Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Special Report: How Trump scored a big tax break for conserving a golf range

EconomyApr 30, 2021 08:26AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. The Trump National Golf Club is seen in Rancho Palos Verdes 2/2

By Joseph Tanfani and Jaimi Dowdell

LOS ANGELES (Reuters) - When Donald Trump bought his seaside golf course in a wealthy Los Angeles suburb in 2002, he vowed to surround it with “some of the most beautiful houses in California." But the 261-acre property on the Palos Verdes Peninsula had a problem.

Geologists working for the city would not clear part of it for home-building because of unstable soil underlying the course, built on a landslide-prone bluff overlooking the Pacific Ocean.

The denials infuriated Trump, who lobbied and litigated for eight years in a failed effort to reverse the geologists’ findings and secure development approvals, according to interviews with planners and geologists and a Reuters review of public records and court filings.

Trump eventually abandoned a plan to build 16 homes and turned instead to the tax code to offset the lost profits - securing a $25 million tax deduction in exchange for a promise not to develop the land. The agreement with a nonprofit conservancy allowed him to continue using the land as a driving range for the Trump National Golf Course.

That 2014 agreement, known as a conservation easement, is now one focus of a broader investigation by New York Attorney General Letitia James into whether Trump improperly manipulated real-estate values for tax and other economic benefits, court records filed by her office show. “Information regarding the valuation of Trump Golf LA is significant to the Attorney General’s investigation,” the office said in a filing.

The attorney general is also investigating a $21.1 million tax deduction claimed on Trump’s Seven Springs estate in New York through another conservation easement. The office declined to comment on its investigations into the easements.

An attorney for the Trump Organization, Jill Martin - who worked on the California easement and whose office is on the golf course - declined to comment. Other lawyers representing Trump and his business did not respond to requests for comment.

Conservation easements are usually agreements between property owners and nonprofit organizations dedicated to preserving open space. In return for foregoing development rights, property owners can take a charitable tax deduction based on a real-estate appraiser’s estimate of lost value. The agreements are under growing scrutiny by tax authorities and Congress members who contend wealthy developers often get huge tax breaks for easements providing little public benefit. The Internal Revenue Service has been particularly skeptical of values of easements on golf courses.

Some tax specialists questioned whether Trump could have earned $25 million from developing the seaside land because he hadn't been able to win approvals despite years of trying. Even if he could get those approvals, Trump would have faced a costly investment in engineering to stabilize home foundations on the shifting soils, raising questions about the value of the land and its development potential, according to local officials, geologic consultants and tax specialists.

Trump’s troubled effort to develop the land, and its continued use as part of his golf business, also casts doubt on the public benefit of protecting it.

“What conservation value is there in an urban golf range that can’t be developed anyway because of foundational problems?” said Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center in Washington.

Trump made his easement agreement, for 11.5 acres, with the Palos Verdes Peninsula Land Conservancy. Allen Franz, a longtime conservancy board member and former president, acknowledged in an interview that the easement had little public value compared to most of the organization’s agreements. The conservancy typically focuses on areas with a public use such as parks or hiking trails. The driving range, by contrast, was just a part of Trump’s business.

“It doesn’t do us a whole lot of good to have a conservation easement over a driving range,” Franz said.

The conservancy and some local residents did value preventing home construction there, however, in part because they believed homes on the site would obstruct the area’s ocean views. Franz said the conservancy had “no role in assigning any value” to Trump’s driving range easement, which is typical in such conservation agreements.

DETERMINING PUBLIC VALUE

Pinpointing the value of Trump’s lost development rights is a central challenge facing the New York investigators in proving that Trump took an improper or inflated tax deduction.

That may not be easy, and hinges on the question of whether a builder could have profited from development despite the lack of approvals and the engineering costs. Developers and engineers said builders sometimes do spend large sums on engineering to stabilize land for construction on high-value oceanfront lots. Before making the easement agreement, Trump continued to insist he could build on the land despite the unstable soil and his struggles to win local approvals.

“It would be worth at least that,” said Scott Wellman, a lawyer who represented Trump in his fight against the city, of the $25 million deduction.

