Firm Loses Appeal of $1-Million City Tax Bill

One of the major players in the world aircraft market has failed to overturn a charge of more than $1 million in back payments for the right to do business in Beverly Hills.

International Lease Finance Corp. plans to leave the city and move to Los Angeles as a result of the City Council’s action, said Louis Gonda, executive vice president of the firm.

He said the company will challenge the constitutionality of Beverly Hills’ business taxes if the city persists in trying to collect the increased fees for the years 1985-1988.

The company paid less than $1,000 a year in those years, when the fee was based on the number of employees at its headquarters in the Great Western building at La Cienega and Wilshire boulevards.

Owns 77 Planes

Founded in 1973 with three principals, two secretaries and a handful of planes left over from a failed effort to run a commuter airline, ILFC now owns 77 airliners and reported revenues of $213.2 million last year.

One of the world’s two largest aircraft leasing firms, with more than 100 additional airliners on order in the United States and Europe, it has kept its work force down to a lean 24.

But city officials decided that its business tax should be computed as it would be for automobile leasing companies, using a formula based on gross receipts.

The result was a letter from the city’s finance director in December assessing the company $670,883 for the previous three fiscal years. After phone calls, meetings and letters back and forth, city Finance Director Donald J. Oblander followed up in June with a bill for $1,002,940 in fees and penalties.

‘An Absolute Outrage’

Barbara Brown, an attorney for ILFC, called this “an absolute outrage,” especially in light of a 1985 letter from a former city attorney who said there would be no change in the company’s tax status.

She argued that ILFC does most of its business outside the city, that all but one of its planes does not even fly in the United States and that there is a constitutional ban against cities taxing companies on business done outside their jurisdiction.

“Nothing has changed since 1973, except one thing, that it now earns a whole lot more money than it did when it started out,” she told the City Council.

But the present city attorney, Greg Stepanicich, said the firm’s leasing and brokerage activities mean that it should be taxable on the same basis as car leasing companies, not simply as a headquarters office as before.

“While its contracts may be executed elsewhere and there may be a great deal of traveling by its executives, there is only one office and that is in Beverly Hills,” he said.

May Drop Penalty Charges

He said that if the company would agree to the change in tax status, the city would consider dropping the penalty charges and that no effort would be made to refigure the fees before 1985.

He said it was not the company’s growing profits that made the city refigure ILFC’s business tax, “but the realization that the nature of the business was different than was assumed by staff at an earlier time.”

The company’s appeal was denied by a 4-0 vote, with no discussion by City Council members.

Brown said after the meeting that the company had offered to pay the same for its business license as it expects to in Los Angeles, between $30,000 and $80,000 a year, but that the offer was refused by city officials.

“To be forced out of Beverly Hills by council members who have been wrongly advised by their staff is very, very disturbing,” Gonda said.

“The only infraction is that we became successful,” added his father, Leslie Gonda, ILFC’s chairman and chief executive officer. “If that is a sin, then let them accuse us.”