To some, Larry Ellison’s $200 million (£100 million) reproduction 16th-century Japanese emperor’s estate in the hills above Silicon Valley sums up everything that went wrong with America’s out-of-control property market.

Perhaps it’s that the founder of Oracle Corporation, and the world’s fourteenth richest man, hired an ordained Zen priest to design the 23-acre (9.3 hectare) plot – a process that ended up taking almost a decade. Or perhaps it’s that the property ended up featuring a 2.3 acre manmade lake filled with drinkable water, 2,000 tonnes of imported Chinese granite, a waterfall with a built-in fog machine and an on/off switch, several miles of underground tunnels for domestic staff, a 30-tonne boulder in the master bedroom shower, and a replica 16th-century bridge that was built by craftsmen in China, disassembled, then shipped to California.

Imagine, then, how upset Mr Ellison’s critics became this week when they found out that the 63-year-old entrepreneur had managed to negotiate a 60 per cent tax break on his property, known as Larryland to readers of his local newspaper, The Almanac News.

As a result, his local assessor’s office is sending him a cheque for $3 million.

Under normal circumstances, of course, no one would raise an eyebrow at the prospect of a 25-times-billionaire getting a cushy tax deal. But property tax revenues go to local government, not the Internal Revenue Service. This means that Mr Ellison’s local school district in Portola Valley, California, will lose the equivalent of three teachers as a direct result of the refund – in a year when it is already facing a $1 million budget shortfall and an increase in enrolment from 714 pupils to 750.

Other school districts near Mr Ellison’s property will also lose funding. “He went through a process that was laid out by the law,” said Susan George, town manager of Woodside – the location of Larryland – in an interview this week with the San Francisco Chronicle. “It shouldn’t make a difference how much money he has if the process was fair.”

Nevertheless, others are using Mr Ellison’s $3 million refund to call for a reform of California’s property tax law – the equivalent of UK council tax – which fixes rates to the value of a property when it is bought or built, making local government finances extraordinarily vulnerable to housing crashes.

Mr Ellison won the tax break by essentially arguing that he had squandered money on Larryland, and would never be able to get his investment back. Through his personal company, Octopus Holdings, Mr Ellison said that the property had suffered from “significant functional obsolescence” and was therefore worth $64.7 million, not the $166.3 million on record (substantially less than the $200 million it cost to build).

The appeals panel of the tax assessor’s office agreed, noting that Larryland had been “overimproved” with such details as handcrafted, untreated wooden shingles, thatched roofs that were “specially and laboriously created” and “ground-up construction [techniques], which required that structures be tented to prevent water damage during the extended building process”.

It also noted that the maintenance for Mr Ellison’s “excessive landscaping” cost him $4.2 million a year.

Mr Ellison – whose unofficial biography is entitled The Difference between God and Larry Ellison (God Doesn’t Think He’s Larry Ellison) – is well known for his extravagance. An America’s Cup competitor, his possessions include a $200 million mega-yacht, Rising Sun. In a recent lawsuit it emerged that his financial adviser had repeatedly urged him to reign in his spending and pay his $1.2 billion overdraft, secured against his holdings in Oracle.

It is not clear, however, if Mr Ellison has changed his ways. Forbes magazines recently reported that the multi-billionaire was building a smaller “leisure yacht” after complaining that Rising Sun, at 452ft (138m), was too difficult to park.

Money maker

— Larry Ellison, 62, still heads Oracle systems, the software company he co-founded more than 30 years ago

— He took Oracle public in 1986, one day before Bill Gates did the same with Microsoft

— His business empire expanded massively after he spent $19 billion on 21 software companies between 2003 and 2006

— He has been divorced three times and has two children

— He once said of his fortune: “Money is just a method of keeping score now. I certainly don’t need more money. No one needs this much money.”

Source: Times archive; Forbes

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