Hunter got break on taxes for home

San Diego Union Tribune (2006-10-08) Jeff Mc Donald

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Hunter got break on taxes for home

By Jeff Mc Donald
UNION-TRIBUNE STAFF WRITER

Back in the winter of 1994, after reapportionment reshaped California's congressional districts, Rep. Duncan Hunter went shopping for a new home.

The seven-term Republican from Coronado headed east, to the foothills outside El Cajon, where he discovered what would become his quiet retreat from the vagaries of Beltway politics.

The house in Alpine was in bad shape. Hunter and his wife, Helynn, looked past the leaky roof, water-stained drywall and torn-up floors and saw 2.7 acres of potential. They paid the $175,000 asking price and poured $160,000 into repairs and improvements.

Tax rolls listed the property as a two-bedroom, 2½-bath house with 2,946 square feet of living space. The property records were wrong.

According to Hunter's insurance carrier, the house was more than twice that size – about 6,200 square feet. The property also featured a 2,000-square-foot guest house, a swimming pool and tennis court.

A county assessor visited the six-bedroom house soon after Hunter bought it and took pictures, the congressman said.

But the home's description wasn't corrected in the property file. The house was reappraised at $249,000 – above the sale price but below its market value.

The discrepancy resulted in Hunter paying less in taxes than others in similar-sized properties, although the amount he saved is not clear. The county relies on square footage, lot size, comparable home sales and other factors to calculate assessments, but does not discuss specific parcels without a release from the homeowner.

Hunter refused to give assessors permission to discuss details about his property with The San Diego Union-Tribune, which has been examining the holdings of public officials since a bribery scandal last year sent former Rep. Randy “Duke” Cunningham to federal prison.

Hunter said it was not his responsibility to make sure property records – and the resulting tax assessments – are correct.

“All I know is what the county gives me,” said Hunter, a lawyer before his election to Congress. “They sent a person on the premises when I bought it. He said, 'This is what you owe.' We simply paid it. We've paid it ever since.”

Three years ago, the Cedar fire ripped through San Diego County, claiming 15 lives and destroying more than 2,200 homes, including Hunter's house and guest quarters.

After the fire, as many as 30 victims told the county they had bigger homes than the property records indicated, assistant assessor David Butler said.

The distinction was critical.

County planners had been directed to expedite permits for those who wanted to rebuild at the same square footage. If a property owner claimed his home was larger than what county records showed, he had to prove it.

Hunter provided a letter from his insurance carrier stating that the main house was about 6,200 square feet and the guest house 2,000 square feet.

Like so many others, Hunter made his way slowly through the permitting process. He said a letter from the assessor last year noted for the first time that the home was apparently much larger than public records showed.

Government-owned

Hunter's Alpine property was owned by the federal government months before he bought it, something he says he did not know at the time.

The estate was built in 1975 and owned by Edgar Jack Ridout, a globe-trotting plastics magnate who convalesced at the home after surviving the crash of two Boeing 747s on the Canary Islands in 1977. The collision killed 583 people and was the deadliest aviation disaster in history until the terrorist attacks of Sept. 11, 2001.

Ridout is retired and living in Italy. In the late 1980s, he was entangled in a messy divorce and let the property deteriorate, said an associate who sees to Ridout's affairs in the United States.

The house went into foreclosure in 1993, by which time the lender had been seized by the Resolution Trust Corp., the agency formed by Congress in 1989 to bail out hundreds of failed thrifts.

Hunter was among those who voted to create the Resolution Trust Corp., a bill that passed the House 201-175 and was signed by President George H.W. Bush.

The resulting sell-off of more than 700 savings-and-loan institutions and their assets was estimated by the government to cost taxpayers at least $325 billion.

According to county records, the Resolution Trust Corp. sold the 2.7 acres on Vista Viejas Road at public auction Dec. 15, 1993. State Street Bank and Trust paid $175,000 for the parcel and took title Jan. 4, 1994.

State Street Bank and Trust is a subsidiary of State Street Corp. of Boston, a global financial-services provider for institutional investors.

