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The Loop

A taxing issue for Los Angeles' equity clubs

January 17, 2010

Members at some of Los Angeles' high-profile equity-owned country clubs might have been alarmed to read this this story in the Los Angeles Times on Saturday, one that raises an issue that potentially could cost the clubs millions in property taxes they aren't currently paying.

California's Proposition 13, passed by voters in 1978, capped property taxes and limited annual assessment increases. Moreover, as the Times notes, "properties are usually reappraised at market value only when they change hands."

Los Angeles Garment & Citizen, a little known weekly magazine targeting downtown Los Angeles and surrounding neighborhoods, originally had the story last month, asking

Los Angeles County Assessor Rick Auerbach why equity clubs were not reappraised given that ownership routinely changed hands via memberships being bought and sold.

"I didn't have a good answer for him," Auerbach told the Times.

Auerbach, the newspaper reports, has turned to the state Board of Equalization for guidance on the issue. So what are the stakes?

Garment & Citizen cited the example of the Los Angeles Country Club, a 36-hole facility in the heart of Beverly Hills, 313 acres of some of the most expensive real estate in the country.

"Yet records kept by the County Assessor's office indicate that the 313 acres have an assessed value of $17.6 million, or approximately $5,623 an acre," Benjamin Mark Cole wrote in the magazine. "The club pays taxes at a rate of a little more than 1% of the current assessed value, or less than $200,000 a year.

Cole juxtaposes that against a home on Mapleton Drive adjacent to the club that sold for more than $18 million less than a year ago. "Based on the Mapleton Drive sale," he wrote, "if the Los Angeles County Club was developed only with low-density single-family housing on two-acre lots, annual property tax revenues would rise from the current $200,000 to $25 million."

Among the equity clubs in the area are Bel-Air Country Club and Brentwood Country Club.

"At least two homeowners within a half mile of the Brentwood Country Club, for example, pay more property tax than the 128-acre club, according to records from the Los Angeles County assessor's office," Alexandra Zavis wrote in the Times. "A six-bedroom house in the 12000 block of Marlboro Street had an assessed value last year of $14.35 million, or $737.79 a square foot of house and land. Another six-bedroom house in the 12000 block of Hanover Street was assessed at nearly $11.1 million, or $565.92 a square foot. But the country club, with its 18-hole golf course, tennis courts and pool, was valued at $9,526,453 -- $1.71 per square foot of land and facilities."

-- John Strege