Property Owners Move to Derail Subway Tax Bills

Owners of small downtown properties who are fighting huge tax increases that were levied to help fund the Los Angeles Metro Rail subway filed a lawsuit Thursday challenging the tax and said they will seek a court order today halting its collection.

Also on Thursday a capacity crowd of protesting property owners jammed a meeting of the Southern California Rapid Transit District board to demand that the tax be delayed and ultimately eliminated.

The lawsuit challenges the equity of the so-called Metro Rail benefit assessment tax that is designed to raise 11% of the $1.25-billion cost of the first 4.4-mile segment of the subway. The tax has been added to new tax bills for some 2,000 properties near the proposed downtown and MacArthur Park stations. RTD officials say the special taxes are justified because of new business that the subway stations will attract to nearby merchants.

The suit charges that the tax, which has increased some tax bills 500% or more, is discriminatory against a limited group of property owners. Benefits of the transit project will be enjoyed by the entire region and not a limited few, the plaintiffs contend. The suit also charges that the RTD, which is building Metro Rail, has not adequately proven its claim that properties near the stations will reap huge economic benefits.

Sam Rubinfeld, a spokesman for the group that filed the lawsuit, said many property owners cannot afford the tax and are trying to postpone the Wednesday deadline for paying the first installment. “We are totally against the benefit assessment district (because) it’s totally unfair,” Rubinfeld said.

At the RTD meeting, an overflow crowd of property owners criticized the tax and demanded that the board delay any action to issue $170 million in bonds that would be repaid with the Metro Rail assessments.

After three hours of overwhelmingly negative testimony, board members took no action but expressed a desire to speedily review individual tax increases that may be too large or in error. They did not, however, give any indication that they would move to postpone collection of the tax.

Officials said the district will not be able sell the benefit assessment bonds until the legal challenges are resolved, probably sometime next year. RTD General Manager John Dyer said construction can proceed using state, federal and other local money, but the lawsuits must be settled by next fall and the bonds issued to fulfill the requirements of the project’s complex financing agreements.

During the board hearing, several property owners said the tax may be too much for their businesses to bear. Frank Fouse said he has had difficulty leasing some of his building at 3rd Street and Broadway. “I’ve done everything I can to keep the building open. . . . You’re inviting me to close the building and create more blight.”

Ken Rausch, whose family owns a downtown restaurant, said the $11,000 tax bill increase on the property may “force us to consider leaving the city of Los Angeles.”

Supporting the assessments and urging the board to approve the bonds were representatives of the Los Angeles Area Chamber of Commerce and the Central City Assn., a lobbying organization for large downtown businesses. Chris Stewart, president of the Central City Assn., said the Metro Rail project is vital to downtown and cannot proceed without assessing businesses. But he said it was the federal government, hoping to limit its share of the project costs, that required the assessments. “We didn’t do this willingly,” he told The Times. Stewart was a leading supporter of the present means of financing the transit project.

Backed by a huge display of charts and graphs, Dyer cited huge land value increases near transit systems in other cities and said Metro Rail will bring a $750-million-to-$1.5-billion windfall of benefits--including increased land values and greater demand for commercial space.

At 30 cents per square foot of improved building space, the Metro Rail assessment represents only about 1.4% of the average downtown square footage rental rate, he said.

“We expect that every dollar of capital investment will be returned to the property owners,” Dyer said.

In other RTD developments, November’s drug testing figures for bus drivers were released, showing an increase for the third straight month in those testing positive for use of illegal drugs. Of 194 bus drivers tested, 6.2% were found to have used illegal drugs. It was 5.2% in October and 4.1% in September. RTD officials earlier predicted the figures would go down.

Dyer said the results show the district needs the strengthened drug testing policy recently approved by the board. That policy will allow more testing of drivers and is scheduled to be implemented Dec. 15.

The board also deferred action on how it will deal with a projected shortfall in revenue this year of up to $6 million.