Howard Jarvis group won’t oppose bill to close Prop. 13 loophole

REPORTING FROM SACRAMENTO  —  The staunchest defender of California’s politically untouchable property-tax initiative, Proposition 13, has tacitly approved a bid to change the landmark law for the first time since voters passed it 36 years ago.

The Howard Jarvis Taxpayers Assn., the anti-tax group named for the champion of the 1978 measure, dropped its opposition to a bill that would clamp down on companies avoiding higher property taxes when they buy commercial real estate by using a corporate ownership maneuver.

“I think that the withdrawal of our opposition, at least for now, suggests that we don’t see this as a direct threat to Prop. 13,” said Jon Coupal, president of the Jarvis group, whose crusade for the law sparked a nationwide tax revolt.

He said his organization would not turn the proposal — if it remains as is — into a political cudgel in the upcoming elections. That’s a boon to lawmakers who might otherwise hesitate to back the bill, which is supported by a surprise coalition of business interests and Democrats.

Among those backing it are the California Chamber of Commerce and the California Business Roundtable.

“It must be a cold day in hell. The cow jumped over the moon. And pigs are flying somewhere,” quipped Republican Assemblyman Brian Nestande of Palm Desert at a committee hearing on the legislation Tuesday.

For decades, tinkering with Proposition 13 has been politically taboo, even for Democrats, especially in an election year. But the blessing from business groups, combined with the Jarvis association’s implicit nod, could persuade some moderate Democrats and Republicans, whose votes are needed to pass the measure, to sign on.

The bill, which cleared the Assembly Revenue and Taxation panel Tuesday, will need two-thirds approval in the Legislature.

Coupal’s group and its allies have traditionally viewed Proposition 13 as “canonized and holy and untouchable,” said Stuart A. Gabriel, director of the Richard S. Ziman Center for Real Estate at UCLA.

“I believe that these same groups have now correctly read political tea leaves,” he said, “to understand that there is concern … with the way that the proposition was implemented and that this concern is broad-based and widespread.”

The legislation would eliminate the ability of businesses to elude higher property taxes by carving up ownership in commercial property purchases so no one has a majority stake. The tactic averts a reassessment of the property that can increase its taxes.

The 2006 sale of Santa Monica’s Fairmont Miramar Hotel to computer magnate Michael Dell cast one of the brightest lights on that loophole. Dell divided ownership shares among his wife and two business partners, with no one taking on more than 49% of the property.

The move saved him about $1 million a year in property taxes.

“This particular loophole really pushed a button in people,” said Assemblyman Tom Ammiano (D-San Francisco), coauthor of the measure, AB 2372, with Raul Bocanegra (D-Pacoima).

Lenny Goldberg, leader of the California Tax Reform Assn., praised the measure as a “step forward” and noted the irony of being on the same side as his frequent foes.

“I get a little nervous sitting here with Rex Hime,” president of the California Business Properties Assn., Goldberg deadpanned. “He and I have been at it for many, many years.”

Hime, in a quick rejoinder, said he gets “a little tongue-tied sitting next to Lenny.”

Hime later said he believed that the unlikely coalition of supporters would stick together “unless one side or the other gets greedy.”

But Ammiano and Bocanegra will have to contend with deep-rooted distrust among some of Proposition 13’s staunch defenders, who fear that the new measure could open the door to further changes.

“I believe this is the camel’s nose under the tent,” said Assemblywoman Diane L. Harkey (R-Dana Point), who voted against the measure.

Other Republicans appeared more inclined to support the legislation.

Nestande, who is running for Congress against Democratic incumbent Raul Ruiz of Palm Desert, declined to take a position on the bill Tuesday but said he would be open to supporting it going forward.

melanie.mason@latimes.com