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 drew some raised 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.”