Six-digit donations mark 11th-hour battle over Proposition 98

by John Howard, Capitol Weekly
May 30th, 2008

A major Bay Area real estate investor has donated nearly $1 million in less than two weeks to Proposition 98, which would repeal rent control ordinances in scores of cities across the state and limit the use of eminent domain.

Thomas Coates, partner in the San Francisco-based commercial real estate investment and management firm Arroyo & Coates, gave $450,000 last Thursday to the pro-Proposition 98 campaign, according to financial disclosure records on file with the state. Six days earlier, on May 16, he gave $300,000 and the day before that he donated $200,000.

Coates, who was traveling, was not immediately available to discuss his donations, said his aide, Angel Chan.

His contributions were the latest in a series of six-digit donations that have marked the campaign—on both sides.

The clients of Coates’ firm include a company run by Tribune Co. chief and billionaire Samuel Zell, who has donated $100,000 to the Proposition 98 campaign, including a $50,000 contribution on Friday and a $50,000 donation last September.

Zell, who has extensive mobile home holdings, earlier told the Securities and Exchange Commission that his company, Equity Residential Property Trust, could gain an estimated $15 million in increased revenue if rent control rules were removed. The Tribune Co. owns the Los Angeles Times, California’s largest newspaper, which has editorialized in opposition to Proposition 98.

Coates, who also has varied in interests in mobile home parks, appears to be the largest single financial supporter of Proposition 98, which is sponsored by the Howard Jarvis Taxpayers Association. The political action committee of the California Association of Realtors has donated $675,000.

The League of California Cities and a coalition of local governments, mobile home owners and public-interest groups oppose Proposition 98, but are backing a rival initiative, Proposition 99, which proponents say is not as restrictive as Proposition 98.

The League is the largest donor to the anti-Proposition 98 effort, contributing more than $5.1 million, according to financial records. Other major donors include The Nature Conservancy and Californians for Neighborhood Protection. The latter has received funding from the California Teachers Association, SEIU, the Pipe Trades Council, among other labor groups, and a number of environmental groups.

Coates & Arroyo is a significant commercial real estate firm, with clients that include Walgreens, Circuit City, California Pacific Medical Center, Avalon Bay Communities and J.P. Morgan Investment Management, according to the firm’s Web site.
Other high-profile contributors include Doug Ose, a former congressman who is running again for Congress in the seat east of Sacramento held by John Dootlittle, who donated $25,000.

Proposition 98 would prohibit the government’s use of eminent domain to transfer property to a private party. It would also repeal rent-control ordinances in about 100 municipalities in California, including Los Angeles and Santa Monica. Rents in mobile home parks currently under rent-control ordinances also would be subjected to decontrol when the property changes hands.

“It identifies a handful of specific property-rights abuses that are virtually unique to California, although not entirely,” said Jon Coupal of the Howard Jarvis Taxpayers Association, a property-rights group that supports Proposition 98.

He also said that the rent-control ordinances currently in effect “result in policy outcomes that are the direct opposite of what was intended. It (rent control) dries up affordable housing, it doesn’t create it.”

They and other critics of Proposition 98 say that initiative favors landlords and major property owners at the expense of renters.

“From the beginning, there has been no doubt that Proposition 98 was written by landlords, paid for by landlords for the sole financial benefit of landlords,” Dean Preston, the co-chairman of the anti-Proposition 98 campaign said earlier in a written statement.