Anti-tax groups call LA 'mansion tax' misleading at California appeals court

LOS ANGELES (CN) — Opponents of a so-called “mansion tax” in Los Angeles argued that a ballot measure misled voters when the tax was approved and that it was a violation of voter power on Thursday in front of the California Court of Appeals.

Opponents of the tax, such as the Howard Jarvis Taxpayer’s Association, have said that Measure ULA, or United to House Los Angeles stifles development in Los Angeles.

The opponents say that the measure is invalid and fails to accomplish its stated goals. The initiative was passed by Los Angeles voters in 2022 in an effort to provide a “sustainable funding stream dedicated to affordable housing production and homelessness prevention,” according to the Los Angeles Housing Department.

The measure puts a 4% tax on the sale of homes over $5 million and a 5.5% tax on the sales of homes over $10 million or more.

San Luis Obispo County Superior Court Judge Craig Van Rooyen and State Court of Appeal Associate Justice Armen Tamzarian seemed to tentatively agree with a lower court decision to dismiss the claims in favor of the city and ULA proponents.

“The voters have the initiative power. We only get there if we infer [Section] 450 is meant to take away their power with respect to taxes,” Tamzarian said, referring to a section of the city’s charter on proposed ordinances.

State Court of Appeal Associate Justice Audra Mori and Presiding Justice Helen Zukin also joined the panel.

Los Angeles attorney Keith Fromm, representing tax opponents Newcastle Courtyards LLC and Jonathan Benabou, told the panel that the money generated by the ULA wasn’t being spent how voters had been told it would be and wouldn’t solve any of California’s housing issues.

“If you validate the ULA, all that’s going to happen is all these poor people are going to keep paying into the ULA, the money cannot be spent, it will be basically exhausted by administrative fees that get taken out … from time to time, and no significant low-cost housing will be built and no significant amelioration of homelessness is going to happen,” he said.

“The money was to be used to provide low-cost housing, which would in turn alleviate homelessness. But because of the way the ULA was drafted, the self-serving language it gave to the unions and nonprofits and their priorities, it made it impossible to do what it was supposed to do, which means it does not advance a legitimate state purpose," Fromm added.

To date, the city’s housing department says that the measure has collected $881 million through the sale of 1,270 properties since April 2023. The ULA money also comes from commercial property and apartment complexes as well as homes.

But opponents say the defendants misrepresented the facts of the measure on ballots.

“If they had told people in this ballot that once we collect this money we won’t be able to spend it on low-cost housing, nobody would have voted for it,” Fromm said. “It’s the most material omission that there was. Perhaps they didn’t even know about it.”

The defendants representing the city government kept their responses brief, affirming Los Angeles County Superior Court Judge Barbara Scheper’s decision in their favor.

An attorney for co-defendant Southern California Association of Non-Profit Housing, Connor He-Schafer, of Irell & Manella, countered that the money the measure was supposed to raise was an estimate, not a “promise” and that the purported misrepresentations were clearly marked as opinions when they were published.

Attorney Timothy Bittle of the Howard Jarvis Taxpayers Foundation argued that the city’s own charter prevented the city’s voters from adopting property taxes such as the ULA. He said that ULA was an attempt by politicians to hijack the people of Los Angeles’ initiative power, though Tamzarian disputed that argument.

In their brief, the city and the other defendants argued that the city’s charter does not limit voters’ power to enact tax measures by initiative.

If the appeal is successful, the Howard Jarvis Taxpayers Association said that those who paid the tax will be entitled to refunds.