Tax Hike for Metro Rail Sparks Downtown Uproar

New property tax bills are out and many downtown businesses are gasping--and then fuming--at the increase of up to 500% due to the Los Angeles Metro Rail subway project.

Sam Rubinfeld says the tax bill on his old brick warehouse on Skid Row, several blocks from the nearest proposed subway station, has risen from $671 to nearly $4,300--virtually all of the increase due to a special “benefit assessment” tax approved last year by the Southern California Rapid Transit District. “It’s obscene,” Rubinfeld said.

“I thought it was a computer error,” said Marino Salcedo, a co-owner of the Victor Clothing Co. building on Broadway, who has spent the last several days calling city, county and RTD offices trying to protest. Salcedo’s bill rose from $3,173 last year to to $18,053. “We went over the numbers and just with this expense, we won’t make money. The other partners want to sue and refuse to pay it.”

The story has been the same recently for hundreds of downtown businesses and landowners--particularly smaller ones who claim that they were not aware of the huge tax hikes that the transit line would bring.

A spokeswoman in the Los Angeles County assessor’s office said the office has received calls from affected property owners “in the hundreds.”

“They’re saying they didn’t know about it and asking why the increase is so large,” the spokeswoman said, noting all calls are referred to the RTD, which administers the special tax.

An RTD official said its office has received about 150 calls in recent days, with many of the same complaints.

The furor, which may grow in the coming days as irate landowners get organized and more tax bills make their way through the mails, is over a special tax that will be imposed for the next 20 years on nearly 2,000 properties near the five proposed stations along the $1.25-billion first leg of the route between Union Station and MacArthur Park.

With construction now beginning on the project, the first taxes have appeared on annual bills. The tax will generate $130 million, or about 11% of the cost of the first segment, with $20 million to be raised in the first year.

Justification for Tax

The justification behind the tax, which has been used in other cities to finance transit projects, is that properties near the subway will benefit from increased land values and business and should help finance the project.

“There is no reason the people who have a tremendous windfall should not pay a portion of the cost,” said Deputy Mayor Tom Houston, one of the key officials on a business and landowners task force that recommended the levy two years ago. Houston and RTD officials said studies in other cities have shown land values increase near transit systems.

But many business owners, some of whom are trying to organize a revolt against the tax, say they had no idea how large the increases would be and doubt that the benefits will be anywhere near the cost.

Rubinfeld does not see how his warehouse on Skid Row is going to benefit. “I don’t know how they can justify the benefit five or six blocks away.”

‘Won’t Help Us’

A spokesman for another Skid Row business, Coast Fixtures and Liquidators, said: “It won’t help us. . . . They’re trying to rob us without a gun.” The spokesman, who asked not to be named740324193more than $12,000.

Leo Bevon, an RTD planning manager who oversees the special tax, insisted that there was ample public discussion of the tax before it was adopted. He said mailers were sent to property owners when the matter was being discussed, although he acknowledged that the notice did not indicate that some tax bills would rise three- to five-fold.

“We’re sort of surprised people don’t know about it,” he said.

Most of the complaints had come from smaller businesses and property owners, Bevon said. And the biggest percentage increases are on those properties that have not changed hands since before passage of Proposition 13. On such properties, annual tax increases have been frozen at 2% per year.

He noted that there is an appeals process available at RTD, although he said officials believe that most of the bills are accurate.

Bills Based on Formula

The bills are based on a formula of 30 cents per square foot of property or improved floor space, whichever is greater. The tax, which will continue until 2008 to pay off Metro Rail bonds, covers Chinatown and most of the Central City. Though RTD staff at one time considered making the rate variable, with smaller levies farther from Metro Rail stations, the tax adopted is the same for all affected properties. It does not apply to residential properties, public properties and property owned by nonprofit organizations.

On large office skyscrapers, the tax could be several hundred thousand dollars.