Developer Owes County Back Taxes of $1.4 Million

An Irvine-based company that hopes to build a huge housing development on the northeastern edge of town has not paid property tax on its land for five years and now owes Ventura County more than $1.4 million in back taxes and penalties.

If the developer, Messenger Investment Co., does not pay the bill by July 1, the property will be auctioned off by the county to the highest bidder, said Assistant County Tax Collector John McKinney.

The unpaid bill has prompted some residents to question whether Messenger Investment has the financial strength to complete the project, which is expected to cost about $1 billion.

This month, the company was able to reduce its total tax bill by an estimated $368,000 after taking its case before the county Tax Assessment Appeals Board, county officials said.

A new bill has not yet been worked out, but company officials concede that even with such a sizable reduction, it will be a struggle to pay the tax on the roughly 4,000 acres of undeveloped land they refer to as Hidden Creek Ranch.

“We will pay the bill, but we’re hoping to work out some sort of payment plan,” said Gary Austin, a company vice president, adding that the company is financially solid.

Not paying the bill until the last minute has been a strategic business decision, Austin said. The idea has been to wait until this spring before paying the overdue property tax, by which time company officials had hoped to receive an influx of cash.

They were anticipating that the city would have finished with its reviews of the proposed 3,221-home Hidden Creek development before the final tax deadline. With the reviews completed, the city could give its tentative approval to the project, and company officials could then use that pre-approval to acquire financing from outside investors.

But things didn’t pan out that way, Austin said.

The company’s outline for the development--planned to replace scrub-covered former ranch land--has become bogged down in a slow environmental review process with the city, which is expected to take several additional months.

“I don’t know what we can expect to happen before July,” Austin said. “No matter what happens though, we’re still going to have to meet the county’s deadline.”

Officials at the county assessors office said last week that after Messenger Investment appealed, the county reduced the assessed value of its property by about 50% for each of the last three years. The tax rate is about 1% of a property’s total assessed value.

In fiscal year 1993-94, Messenger’s original property assessment was roughly $21.2 million, which was lowered by about $10.4 million, said County Assessor Glen Gray. In 1994-95, the land was valued at about $23.4 million, and that amount was reduced by $12.3 million. And for 1995-96, the original assessment of $25.4 million was reduced by $14.1 million, Gray said.

When the company’s tax bill is finally revised, it could translate into a tax savings of about $368,000 over that three-year period, officials said, but the new bill is still being worked out.

While such a reassessment is large, it is not unheard of, according to the assessor.

“I don’t know the specifics of this appeal, but we’ve had a number of appeals where the property was assessed during the 1980s at a highly inflated value,” Gray said.

Before the Messenger Investment Co. took control of the property in 1987, the former grazing land was considered an agricultural preserve by local tax officials. Such parcels are typically valued at about $40 an acre and are protected under a statewide farmland conservation act known as the Williamson Act that uses tax breaks to preserve such rural property.

But when Messenger purchased the land, it applied to remove the property from Williamson Act protection. It takes 10 years for such protected lands to come out from under the farmland protection program, during which time the assessed value of the property and its taxes are gradually increased.

In 1995, about half of Messenger’s property was not covered by the Williamson Act and was being assessed at the full market value--between $3,000 and $10,000 an acre. The remainder of the property is scheduled to be out of Williamson Act protection by 1997.

Whatever the final assessment, the bill will still take a big bite out of Messenger’s corporate coffers, Austin said.

Messenger has spent well over $1 million in fees and consulting costs during the past six years. During the last 12 months, the company said that it sunk about an additional $650,000 into producing a 2,000-page environmental impact report on its planned development, that would increase the size of Moorpark by more than one-third if built.

Although city officials have said they believe Messenger is financially strong, the flap over the delinquent tax bill has prompted some residents to once again doubt the company’s financial stability.

Just last summer, Messenger balked at paying the city a final $70,000 owed for fees related to the environmental review. That bill was eventually paid.

At a Planning Commission meeting last week, Tim Kelly, a staunch opponent of the development who lives near the property, asked why the developers have not paid their tax bill.

“I think it’s a legitimate question,” Kelly said.

Kelly was joined in his questioning by City Council candidate Bill LaPerch, another opponent of the development.

But Mayor Paul Lawrason responded to the comments by saying it may be premature to start scrutinizing Messenger’s financial stability.

Lawrason pointed out that if the company wins approval for its plan, the city would be protected by performance bonds the company would have to acquire to guarantee construction.

But Lawrason reiterated that with the environmental impact report and specific plan for the project still being reviewed by the Moorpark Planning Commission, it was much too early to analyze the financial wherewithal of the company.

“Of course you’ll always want to know if a company that may be embarking on a long-term project with the city is financially capable of completing the project,” Lawrason said. “But I don’t think this is the time yet. We’ve been dealing with the Messenger company for several years and they have always had a good reputation in the industry.”

The company made a name for itself in the 1980s by building warehouses, business parks and industrial facilities across California, Texas, Indiana and Illinois, according to Austin.

But Messenger was also hit hard by the recession, going from a high of about 40 employees in 1992 to about six now. Company President William Messenger Jr. said in an interview last year that his company was focusing solely on the Hidden Creek Ranch development near Moorpark.

As a top Messenger official, Austin has worked for five years to win the trust of city officials and many local residents by tirelessly commuting back and forth between meetings in Moorpark and his office in Orange County. He said the privately held company is sound, but must still justify spending any more than it has to.

Austin says the company is constantly re-evaulating whether the project is worth completing. “We have to ask if it’s still economically viable,” Austin said. “We think it is. It’s a viable plan and a very attractive project.”

Before the project reaches the City Council for consideration, the Planning Commission would have to deem the environmental review complete and then approve the specific plan for the project. This would list the details of the development, such as the types of homes to be constructed and where exactly they would be built.

Then, because the property is just outside the city limits, the company and the city would have to seek approval from the county to annex the land to the city.

The sheer size of the proposed development has made it the focal point for debate on growth in the city, and with a special City Council election scheduled March 26, the project has also become a major campaign issue.