Yet Trump himself valued a parcel covering most of the driving range at just $900,000 in a 2013 property tax appeal, just a year before signing the conservation agreement, Los Angeles County assessment records show. Trump was seeking to lower his taxes after a county assessor pegged the value at $1.1 million.

Trump has a history of assigning widely varying values to the course. An attorney general’s legal filing shows that Trump’s appraisers on the conservation easement assigned a value of $107 million to the entire property in December of 2014, including the driving range.

In 2005, the Trump organization valued the property at $360 million in a financial statement, according to testimony in a defamation lawsuit filed by Trump that involved his claims about his wealth.

Appraisals to support Trump’s tax breaks for the California and New York easements were done by the firm of Cushman & Wakefield (NYSE:CWK) Plc. Cushman did not respond to requests for comment on how it arrived at the $25 million figure. Trump, his appraiser and the conservancy declined to disclose the appraisal to Reuters.

Lots around the course that can be developed have proven to be valuable. Trump sold more than 25 vacant lots bordering the course from 2007 through 2019, for a total of $48.2 million, with a median price of about $1.6 million each, according to property records.

THREATS, INSULTS, LAWSUITS

The Trump National course is in a spectacular spot, perched on cliffs overlooking Catalina Island.

But unlike Trump’s ultra-exclusive golf resorts in Palm Beach and New York - where membership fees can be hundreds of thousands of dollars - he was required to keep Trump National open to the public by the California Coastal Commission, as part of a deal that the previous owners made with local residents to maintain open space.

To boost profits, Trump sought to develop expensive homes around the course. The previous developers had drawn up plans for 75 houses on its borders.

The risk of unstable soils was apparent when Trump bought the course in 2002. When another developer was close to opening the course in 1999, most of the 18th hole and parts of the 9th and 12th holes collapsed, trapping a man and his dog, who were rescued by helicopter. The owners then tried but failed to run it as a 15-hole course. Three years later, after the owners declared bankruptcy, Trump bought it from banking giant Credit Suisse (SIX:CSGN) at the bargain price of $27 million.

The landslide raised doubts among local officials that Trump could safely develop the area. The city of Rancho Palos Verdes began extensive geological tests. Although the developers who sold to Trump blamed a leaky sewer pipe for the 1999 collapse, the city’s geologists believed the main culprit was a thin layer of slippery volcanic ash called bentonite that ran under parts of the property, according to interviews and city documents.

“We wanted to make damn sure that anybody who thought about building a house with conventional foundations wouldn’t have to worry about the house sliding into the ocean,” said Bill Cotton, one of the city’s consulting geologists.

‘ALL HE DID WAS BULLY US’

Trump’s history as owner of the Los Angeles golf course is a study in the hardball tactics that became a hallmark of his business career and White House tenure. When he ran into resistance in the secluded seaside enclave, Trump repeatedly tried to bulldoze his way through obstacles with threats, insults and legal actions.

In 2003, he sued the local school board in a dispute over the rent he owed for a piece of land he needed for the course; the school board prevailed. To block the view of some neighboring homes he didn’t like, Trump planted a row of trees without city permission. In 2006, he erected a giant 70-foot flagpole without a permit. When city officials objected, he accused them of being against the American flag.

“Councilman Stern doesn’t want to take down a flagpole, he wants to take down the American flag,” Trump wrote in a letter to the city manager, speaking of then-Councilman Doug Stern. “He should be ashamed of himself!”

The public browbeating was typical of Trump’s style, Stern said in an interview.

“All he did was bully us or try to,” he said. “If there are two ways to do something to accomplish a goal, there’s no thrill in doing it the right way. He always did it the wrong way.”

Trump did build some homes on land the city judged safe for development, and he sold other lots. But 39 home lots in one section of the property remained in development limbo, as the geology studies and disputes continued.

In 2005, when Trump needed to build a driving range before hosting a professional golf tournament, Stern said he proposed a solution.

“We told him: You can put a driving range in the area where you have questionable geology,” Stern said.

In June of 2005, a Trump executive came to a city hearing and agreed with city officials to get rid of 16 of the 39 lots under review and to instead use that land for the driving range.

