Burden of Proof to Be on Irvine Co. in Property Tax Case

The Orange County assessor’s office won a procedural battle Thursday that will force the Irvine Co. to shoulder the burden of proof in its fight to show that the estimated $1.7 billion that developer Donald Bren paid to gain control of the company in 1983 accurately reflected its true market value.

Assessor Bradley Jacobs, arguing that the company’s vast landholdings are worth far more than the price Bren paid, appraised the properties at a total of $3.2 billion, which has forced the Irvine Co. to pay more than $60 million in additional property taxes in the past two years. The taxes have been paid under protest.

A three-member panel of the county’s assessment appeals board ruled Thursday, in a 2-1 vote, that the company could not begin its lengthy tax appeal hearing set for Aug. 5 under the presumption that the market value of its 68,000 acres was reflected by the price Bren paid.

“I don’t feel depressed about it because the bottom line is that the purchase price still will be the most important factor,” said Robert E. Currie, an attorney for the company. “It just means the hearing will be months longer because of the additional proof we have to provide.”

Currie said Bren paid a cash equivalent of $1.4 billion to $1.7 billion to gain control of the company, which owns about one-seventh of all the land in the county. Specialists working for the Irvine Co. still are working to come up with a specific value for the cash-and-stock deal, he said.

The tax fight arose after Jacobs decided in July 1984 that the transfer of control to Bren was, in fact, a change of ownership, triggering a reassessment under provisions of Proposition 13, the property tax limitation initiative approved by California voters in 1978.

Increasing the appraisal from $1.1 billion to $3.2 billion for the 1984-85 tax year meant a tax bill of about $51 million, or $32 million more than the company would have paid under the lower assessment. The appeals board already has ruled that Bren’s purchase in April 1983 was a change in ownership but has overruled Jacobs’ contention that the November, 1983, merger of the Irvine Co. and Newco, a company formed by Bren to acquire the Irvine Co., did not constitute a second change in ownership.

The hearing is expected to run for six months or more. It promises to be one of the largest and most complex assessment cases the county has ever undertaken.