Local firms shaking as Prop. 13 wobbles: state property system faces Supreme Court review.

Local firms shaking as Prop. 13 wobbles

Shock waves traveled quickly from Washington to Los Angeles last week after the U.S. Supreme Court decided to hear a case that could undermine California's property-tax system.

Although a ruling is unlikely before 1992, it could be explosive for Southlanders - including many businesses - whose lands appreciated greatly in the 1980s. They've been protected from proportionately higher property taxes by Proposition 13, the landmark 1978 tax-revolt amendment to the state Constitution.

On June 3 the High Court announced it will hear a constitutional challenge to Proposition 13 brought by Macy's department store over the uneven tax bite dealt landowners.

Inquiries streamed into the Los Angeles County Assessor's Office about potential impacts and whether tax law could eventually be rewritten to avoid painful tax increases, said Sid Delgado, assistant assessor for valuations to Assessor Kenneth P. Hahn.

"We've had many calls, and they're asking for Ken's opinion," said Delgado.

Hahn said he might lend political clout towards a legislative solution.

"Business folks are not terribly pleased that there's a prospect Prop. 13 might be overturned," Hahn commented last week. He said he may devote more staff to research duties, welcome news to a number of business and taxpayer groups that are anxious to shape future tax-law changes that the court might mandate.

"I'm working with the business community and the boards of realtors" in assessing the prospects, Hahn added.

Ex-assessor John Lynch, an ardent Proposition 13 supporter, was defeated by Hahn last November.

Proposition 13 was passed overwhelmingly by California voters in 1978. They were eager to cap the spiraling growth of property taxes. The measure capped property taxes at 1 percent of the property's assessed value in 1975. Assessments were constrained to a 2 percent-a-year increase but - importantly - must be updated following a change of ownership. In Los Angeles, sales have usually triggered sharply higher taxes, as frozen low assessments vanished.

Countywide, homes and businesses are worth about 4.6 times more than they were in 1975, said Delgado. Typically, a business with the same owner for 15 years could see its property taxes quadruple after a sale, and sometimes more.

For instance Century Plaza Towers, the high-profile triangular twin highrises in Century City, are worth about $730 million, but it is paying taxes on an assessment of only $144 million, pegged to the last change of ownership in 1981, said an Assessor's Office official.

Dodger Stadium, with no reassessment since 1975, is valued at just $36.7 million.

This disparity forms the basis for Macy's lawsuit over its 203,000-square-foot department store in Contra Costa County. Macy's pays property taxes 2.5 times greater than do Penney's and Sears on comparable properties nearby.