“Giving up 16 lots is quite a bit of real-estate,” said Vincent Stellio, who then was Trump’s director of golf course development, at the hearing. He told city officials and neighbors opposing the development that giving up the housing sites was the best way to resolve the disputes.

‘WE’RE GOING TO SUE YOU’

Despite that agreement, Trump kept trying to win city approvals to build homes on that land. As the geology studies continued, Trump began leaning on local officials and the geologists who continued to find safety problems on the driving range site that stymied Trump’s development plans.

In June 2007, Trump called the Rancho Palos Verdes city manager and threatened to sue, according to minutes of a city meeting. Cotton, one of the geologists the city consulted, told Reuters that Trump also called him at his office twice with legal threats.

“First thing he says to me: ‘I’m looking at these lawsuits. We’re going to sue you and sue your company,’” Cotton said.

Cotton asked for time to review his files. Trump called him the next day, letting him know first that he was in a limousine on his way to film his reality television show, “The Apprentice.”

“Look, I can’t do anything,” Cotton recalled telling Trump when he called him back. “The ball’s in your court.”

“I’m going to sue you guys then,” Trump shot back, according to Cotton.

Trump’s lawsuit against the city, filed in December 2008, claimed he was being unfairly denied permission to build the 16 homes, among other projects, and that he was being held to a higher standard than other developers. As promised, Trump’s suit also named Cotton and two other geologists individually as defendants, alleging that they were trying to squeeze him to spend more money on unnecessary geological studies after he had already spent $3 million.

Steve Wolowitz, another council member at the time, told Reuters that Trump also called him at his home and office a “half dozen” times to pressure him before Wolowitz finally got fed up with Trump’s insults and told him to quit calling.

As the lawsuit dragged on, Stern wrote a memo to the city manager and his fellow council members in 2010 urging them not to settle the case because Trump could not be trusted to abide by any commitments he might make.

“What amazes me is that we seem to ignore the reality of what and who we are dealing with, acting like he thinks and behaves like an ethical person,” Stern wrote in a memo reviewed by Reuters. “Why do we now expect him to live up to his word, when he does not do that?”

SHOT DOWN IN COURT

Federal and state judges ruled against Trump during the long case, saying there was no evidence the city was being unfair. After four years of litigation, a new group of council members agreed to settle the lawsuit.

The city granted Trump’s request to rename a street at the golf course Trump National Drive. Other details of the settlement were subject to a confidentiality agreement. But Trump received no money, said the mayor at the time, Anthony Misetich, who added that the city’s relations with Trump improved after the settlement.

“My philosophy was, we were fortunate to have Donald Trump,” Misetich said in an interview, because Trump invested heavily to make the golf course “a beautiful property.”

By then, geologists had concluded in an August 2012 city report https://www.documentcloud.org/documents/20694011-rpv2012-hearingfortrumpgolf that the driving range could only be developed if Trump conducted a massive stabilization project by sinking 104 “shear pins,” which are vertical shafts reinforced with concrete. That reinforcement work would likely require supports running 50 to 60 feet deep, with costs well into the millions, according to southern California construction engineers and geologists.

Trump also faced a steep political challenge in restoring the housing lots - lots that he had agreed to give up when he sought city permission to use the land as a driving range. He would have to start over in applying to subdivide the property for homes, and then, separately, he would have to apply for permission to build on the unstable soil, the 2012 report said. That process would likely have dragged on for years and drawn fierce opposition from community groups, said current and former officials from the city and the state coastal commission.

In the end, Trump never did the pricey stabilization work, and never applied to reinstate the building lots. He chose instead to use the easement to get the $25 million tax deduction that is now under investigation.

In a letter memorializing the easement, the conservancy’s board thanked Trump, calling his donation “generous.” Trump also agreed to give a total of $70,000 to the nonprofit.

The land will be primarily used by golfers - Trump’s paying customers. Still, the letter, signed by the conservancy’s board president, hailed Trump for preserving the property “so that the public may use it for recreational purposes and enjoy its breathtaking views for years to come.”

