"$30 million at stake in Bay Area airport tax suit"

Thursday, September 26, 2002

$30 million at stake in tax suit 
By Mark Simon   
San Francisco (CA) Chronicle


Three Bay Area counties -- San Mateo, Santa Clara and Alameda -- are
suing to stop what they say was a blatantly political attempt to
capitalize on the events of Sept. 11. 

The effort threatens to cost the counties more than $30 million in
property taxes collected from the region's airports. 

The target in the lawsuit is the state Board of Equalization, the body
that rules on tax disputes and interprets tax laws. 

Two of its members, Democrat Johan Klehs and Republican Dean Andal, were
running, unsuccessfully it turned out, for state controller when the
nation's airlines asked for extraordinary tax relief after the terrorist
attacks. 

Under state law, property taxpayers are entitled to a reassessment of
their property values should they be struck by disaster. Under that law,
the airlines were granted a reduction in taxes because of the loss of
airplanes from their fleet because of the Sept. 11 airline crashes. 

But the airlines and airport vendors wanted more. 

They filed claims calling for a reduction in their assessed property
values based on all the economic losses resulting from the attacks. The
losses included a sharp drop in the number of passengers, the loss of
business because the airports were closed for several days after the
attacks and a decline in sales at airport shops and concessions because
of new regulations limiting access to passenger areas. 

The claims amounted to a $2.5 billion reduction in property values at
San Francisco International Airport, $530 million at Oakland
International Airport and $300 million at San Jose Mineta International
Airport. That translates into a loss of property tax revenues to the
three counties of more than of $30 million. 

The claim for economic relief "was without precedent," said San Mateo
County Counsel Tom Casey. "There was no basis for it whatsoever." 

After the counties rejected the claims, the airlines and concessionaires
appealed to the Board of Equalization. 

Against the advice of the board's legal counsel, Klehs proposed
approving the airlines' claim and Andal voted for it. 

"At the time, (they) were trying to raise money for their political
campaigns," said Santa Clara County Assessor Larry Stone, president of
the California Assessor's Association. "There is a political connection
here." 

Calls to Andal's office were referred to Klehs, who did collect a few
thousand dollars from airlines during his campaign for controller. 

Klehs said the board's decision is legally sound. 

"State law allows (relief for) economic damage and economic damage can
be considered physical damage," he said. 

Not so, said Stone. "The law couldn't be clearer," he said. "There must
be physical damage in the county where the assessment occurred." 

The claim that restricted access to an airport is cause for relief could
open up the counties to a wide range of theoretical claims, Stone said. 

"A business inside the Rose Bowl Parade route could claim the government
is restricting access to his business," Stone said. 

Klehs said he was disappointed with the suit. 

After Sept. 11, "when the entire nation pulled together . . . the only
people standing in the way of helping businesses who were hurt the most
are the county assessors," he said. 

Replied Stone: "The state board is trying to put us in a position of
being insensitive to the tragedy of Sept. 11. That's not fair. . . . To
insulate the airlines or anybody else from the economic impact of Sept.
11 is a never- ending situation. They're acting like they're the only
people who were affected negatively." 

HIRED GUN: San Mateo County, being sued by Bank of America and Wells
Fargo over consumer privacy legislation, is negotiating with Burlingame
attorney Joe Cotchett to have him serve as a legal counsel on the case. 

Cotchett is one of the top consumer attorneys in the country, known for
winning large judgments on behalf of shareholders and investors against
the legal and accounting firms that have propped up some of this
nation's most notable fraud schemes. He is suing Goldman Sachs, Salomon
Smith Barney, Bank of America Securities and Arthur Andersen on behalf
of investors who say they were defrauded into buying Enron stocks and
bonds. 

In August, San Mateo County supervisors adopted an ordinance requiring
written consumer consent before financial institutions share any
customer information. The measure would apply only to institutions
operating within the unincorporated portions of the county and was
largely a symbolic show of support for a similar proposal by state Sen.
Jackie Speier, D-Hillsborough, that was killed in the Legislature. 

The banks filed suit two weeks ago, and Cotchett expressed interest in
helping the county on a pro bono basis. 

"We're still talking to him," said County Counsel Tom Casey. "We're
obviously very interested in seeing if we can do something with him."


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