L.A. Superior Court Judge Barbara Scheper formally dismissed legal challenges from Howard Jarvis Taxpayers Association and Newcastle Courtyards to the City of Los Angeles’ controversial Measure ULA transfer tax on Oct. 24.
In a terse ruling, Scheper wrote “plaintiffs’ and the Newcastle plaintiffs’ fail as a matter of law and any amendment would be futile. Accordingly, the court grants defendants’ motions for judgment on the pleadings on the grounds that plaintiffs fail to state facts sufficient to support any claim against any defendant.”
It was a lightning-quick decision. At an Oct. 23 hearing, Scheper made a verbal tentative ruling that she would dismiss complaints from Howard Jarvis Taxpayers Association and Newcastle Courtyards on ULA. The wealth transfer tax was approved by Los Angeles voters in November 2022.
Shortly after the Oct. 23 hearing, Howard Jarvis Taxpayers Association lawyer Laura Dougherty forecast that her group would appeal if its case was dismissed.
Keith Fromm of Newcastle Courtyards said he was not surprised at the judgment.
“Whatever the merits may be of a case, it takes a very courageous trial court judge to face the political blowback of striking down a voters’ initiative. So to that extent, this result was not entirely unexpected,” he said.
The Measure ULA imposes a 4 percent tax on any real estate transaction above a $5 million threshold. The tax rises to 5.5 percent for deals worth $10 million or more.
Newcastle Courtyards and Howard Jarvis Taxpayers Association suits were combined by the courts earlier this year, but they made different arguments. Howard Jarvis said the California Constitution prohibited cities from levying a special tax with a simple majority of voters. A significant argument by Newcastle Courtyards said Measure ULA violates real property owners’ equal protection rights under both the U.S. and California constitutions.
Joe Donlin, director of United to House LA Coalition, which helped spearhead the campaign to pass Measure ULA, also predicted the decision.
“We are relieved but not surprised by the judge’s ruling. We were confident in the validity of Measure ULA from the start. Voters knew this was a monumental initiative for our city,” he said.
ULA funds will finance a number of city programs, which include developing affordable housing, rental assistance and legal counsel to stop evictions. In August, the L.A. City Council allocated $150 million from the measure to support these projects.
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ULA has been the target of heavy criticism from the city’s real estate industry. At The Real Deal’s Los Angeles Forum in September, Lew Horne, president of Advisory Services for CBRE’s Greater Los Angeles, Orange County and Inland Empire region, called the wealth transfer tax the “dumbest thing we’ve ever seen.” He continued: ““ULA now has essentially redlined the city of Los Angeles.”
ULA will be challenged at the ballot box in November 2024. The Taxpayer Protection and Government Accountability Act qualified for the ballot and will require that a special tax at the local level would need to be approved by two-thirds of voters, according to a description of the ballot initiative.