L.A.’s role in farm deal
contains a shovel full of legal questions HOW FAR IS MAYOR ANTONIO
VILLARAIGOSA willing to go to save the South Central Community Garden?
That’s the question being debated behind closed doors by the park
advocates, policy analysts and the city's extensive legal staff.
Villaraigosa raised some eyebrows last week after the L.A. Weekly
reported that his appointees at the Port of Los Angeles had agreed to
spend tens of thousands of dollars on an option to buy the garden, at
41st and Alameda streets, which has become a cause célèbre for
environmentalists, peace activists and Green Party candidate Peter
Camejo. Now, officials at City Hall are internally divided over the
next, potentially perilous legal step — orchestrating a tax break for
the owner of the land, Ralph Horowitz.
With time running out for the gardeners, the city’s lawyers have been
reviewing whether to make Horowitz eligible for a “1033 exchange”
— allowing him to defer the capital gains on his property for at least
two years if his land is purchased for a garden permanently. That
provision of the federal tax code can be exercised by Horowitz only if
his property is threatened by eminent domain, the process by which
government agencies seize private property, or destroyed by an Act of
God.
Since an earthquake or a flood wouldn’t exactly do lasting damage to a
verdant garden, the city would need to show that it intends to take
Horowitz’s property by eminent domain — something it already did 20
years ago, igniting the legal free-for-all that has since enveloped the
property. The Trust for Public Land (TPL), a park-advocacy group working
with Villaraigosa to buy the garden, confirmed that the 1033 exchange is
a component of the deal being crafted for the property.
The only problem is, Trust for Public Land area director Larry Kaplan
also said that there is no plan for acquiring Horowitz’s property by
eminent domain, since the TPL only works with willing sellers — a
policy established 35 years ago by the group’s national board.
“Nobody’s holding a gun to [Horowitz’s] head to sign a contract
with us,” Kaplan said. “Anytime you get into condemnation and
eminent domain, we’re not in the picture, that’s not our thing. And
besides, what does a government agency need us for if they’re doing
eminent domain? The skill set we bring is, we know how to do a deal.
Eminent domain is not a negotiation. Eminent domain is a police
action.”
And therein lies the legal quandary. If a property owner seeks a 1033
exchange, he must show proof that his property was truly threatened with
condemnation, said Christopher Sutton, a Pasadena-based attorney who
specializes in eminent-domain cases. That proof would most likely come
in the form of a lawsuit, a City Council vote or possibly a letter from
the mayor declaring his intent to condemn the property.
“Is this in fact a condemnation or is it just a bogus threat?”
Sutton asked. “I’ve seen cities threaten eminent domain, and, to the
extent that the IRS finds out that it’s not really a threat, it’s a
staged letter, the property owner takes the risk. [IRS investigators]
will say, ‘You weren’t really forced to sell, and we’re going to
tax you on the profits from the sale.’
“If the IRS finds out,” he added, “somebody’s going to get in
trouble, because that’s a felony. You’re engaging in a scheme to pry
money out of the federal government.”
Harbor officials have already received a call from the State Lands
Commission, the agency that oversees port spending, asking why they are
spending money on a property so far north of the port. The commission
has taken action against the port in the past when it has violated state
law, which requires that port funds be used only for port commerce,
navigation or fishing purposes.
Villaraigosa’s office did not return calls seeking comment on the
talks. But mayoral aides have argued privately that the option to buy
Horowitz’s land, which is expected to last 45 days, is really a legal
expense, since a successful purchase of the garden would persuade the
South Central Farmers to drop their lawsuit. Horowitz would not discuss
the negotiations, saying only that he has offered to sell his property
to the TPL for a price that is “substantially below market” — an
offer that has not yet been accepted.
Meanwhile, Councilwoman Jan Perry, whose district includes the garden,
introduced a motion last week asking for an explanation of the port’s
involvement, saying she had been left out of the loop during the Harbor
Commission’s closed-door talks. Perry, whose district includes the
garden, also said she would not consider a request for the council to
again condemn Horowitz’s property. “That’s what started this whole
mess in the first place,” she said.
Asked if a 1033 exchange was part of the negotiations, City Attorney
Rocky Delgadillo’s spokesman, Jonathan Diamond, refused to comment,
saying the effort to save the garden is “being driven by another
office.” Still, Diamond also said that any tax break is ultimately the
responsibility of a private land owner.
“It doesn’t matter to us what kind of exchange the person engages
in,” he said. “Once they’ve got their money, that’s their
problem, [their] tax implications.”
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