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Santa Barbara County Tax Assessment Appeals Boardmember Jana Zimmer April 26, 2012

Paul Wellman

Santa Barbara County Tax Assessment Appeals Boardmember Jana Zimmer April 26, 2012


Miramar and Caruso Hit Road Block

Panel Balks at Plan to Save Developer $200,000 a Year


An obscure county appeals panel balked at granting Los Angeles developer Rick Caruso a property tax break worth $200,000 a year, with members of the real estate Assessment Appeals Board claiming they’d been given too little information to decide and found the information they had been given too confusing.

Typically, the procedure under deliberation would have been a slam dunk, but Caruso — a controversial figure given his role with Montecito’s much beleaguered Miramar Hotel — was seeking to achieve a $24 million reduction in the assessed value of the six parcels comprising the Miramar, and an item that would otherwise have been rubber-stamped got put on hold this Thursday for another month.

If that reduction in appraised value is approved, that means Caruso will pay roughly $300,000 a year in property taxes rather than the half a million he now pays. Given the stakes involved, it was striking that no one representing Caruso appeared at the hearing, held in the County Board of Supervisors room early Thursday morning. Equally striking, the number of reporters covering the hearing — three — outnumbered the number of appeals board panelists — two. (Typically, the panel consists of three voting members.)

Two years ago, Caruso had applied for a dramatic reduction in his assessed real estate value, arguing that the recent recession had reduced what his waterfront property was worth from $51 million to $5 million. But even with the market crash, county assessors insisted the property was worth far more than that. After a lengthy — if mysterious and confidential — process, they concluded the market value of the Miramar’s land and blighted cabins, combined, was $30 million. Caruso agreed, and this Thursday the appeals panel was asked to ratify a stipulated agreement between Caruso and the county to that effect.

Boardmember Donald Rowland objected on arcane legal and procedural grounds. Boardmember Jana Zimmer objected because she hadn’t been allowed to see the report justifying the $21 million reduction in value. That report is not available to the public because it contains proprietary information but is available to boardmembers. Zimmer questioned how it was Caruso justified the $5 million he initially said his property was worth. Under her questioning, staff members working for the county assessor acknowledged he provided no data to justify that number and suggested that he had released it merely as a starting point for discussion. Zimmer found that questionable. “They just threw down that number under penalty of perjury?” she asked. Likewise, she noted that $30 million seemed like a good midway point between $5 million and $50 million. “It kind of looks like this has been cut down the middle,” she said.

Melissa Bonilla of the assessor’s office denied that suggestion. The estimate, she said, was reached by examining the 100-page document Caruso released a few years ago when seeking new investors. Based on that and a thorough assessment of the luxury hotel market, Bonilla said $30.7 million was the most the Miramar could be valued at and still be a financially feasible project. While the specifics remain proprietary, Bonilla said, she factored in the cost of construction, the likely room, and the rate of return for the investors. She declined to elaborate what rate of return she used in making her determination.

Zimmer was clearly bothered that such a big ticket item involving someone as controversial as Caruso would be placed on the consent agenda. Unless called out by individual boardmembers, consent agenda items are voted upon with no discussion or debate. Zimmer wondered whether neighbors of the Miramar — vocal in their anger about the hotel’s visual blight — could get their property values reappraised based on “the stigma” and “external obsolescence” — terms of art in property appraisal — caused by the Miramar. If they submitted applications, she was told, they would be considered.

Boardmember Rowland said the stipulated agreement should be withdrawn because the ownership structure of the Miramar has changed since it was first submitted. Initially, Caruso owned only 10 percent of the Miramar; now he owns 100 percent. Because of this, he argued, new owners could not pursue the stipulated agreement sought by the previous ownership. Instead, he noted, Caruso could obtain the reappraisal he sought via other means. When ownership changes by more than 50 percent, reappraisals are automatic and no stipulated agreement need be entered.

Compounding confusion surrounding the proposed deal was Caruso’s request for a multiyear waiver of future bed taxes worth $18 million. This deal, intensely controversial in some quarters, was justified on the grounds that it would make it easier for Caruso to attract the investors needed to knock down the run-down hotel cabins and rebuild the Miramar. What the county would lose in bed taxes, Caruso — and County Auditor Bob Geis — argued, it would more than make up for with additional property taxes and sales taxes. But if the baseline were reduced for calculating property taxes, wouldn’t that have a bearing on how attractive — or not — the bed tax waiver was?

As Zimmer said more than once, “I’m confused.” On this, neither Bonilla, nor her boss, Lisa Hammock, had a ready answer.

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