Even though State Street is listed in county records as the buyer, a spokeswoman said the company never formally owned the property. Rather, it was acting as a trustee for the Resolution Trust Corp., she said

The Resolution Trust Corp., which closed in 1995 and handed operations to the Federal Deposit Insurance Corp., had rules prohibiting insider trading and conflicts of interest as it sold off thousands of seized properties.

The Code of Federal Regulations prevented contractors from buying real estate they were hired to liquidate. The law also excluded “related parties,” described as key federal employees and others, from the government sales.

Several calls to the FDIC seeking clarification about the policy and the Hunter transaction were not returned.

County records show that Hunter bought the property from State Street for the same price – $175,000 – less than two months later. The house appeared on the multiple listing service Feb. 1, 1994, and Hunter made an offer and opened escrow by Feb. 28, records show. The deal closed May 9. The congressman said he had no idea the U.S. government had liquidated the property.

He said he simply noticed the house on the multiple listing service, went inside and found a listing agreement near the sink. He contacted the agent and got the paperwork started.

“This was totally aboveboard and in the regular course of business,” Hunter said.

Despite its run-down appearance, the house proved to be a good deal.

That same month, a five-bedroom, five-bath home on 2.9 acres in Alpine was being offered at $495,000 in newspaper advertisements. A four-bedroom home on 1.2 acres was selling for $359,000.

The listing agent for the property, Ron Hart of Realty Executives, said there was nothing unusual about the Hunter transaction. But his recollection of the circumstances under which he met Hunter is different from the congressman's.

Hart said the house was routinely locked and that Hunter called him using the phone number on the for-sale sign to set up a tour.

Hart, who specializes in foreclosures, also said most buyers would be lucky to get the same price paid at an auction.

“The man had his ducks in a row,” he said of Hunter. “He had all his financing.”

Bob Winterton, the pastor at Trinity Baptist Church in El Cajon, who lives a mile or so from Hunter, had yet another recollection of the Hunter's move into Peutz Valley.

Winterton said he told Hunter about the vacant home three or four times over two-plus years.

“I begged him to come out and look at this house,” Winterton said. “I wanted him to be my neighbor.”

'Prejudicial inquiry'

The California Revenue and Taxation Code regulates what information can be made public and what should remain confidential between property owners and their county government.

A home's sale price, assessed value, taxes paid, square footage and the number of bedrooms and bathrooms are all matters of public record.

Information not open to public inspection includes appraiser notes and other factors used to calculate assessments, letters between homeowners and the county or other paperwork related to assessed values, said Butler, the assistant county assessor.

“Only the owner of the property can give us the permission to release that information,” he said.

Hunter said there is no reason to permit a review of his property file. Questions about his initial purchase and the calculation of the property taxes amounted to “an extremely prejudicial inquiry” on the part of the newspaper, he said.

Government watchdogs say the questions are appropriate.

Melanie Sloan, a former federal prosecutor who now runs Citizens for Responsibility and Ethics in Washington, said the 1994 transaction and amount of taxes paid do not look good.

Members of Congress “should be avoiding the appearance of impropriety,” Sloan said. “This could be an appearance problem” for Hunter.

Robert Stern of the Center for Governmental Studies in Los Angeles said a congressman buying a home so recently owned by the federal government raises serious questions.

“It doesn't surprise me. It bothers me,” Stern said. “The question I would ask is, 'Why didn't (State Street) make a profit on it?' When you buy property, you buy it to sell at a profit.”

Today, many of the houses along nearby Peutz Valley Road are new, rebuilt after the walls of flame that raced across the county three years ago this month.

The least expensive five-bedroom home now for sale in Alpine is listed for $785,000 and features 3,168 square feet on 1.2 acres. If the house sells for that price, the property taxes would be about $8,000 a year.

Like every rebuilt or expanded home, the Hunter residence – which will have five bedrooms and 6½ bathrooms when finished – will be reassessed once a notice of completion is filed with the county.

In the meantime, construction continues. One recent day, a painter was finishing work on the stairs leading to the two-bedroom apartment above the more than 1,600-square-foot garage and workshop.

Hunter said he expects to move into the home before Christmas.