

Too Big for County Counsel

“Attorneys on both sides have a way of extending negotiations forever in perpetuity because it’s to their advantage perhaps. I’m not saying it’s happening here,” Nestande said, but he added that he still wants a report from the county counsel.

A year ago, the supervisors agreed that the fight with the Irvine Co. was so big and complex that the county counsel’s office, which serves as the county’s lawyer, would need outside help.

Some Funds Still Left

The supervisors authorized spending $250,000, and the county retained the San Francisco law firm of Pillsbury, Madison and Sutro to handle the case. Another $575,000 was authorized last July--although not all of it has yet been spent. Jacobs went before the board Tuesday to ask for the latest addition.

Supervisor Harriett M. Wieder noted that the county’s attorneys’ fees were “a small percentage of what we have to gain or lose,” but she complained that “maybe we’re not being kept abreast of what the future has in store for us.”

The dispute with the Irvine Co. started in July of 1984, when Jacobs’ office put the value of the company’s vast landholdings in the county at more than $3 billion. The previous assessment had been $1.1 billion.

The effect of the reassessment was to increase the company’s property taxes from $19 million to $51 million a year, and the firm appealed the action to the Assessment Appeals Board.

The Irvine Co. agreed with the county last September on the value of most of its developed properties, including Fashion Island in Newport Beach and other retail centers. After selling some of its property, the company’s tax bill dropped to $47.4 million in the current fiscal year, Treasurer-Tax Collector Robert L. Citron said.

Uses Impound Account

The Irvine Co. paid the disputed $32 million from the first year’s tax bill into an impound account, and will dispute an estimated $26 million more this fiscal year and pay it into that account, Citron said.

Jacobs said the $3-billion assessment was based on the “market value” of the land and the reassessment was allowed because of a change in ownership of the company that occurred in April, 1983, when developer Donald Bren bought out five investors for $500 million.

Irvine Co. officials argued that Bren paid the money for 51% of the company, and it was not really a change in ownership. Even if it were, company officials said, the market value of the firm was $1.1 billion, based on Bren’s purchase price.

Jacobs argued that the selling price is only one criterion in assessing the market value of property as specified in the 1978 California tax reduction initiative, known as Proposition 13.

Jacobs told the supervisors that the Assessment Appeals Board said last month that it would delay the start of a hearing on the case until July, and wanted more information. Jacobs said the panel’s members functioned as an “independent board.”

Surprised by Options

“We appoint them, though,” Nestande replied.

Supervisor Thomas F. Riley asked if the board could simply appoint a new assessment appeals board to hear the Irvine Co. case.

Several supervisors also expressed surprise at being told that they could decide against approving more money for outside counsel, contending they were told earlier that they had no choice but to proceed with the case.

Still, Nestande conceded that if the supervisors voted against spending more money in the fight, “people in the community could just say we caved in to the ‘King of the Hill,’ the Irvine Co. No one with any sanity is going to make that decision.”

The supervisors told County Counsel Adrian Kuyper to report back in a week with answers to their questions and possible options to pursue.