SACRAMENTO : Appointee to California Cabinet Post Still Faces Confirmation Hurdles

As California’s secretary of business, transportation and housing, Carl Covitz, is charged with managing a sprawling state agency with 38,000 employees and a $6-billion budget. He must also contend with an unusual amount of gossip, barbs and charges from a host of critics who want to sabotage his official confirmation to the $106,000 post.

Last December, Gov. Pete Wilson tapped the 52-year-old former real estate developer to take the Cabinet position, whose responsibilities include the departments of transportation, commerce and motor vehicles and oversees the regulation of banks, savings and loans, corporations and real estate agents.

Covitz, who previously served in the Reagan Administration from 1987 to 1989 as an official with the Department of Housing and Urban Development, must be confirmed by the Senate to keep the position. His hearing, scheduled later this month, has been delayed once already.

Trouble began for Covitz in February, when he paid a courtesy visit to Sen. Bill Lockyer (D-Hayward). Angry with the Wilson Administration over a proposed toll road in his Alameda County district, Lockyer is pushing a bill that would prevent public funds from being used to jump-start the development of toll roads. Wilson threatened to veto the measure, and Covitz carried the governor’s unwelcome message to Lockyer.

“I plan to vigorously oppose the (Covitz) appointment,” said Lockyer, who admits that his opposition is based solely on the scrap over toll roads.

In the heat of the budget debate last month, the Senate Rules Committee postponed a hearing on the Covitz appointment. At the time, Sen. David Roberti (D-Los Angeles) threatened to hold up the confirmation because of a rift with Wilson over reforming workers’ compensation laws.

Covitz’s outspoken criticism of rent control has also rankled a few lawmakers. More than 20 years ago he helped found the California Housing Council, which has championed legislation to overturn local rent control laws. An ardent defender of rent control, Roberti has opposed the housing council at every turn. Although Roberti’s aides say the rent control issue alone wouldn’t kill the Covitz appointment, a number of Roberti’s constituents are concerned that Covitz might undermine local rent control efforts.

The delay in the confirmation hearing has given critics time to try to build a case against Covitz.

The Senate Rules Committee has looked into Covitz’s tenure at HUD, where he reported to Secretary Samuel Pierce. After exhaustive investigations into the scandal-ridden federal housing agency, Covitz was never in any way implicated in the wrongdoing, in which HUD officials awarded federal housing monies to their political favorites.

“In fact, I took steps (while at HUD) to set up a system to prevent future abuses,” Covitz said.

Nevertheless, when Covitz is brought before the Rules Committee this month for confirmation, he should expect tough questions about his role at HUD. Consideration was even given to hiring a private investigator to look into Covitz’s record while in Washington. “We haven’t found a smoking gun, but we have a lot of questions,” said one official, who didn’t want to be identified.

Some political insiders believe that the damaging stories about Covitz’s personal style are emanating from conservative detractors who don’t approve of his past ties and friendships with Democrats, such as Mayor Tom Bradley, former Assemblyman Mike Roos and former Atty. Gen. John K. Van De Kamp.

One report said Covitz had used a chauffeur-driven limousine. Covitz admits to hiring a car and a driver on a recent trip to Washington but said: “It wasn’t a limo. I paid for the car myself and I was a lot more productive as a result.” He added: “In Sacramento, I drive myself.”

Mortgage Deduction Threat Defeated

As the state budget debacle unfolded this spring, every imaginable scheme for plugging loopholes was put on the table by frantic legislators. Almost every serious proposal was enacted in one form or another, except one. A plan to curtail the mortgage interest deduction was scrapped after furious lobbying by the real estate industry.

Current law limits the deductible interest to $1 million in home-loan debt. At today’s rates, a homeowner with an $11-million mortgage can deduct all of the interest from state income taxes. One proposal would lower the amount of interest that could be deducted to $70,000, which would affect only homeowners with mortgages of more than $710,000.

Another recommendation would have killed the mortgage interest deduction for the purchase of a second or vacation home.

Indeed, according the state legislative analyst’s office, the total revenue loss to the state from the mortgage interest deduction amounts to $2.5 billion. The tax break causes the U.S. Treasury to lose $47 billion in federal income-tax deductions.

To fight the proposals, the California Assn. of Realtors issued a “red alert” to its 120,000 members, which prompted thousands of letters to legislators demanding that the proposal to limit the mortgage deduction be dropped. Lawmakers also heard from local leaders in resort communities who were fearful that changes to the second-home deduction would cripple local real estate markets.