Renne Public Law Group (RPLG) Of Counsel Mike Slattery successfully represented the County of Los Angeles in a significant California Supreme Court decision addressing the taxation of revenue associated with major commercial properties. In Olympic & Georgia Partners LLC v. County of Los Angeles, the Court issued its opinion and subsequently denied the taxpayer’s petition for rehearing, affirming a key portion of the county’s position.
The case concerned the Los Angeles County Assessor’s valuation of the 1,001-room JW Marriott Los Angeles and The Ritz-Carlton, Los Angeles hotel complex located in the L.A. Live sports and entertainment district, which is owned and operated by Olympic & Georgia Partners LLC. The taxpayer challenged approximately 40 percent of the assessment — roughly $150 million — over 15 years.
In addition to room revenue paid by hotel guests, the JW Marriott and Ritz-Carlton hotels receive income from two separate sources, according to Mike: “First, the City of Los Angeles rebates its 14 percent hotel occupancy tax to the property owner in exchange for an agreement to make up to 75 percent of the hotel’s rooms available to the adjacent Los Angeles Convention Center for up to half of each year over a 30-year term.” he said. “Second, Marriott paid the property owner $36 million in so-called ‘key money’ for the right to operate its hotel business on the property. Olympic would pay 3 percent of revenues to Marriott, along with other incentive-based management fees, as compensation for management duties. The assessor and the taxpayer also disputed whether the assessor had fully removed the value of Marriott’s management and franchise agreements from the property’s taxable value.”
The dispute centered on a foundational principle of California property tax law: intangible assets — such as licenses, permits, franchises, a skilled workforce and business goodwill — are not subject to property taxation. Los Angeles County argued that the tax rebate and key money constituted taxable income derived from the use of real property. The taxpayer contended that both were nontaxable revenues attributable to intangible assets.
The trial court ruled in favor of the County on the tax rebate and key money issues, but the court of appeal reversed, issuing a divided opinion with a strong dissent. The California Supreme Court ultimately agreed with the county’s position, holding that both the tax rebate and the key money constitute taxable revenues. The court remanded the case to the County of Los Angeles Assessment Appeals Board to reconsider the remaining issue of whether the assessor fully excluded the value of the Marriott franchise and management agreements from the assessment.
“While the court of appeal had ruled against the county on all three issues, RPLG drew on its recent successes before the California Supreme Court in other cases, including Stone v. Alameda Health System (2024) 16 Cal.5th 1040 and Prang v. Los Angeles County Assessment Appeals Board (2024) 15 Cal.5th 1152, and persuaded the California Supreme Court to exercise its discretion in granting review and then ultimately side with the county on the merits of the first two issues presented,” said Partner and Head of Appellate Practice Ryan McGinley-Stempel.
Ryan and Of Counsel Thomas Kelch joined Mike on the briefing.
Mike and Tom regularly represent the County of Los Angeles and smaller counties throughout California in complex property tax disputes. Their work has resulted in nine published California Court of Appeal decisions over the past eight years. They also represent municipal clients in bankruptcy matters, including serving as counsel to a committee of California counties during the second PG&E bankruptcy proceeding.
“Mike and Tom bring decades of collective experience representing public agencies in high-stakes property tax cases,” said Ryan. “Combining their extensive expertise in property tax law with my experience as a former law clerk of, and frequent practitioner, before the California Supreme Court allowed us to frame the Byzantine tax law concepts in a way that was more approachable to generalist judges.”
Over the past year, Mike has also filed amicus curiae briefs on behalf of the California State Association of Counties in multiple property tax cases before the California Supreme Court and courts of appeal.
The outcome in Olympic & Georgia Partners LLC v. County of Los Angeles is significant because it affirmed the Los Angeles County Assessor’s inclusion of $116 million in additional income in its valuation of the JW Marriott and Ritz-Carlton hotels in L.A. Live for property tax purposes.
“More broadly, said Ryan, “the decision provides clarity for county assessors as to when they can include intangible assets that directly enable or increase the income potential of the property itself in a property’s taxable value under the income approach to property tax valuation, which will in turn have a positive impact on county tax revenues.”
RPLG practices throughout California, advising and advocating for public agencies, nonprofit entities, individuals and private entities in need of effective, responsive and creative legal solutions.