Fees for Tax Appeals Shock Owners Along Subway Route

Downtown Los Angeles property owners who were stunned by huge increases on their tax bills to help pay for the Metro Rail subway have encountered another shocker as they scramble for relief. Just filing an appeal with the Southern California Rapid Transit District can cost thousands of dollars in non-refundable fees.

Although it costs nothing to appeal the rest of a property tax assessment to the county Assessment Appeals Board, RTD has established fees of $200 to $5,000, based on the size of the property and improvements, just to have a staff-level review of the so-called “benefit assessment” for Metro Rail. It can cost an additional $1,000 or more to appeal the staff’s decision to the RTD board.

The 20-year tax, which applies to some 2,000 properties near the proposed downtown and MacArthur Park Metro Rail stations, is designed to raise $130 million, or about 11% of the cost of building the first leg of the subway. It is the largest effort in the nation to have businesses near proposed stations help pay for a new transit system.

Some property owners, irate about recent property tax bill increases of 500% or more because of the Metro Rail, are complaining bitterly about the fees.

“I think it is calculated deliberately to discourage appeals,” said David Hart, owner of the historic Subway Terminal Building on Hill Street, over an abandoned Pacific Electric “Red Car” subway tunnel. Hart’s tax bill quadrupled because of a $178,000 Metro Rail assessment and his appeal fee will be $3,500.

Ramiro Salcedo, co-owner of the Victor Clothing Co. building on Broadway, said, “I have to pay $3,000 for them to hear me. And who is going to be judging us? The RTD themselves. How could you win?”

One businessman with a parking lot in an industrial area near Union Station said the minimum $200 appeal fee is more than last year’s tax bill on the parcel.

“I’ve never had any filing fee comparable to that,” said Bill Bitting, an attorney representing property owners challenging the fees. “I only have to pay a $200 fee to appeal to the California Supreme Court.”

RTD officials denied that the fees were intended to discourage appeals. They said they are needed to cover the administrative costs of reviewing assessments and to pay hearing officers, who will weigh the arguments of property owners.

Leo Bevon, the RTD official who is overseeing the appeals, said that without the appeals fees the administrative costs would have to be spread over all the businesses in the benefit assessment district. “They would be upset because they have to pay for someone else’s appeal,” he said. “The people who are filing the appeal should pay the costs.”

Fourteen appeals have been filed, but RTD officials do not know yet what the actual costs of handling the appeals will be. “We’ve never done this particular aspect before,” Bevon said, adding that the staff may seek an adjustment in the fees once it sees how costs are running.

Bevon insisted that the appeal fees and the Metro Rail assessments are relatively small, measured against the values of the land involved and potential for property appreciation because of the transit system. He said the appeals filed so far represent less than 1% of the affected property owners.

He also noted that many landowners will simply pass on the increases to tenants.

“I don’t think there is the general outrage that people seem to want to say there is,” he said.

Meanwhile, RTD board members--some of whom had said they were surprised by the size of some of the tax increases--expressed concern that property owners might not have been adequately alerted about how much they would have to pay. The RTD staff has insisted that there was adequate notice of the tax during a series of public hearings before the assessment was approved in July, 1985.

The board also appointed a committee Thursday to explore how it will evaluate appeals cases that are not resolved at the staff level. But RTD General Manager John Dyer pointed out to the board that reductions made in any individual property owner’s tax would have to be made up by higher levies on other properties within the assessment area.

In another development, a group of about 35 downtown property owners formed a new association to fight the payments. They tentatively agreed to join a lawsuit already filed by the railroads that own Union Station. Last week, the owners of the huge Broadway Plaza shopping center and hotel complex filed a court motion to join the challenge.

The RTD appeal process was criticized at the meeting. “It’s like opening the door and sending the fox in to count the chickens,” said Norman Dreyfuss, owner of a 100,000-square-foot office building on Spring Street. His annual tax bill jumped from $15,000 to $51,000.

As for passing the increase along to tenants, Dreyfuss said, “Spring Street is a place you fight like hell to get people there in the first place. You can’t readily pass that along” without risking the loss of renters.