The public reluctance by the owners of Taylor Ranch to sell 465 acres for a new California State University campus may eventually help them obtain a tax bonanza of more than $2 million, a survey of legal experts revealed this week.
Virtually assured of the tax windfall, owners of the ranch broke a yearlong silence this week, disclosing that they are actively negotiating the sale of their land while fighting to retain some oil-drilling rights.
Prompted by Cal State's clear determination to use eminent domain powers to seize the ranch for a campus site, a lawyer representing the Taylor Ranch owners said they are now trying to work out "the best deal possible" with the state.
"It's no longer a question of whether we are willing to sell," said Santa Barbara attorney James Hurley, representing Taylor Ranch heiress Cynthia Wood and other family members. "The state has made it clear they plan to take the property. In that case, you then try to negotiate or make the best deal you can for the rest of the ranch."
In negotiations with the state, Hurley said, the primary concerns will be in securing oil-drilling rights on the land, adequate water supplies for the rest of the ranch, a satisfactory price and environmental safeguards involving the proximity of oil-drilling operations.
Despite the tax advantages of having opposed a project headed for condemnation, Hurley said the potential tax benefits were never a consideration in opposing the campus site.
"Absolutely not," Hurley said. "Our opposition from the start has been made primarily because of environmental concerns."
While Hurley denied that a tax break was one of the motives for opposing the Cal State campus site, several leading California lawyers told The Times that one benefit of the opposition will be a considerable windfall for Taylor Ranch's owners.
When a state agency moves to acquire private property for public use, they pointed out, the owners must resist the initial purchase offer to qualify for tax breaks.
Beverly Hills attorney Bruce I. Hochman, one of the leading tax lawyers on the West Coast, said that if the owners of Taylor Ranch had immediately accepted a state offer to purchase their land, they would have lost a chance for lucrative state and federal tax deferments.
Hochman said that if the state pays $7 million for the land, the sum earmarked for the purchase of the hillside parcel, the owners would have two years to reinvest tax-free profits in similar property and would never have to pay capital gains taxes on the profits if they did not resell the new holdings during their lifetime.
The savings in state and federal capital gains taxes would be $2 million at that $7-million purchase price if the land had originally cost $1 million, Hochman said. Assuming that the initial land costs were significantly less, he said, the savings would be even greater.
The legal insights into the high-stakes tax maneuvers that accompany almost all major state land acquisitions followed a week of major new developments in Cal State's continuing quest to acquire the Taylor Ranch site:
* After a unanimous vote by the Ventura City Council rezoning the hillside parcel for institutional use and encouraging Cal State to proceed with the project, the university took the first step toward seizing the land by obtaining authorization of the California Public Works Board for eminent domain proceedings.
* At the same time, state officials disclosed that constructive negotiations are in progress that could eliminate the need for eminent domain proceedings and produce a settlement in the next few months. Hurley's confirmation followed.
* As Cal State moved closer to acquiring the ranch site, environmental forces opposed to converting the parcel into a bustling state university site filed a lawsuit seeking to block the purchase, pending revisions in an environmental impact report approved by the state last month.
Months of Speculation
The latest flurry of activity and the outside legal assessments of the economics involved in eminent domain cases came after months of speculation over why the ranch's owners apparently were determined to resist potential legal action that almost always results in a successful state seizure.
The Taylor Ranch owners, Wood and her mother and stepfather, Pierre and Ailene Claeyssens, all of Montecito, have been on record as opposing the sale of the ranch since June, 1988, although Ventura officials have said Wood initially had a favorable attitude about selling the property for a university. The family has owned the ranch since the early 1900s.
In explaining the family's opposition to selling the land, Wood's attorney, J. Robert Andrews of Santa Barbara, initially cited alleged concerns by Shell Oil Co., which has oil leases on the ranch, that the presence of a campus could disrupt oil production and create potential liability problems. Shell officials, however, denied any opposition to a proposed campus.