To understand Los Angeles Country Club is to understand it represents the very pinnacle of exclusivity. Invitation-only doesn’t even begin to cover it. Yet despite its 10-figure valuation, it pays less tax than your local bakery thanks to a decades-old tax law.
In 1978, Proposition 13 — officially dubbed the People’s Initiative To Limit Property Taxation — was formally codified within the Constitution of California in response to the public outcry over rising property taxes. But what had initially been enacted to safeguard retiree homeowners would soon open the door for monied institutions to freely hoard an insane amount of both land capital.
Proposition 13 is significant for two reasons. The first is outlined in Section 1(a), which states: “The maximum amount of any ad valorem tax on real property shall not exceed one per cent (1%) of the full cash value of such property.”
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The second has to do with the fact is assesses property values based on — get this — 1976 appraisals, restricting annual increases to either inflation or a maximum of 2% per year (whichever is lower). Meaning the extra juice is incremental at best, and rather negligible if, say, you charge US$250,000 initiation fees.
Despite how loophole-esque the characteristics of Proposition 13 may seem, make no mistake. It’s simply the law. Ill-conceived and a perfect example of what can go wrong with populist policymaking, sure, but the law nonetheless.
The home of this year’s 123rd US Open has a 1,000-page handbook that dictates everything from the understandable banning of (visual) social media posts involving the club itself to the simply ridiculous, i.e. no shorts, no athletic clothes, no headphones/earbuds, and no changing shoes in the parking lot.
It also has strict guidelines surrounding the prohibition of celebrity members. Not even Hugh Hefner, whose Playboy Mansion sat right behind the 13th green of the North Course, was ever allowed to set foot on these “hallowed grounds.” Anyway, onto the matter of numbers…
Los Angeles Country Club stretches across a coveted 320-acre parcel of land located in the very heart of Beverly Hills with a reported present-day valuation of US$8 billion (read: primo real estate).
In any other state, they’d be staring down the barrel of hundreds of millions in tax obligations. Even if Proposition 13 simply took the aforementioned present-day valuation into account, it’d mean being required to pay US$80 million.
So how much do they get away with actually paying? US$220,000. Based on a US$22 million assessment.
An assessment, it’s worth adding, that had already been lowered in the 60s prior to the introduction of Proposition 13 as Californians had voted to limit the appraisals of “non-profit golf courses.” Obviously, the members-owned Los Angeles Country Club is officially registered as such.
Keep in mind, this isn’t exactly a struggling mum-and-pop operation. After you’ve ponied up for that US$250,000 initiation fee we mentioned earlier, according to Golf Digest (via Country Club Prices), members cough up an ongoing US$25,000 “entry fee” along with a monthly charge of US$100.
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Taking the estimated head count of 800 members at any given time — and without taking into account other revenue streams such as hosting PGA Tour events — that’s a baseline of over US$20 million every year right there.
It’d be unfair to paint Los Angeles Country Club as the sole “villain” of this oversight. After all, Bel Air Country Club, Brentwood Country Club, and Wilshire Country Club are similarly guilty. But the next time you wonder why Los Angeles doesn’t have more freely accessible public parks, you know who to thank.
For a more in-depth exploration of how Los Angeles Country Club leverages Proposition 13 to its full advantage, check out this insightful episode of Malcolm Gladwell’s Revisionist History and — more recently — this cracking Substack article written by sports-business expert Joe Pompliano.
