Grand jury seeks probe of downtown Santa Ana property tax

A special downtown Santa Ana tax aimed at making improvements in a predominantly Latino shopping district may be illegal and should be investigated by county prosecutors, a grand jury panel announced Thursday.

The grand jury is calling on the Orange County district attorney’s office to investigate whether the city illegally created a 66-block tax district in downtown Santa Ana in a 2008 election, in which only 25% of the ballots mailed to property owners were returned.

The report noted that Santa Ana has been placed on notice on “numerous occasions” for its lack of compliance in creating and managing special assessment districts.

“The results have caused, on average, a doubling of the financial burdens on the respective properties,” the report states.

The downtown tax — which funds extra security, marketing and promotional events — has become a source of conflict in the second-largest city in Orange County.

Property and business owners have prominently displayed anti-tax signs in storefront windows, and some have accused civic leaders and developers of leading a “forced gentrification” of a historic downtown core once called Fiesta Marketplace, which was a haven for Latino shoppers.

There are still restaurants, Western wear and quinceañera dress shops off 4th Street, but many property owners have complained that the extra tax money, distributed by a nonprofit organization, is benefiting only a select few rather than the entire business district.

Some merchants singled out Irv Chase, a developer who owns much of the shopping district, which is now dubbed “East End” and is home to new restaurants and even a hip barber shop.

Chase, known to some as “the great gentrifier,” was accused of trying to drive out Latino business owners, and at a high-profile public meeting last year, Councilwoman Claudia Alvarez accused the developer of leading an ethnic cleansing campaign in a city that is nearly 80% Latino.

“I want original entrepreneurs, people who are starting businesses that aren’t done anywhere else,” Chase told The Times last year. “If you can find everything in South Coast Plaza or Main Place, or the Block, why would you go to downtown Santa Ana?”

He declined to comment on the grand jury report, which also alleged that there was an “appearance of impropriety” between Chase and Downtown Inc., the nonprofit created to distribute the tax funds. Chase served on the group’s board of directors but resigned last year.

The report also leveled criticism at the City Council for failing to handle complaints and proposals from property owners, who “were being assessed monies that were being used to change the identity of the very area that they had long cherished,” according to the report.

Paul Walters, the city manager, said the city attorney will evaluate the grand jury report and will make recommendations to the council.

Arturo Lomeli, a local dentist who said his property taxes doubled because of the district, said the grand jury report affirms what he has been protesting for years.

“This body sees it exactly the way I see it,” he said.

nicole.santacruz@latimes.com