Judge Combines Two Measure ULA Legal Challenges

An L.A. County judge has determined that two pending state lawsuits against the Measure ULA transfer tax, one from a landlord advocacy group and the other from a private developer, should be consolidated into a single case.

The City of Los Angeles, the defendant in both suits, had requested to merge the two suits in an effort to win a quicker ruling.

“We had hoped to avoid consolidating the cases,” Dan Yukelson, executive director of the Apartment Association of Greater Los Angeles (AAGLA), one of the plaintiffs against the city, said by text message, “because doing so slows our path to victory and badly needed relief sought by property owners who may fall prey to this excessive and punitive tax.”

He added that he hopes the cases “will move forward as expeditiously as possible.”

Jeffrey Lee Costell, an attorney for Newcastle Courtyards, the entity that brought the second state challenge to the controversial tax, said he hopes the judge would still consider his client’s numerous additional claims, which are also legally broader than those in the case brought by AAGLA and the Howard Jarvis Taxpayers Association.

“We took exception to the judge’s ruling,” Costell said, “but obviously this is how the judge wants the case and we’re going to do everything we can to make it work.”

Two attorneys representing the City of L.A. did not respond to inquiries.

Measure ULA, which adds a new 4 percent tax on most property deals in the city above $5 million and a 5.5 percent tax on most deals above $10 million, was approved by voters last November and went into effect this month.

The tax, which will be used to fund homelessness housing and programs, is expected to add nearly $700 million to the city’s coffers this budget year alone, although to date the city has been notably cautious about its spending rollout because of the legal uncertainty. AAGLA and the Howard Jarvis Taxpayers Association filed their challenge to the measure in late December in California state court, arguing that the tax was invalid because it amounted to a “special” rather than general tax, which local governments don’t have the authority to impose.

A few weeks later, in January, Newcastle filed challenges of its own in both state and federal court, presenting arguments, among others, that the tax amounts to violations of the Fifth Amendment, which includes protections against government takings, and the Fourteenth Amendment, which relates to equal protection.

“We feel it’s taxing people because they’re supposedly wealthy, but it’s not true,” Costell said of Measure ULA. “This ordinance does not draw a distinction between whether you sell your property at a catastrophic loss or you make a lot of money on it. … We do not even believe that this statute has a rational basis to it.”

Under the judge’s procedural ruling to merge the two state cases, the Howard Jarvis and AAGLA suit becomes the lead case, with another hearing scheduled for next month.

Newcastle’s federal case is also still pending with legal rulings, including a potential dismissal, expected in the coming weeks.