Special Report: How Trump scored a big tax break for conserving a golf range
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (14)
Notvery Goodathis
Peteymcletey Apr 30, 2021 11:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
What a useless article
Catholic Man
CatholicMan Apr 30, 2021 9:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The media sure is desperate.
Show previous replies (2)
Chris Cummins
Chris Cummins Apr 30, 2021 9:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Saroop Calvete  But he loved the white rich the most. I don't think he would want them to pay more to help the poor. He just wasn't that type of guy! Go Trump!
Saroop Calvete
Saroop Calvete Apr 30, 2021 9:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Chris Cummins  He loves the poor of spirit, like you and Trump.
Saroop Calvete
Saroop Calvete Apr 30, 2021 9:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Chris Cummins  Besides, I don't think that paying more taxes helps the poor.  The Bible teaches that we should take care of the poor, not outsource it to the government which, best case scenario, is counterproductive.
Chris Cummins
Chris Cummins Apr 30, 2021 9:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Saroop Calvete  And the rich in the US are doing a great job. Compare homelessness in the EU to the US. I am telling you, Jesus hates the poor. He only loves rich white americans and he wants Trump to get those tax breaks so he can trickle it down to his kids.
Ron Tinari
Ron Tinari Apr 30, 2021 9:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Could this so called news organization write about finance. This site is supposed to be about finance not the "week in washington"... And to be clear I don't care which side of the isle you are cheering for. As far as I'm concerned all politicians are corrupt.
James Thacker
quienes_tu_papa Apr 30, 2021 8:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
this lawyer is going to get Trump a bigger tax break. 16 properties where the avg price at the club is $1.6M.  But you could argue the ones on the coast would be significantly higher.  There is no foul play here.  That value is not only reasonable, but probably low.  But I bet if Bezos did the same thing he would be praised for his environmental efforts. Hypocrites!
Benjamin McIntire
Benjamin McIntire Apr 30, 2021 8:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Trumps are parasites on society.
Catholic Man
CatholicMan Apr 30, 2021 8:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
LOL, desperate democrats
Benjamin McIntire
Benjamin McIntire Apr 30, 2021 8:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Catholic Man desperate for what? Lmao
joe balone
joe balone Apr 30, 2021 8:22AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
seems like they are really digging , if this is all they have it looks like this is just political harassment.
Vinicyus Oliveira
Vinicyus Oliveira Apr 30, 2021 7:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Taxation is theft.
Benjamin McIntire
Benjamin McIntire Apr 30, 2021 7:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Go live in Libya and pay no taxes then you megamind.
Joel Hauser
Joel Hauser Apr 30, 2021 7:40AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Jail him along with his daughter ivanka and her evil husband jared.
joe balone
joe balone Apr 30, 2021 7:40AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Ok Joel , a crime would be nice to assign to this right?
Jacob Steinschlag
Jacob Steinschlag Apr 30, 2021 7:39AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what does this article have to do with investing? nobody wants to hear about this clo.,wn anyways
Catholic Man
CatholicMan Apr 30, 2021 7:39AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
It's desperate democrats, mad that Trump was the most successful president since Reagan.
Chris Cummins
Chris Cummins Apr 30, 2021 7:39AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Catholic Man  One term=success? Losing=winning? You religious right sure do see the world in a unique way.
John Klan
John Klan Apr 30, 2021 7:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
How the Bidens scored big off of Hunters secret dealing with Ukraine and China.
Benjamin McIntire
Benjamin McIntire Apr 30, 2021 7:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hurrrr
Lib Can
Lib Can Apr 30, 2021 7:35AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
taxes is theft
Benjamin McIntire
Benjamin McIntire Apr 30, 2021 7:35AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Live. In. Lybia.
Jeffrey Wagner
Jeffrey Wagner Apr 30, 2021 7:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Rent. Free.
Jeffrey Wagner
Jeffrey Wagner Apr 30, 2021 7:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Rent. Free.
Dave Jones
Dave Jones Apr 30, 2021 7:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
getting a bit desperate there fellas?
Mase Gumbo
Mase Gumbo Apr 30, 2021 7:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
hes an utter piece of refuse
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email