The Misuse of Mello Roos

In California property taxes can not be increased above 1% of assessed value without voter approval. Local government agencies can increase property taxes to pay for bond debt, but they must get 2/3's voter approval because it is the voter that must pay the debt.

Mello Roos was enacted in 1982 to allow local agencies to acquire bond debt from a select number of property owners if the money was to be used only in select areas. For example; if property owners living in one section of town wanted to put in a park or redo the roads in their area they could vote to increase their property taxes to pay for the improvements. It would not take a vote of from the entire district, only those voters directly effected by the increased taxes on their property.

The main violation in the Mello Roos Laws is in the circumvention of the people's vote.

To have a vote in California, you must be:

  • A United States citizen,

  • A resident of California,

  • 18 years of age or older on Election Day,

  • Not in prison, on parole, serving a state prison sentence in county jail, serving a sentence for a felony pursuant to subdivision (h) of Penal Code section 1170, or on post release community supervision (for more information on the rights of people who have been incarcerated, please see the Secretary of State's Voting Rights for Californians with Criminal Convictions or Detained in Jail or Prison), and

  • Not found by a court to be mentally incompetent.

Only qualified people have the right to vote and the main qualification is that the voter must be a person.

Proof of Residency assigns the voter to their district, but Mello Roos has a provision that allows property owners to vote on bond debt that will effect their property even if they are registered to vote in another district. But the voter still must be a person legally allowed to vote AND the owner of the property.

Throughout California local agencies have acquired billions in Mello Roos bond debt without voter approval by ignoring the basic requirements needed to qualify a property owner to vote. Cities have acquired millions in bond debt by giving a representative of a development company 'the vote'.

To add insult to injury; the bonds are written so the additional property taxes are paid not by the developer, but by the 'future property owners' when the developer sells the land. There is no provision in our law that allows one citizen to vote to on the debt to be paid by another citizen certainly not 'occupants of the future'.

In the last 20 years the City of Beaumont has acquired over $300 million in bond debt, but not one resident of Beaumont has voted for the debt. All 33 bonds were acquired by giving development companies that bought cheap/worthless land in the high desert 'the vote'. 'The vote' was cast by employees of the development companies, so they have no legal obligation to repay the debt. The bonds were issued not based on what the land was worth, but on a fantasy of what the land would be worth in the future. Some of the land that acquired bond debt 20 years ago was never developed, but the money is gone and the City is still responsible to repay the debt.

Private sector companies choose their investments based on risk and rate of return, but when the government assumes all risk the private sector has 'nothing to lose', so they will make riskier choices.

Throughout California, but specifically in Riverside and San Bernardino Counties, developers and cities acquired millions in bond debt to build tens of thousands of houses without any housing demand or overall environmental considerations. It flooded the housing market and was a major factor in the economic crash of 2007. Today the cities are responsible to repay the bond debt, there are thousands of empty homes and foreclosures, and the additional property taxes on the homes combined with their location have kept property values from rising at the same rate as the rest of California.

And the developers? Some are still around and now using 'warehouse development' as an excuse to acquire bond debt, but a lot of the development companies no longer exist. Some companies only existed long enough to 'vote' for bond debt to be paid by future taxpayers.

Mello Roos is an extension of RDA and like RDA, it must be closed down because the abuse has far exceeded its use. Laws are enacted as guidelines for our elected and appointed officials to follow, not to circumvent as it is the taxpayers that must pay the price for the government's poor choices.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Dawn Urbanek February 23, 2014 at 12:24 PM
Excellent article Libi - The Capistrano Unified School District is dealing with some Mello Roos issues. This summer, CUSD refinanced bonds associated with several Community Facilities Districts resulting in a $22 million dollar windfall for the District. $17 .4 million came from Talega Mello Roos, and $4.8 million came from Las Flores. At the August 14, 2013 Board Meeting Trustees voted to approve tax refunds for Las Flores residents, while deciding to keep the Talega money for facilities maintenance. Talega residents cried foul at the November Board meeting claiming they were not aware of the August 14, 2013 agenda item. At the Jan 22nd Board Meeting the Board voted to return the refinancing savings to Talega residents but one Mello Roos issue is still being debated. Apparently the District refinanced the bond for a greater amount, but shorter term so the Board is to decide if the shorter term compensates Talega residents for the interest savings (around $5 million). You can hear the Board Discussion at: the following link at 1 hour 20 minutes: PART II http://cusd.capousd.org/cusdweb/boardaudio/1-22-14/01-22-14RegBdMtgPt2.mp3 Exhibit 17: CFD Refinancing Analysis (Reconsideration of Talega IA 2002-1). The $7 million and the Las FLores issues are explained at the folloing links: http://capousd.ca.schoolloop.com/file/1229223560406/1218998864154/3859558749020234609.pdf and ttp://capousd.ca.schoolloop.com/file/1229223560406/1218998864154/1017641641411423662.pdf
Libi Uremovic February 23, 2014 at 12:34 PM
that sounds 'stinky' - i'll look at it today....but it's a big problem that our boards and councils don't seem to understand there are laws that have to be followed.... -------------------------------------------------------------------------- i've filed a lawsuit against the coronado school district because they refuse to release their bank statements .....their theory is 'bank statements don't exist for school districts' and they assure me that all school districts in cali use the same method of accounting: hide the bank statements and beg for more money.... ------------------------------------------------------------------------ i contacted the state department of education and they assured me that school districts policy of hiding the bank statements is not dictated by the state.... -------------------------------------------------------------------- you can read about the audits and lawsuits to compel records request here: http://www.libionline.net
Chip Long February 23, 2014 at 10:30 PM
we should get rid of mello roos period. Its a scam
Chip Long February 24, 2014 at 11:05 AM
amazing . . .people focus on the grammar and punctuation, instead of the articles content. No wonder politicians get away with murder and the state and country is in the shape it is. I grew up in an Italian neighborhood . . . . they might have had poor English and grammar, but they sure knew what the hell was going on.
Chip Long February 24, 2014 at 11:29 AM
Yes, it would be nice if blogs had grammar capability. But, regardless, the issue is Mello Roos, and the mis-use of taxpayers money. Mello Roos was a boon doogle for builders and the real estate market. Focus on the content and hold our elected officials accountable.
Mark Dickinson February 24, 2014 at 12:21 PM
I concur... Mello Roos is a tax loop hole that needs to be shut down!
Donna Gilmore February 24, 2014 at 12:32 PM
And I thought Mello Roos was only used to get around prop 13. Thanks for this enlightening article. SanOnofreSafety.org
Shirley Cameron February 24, 2014 at 01:19 PM
Not only is Mello-Roos bad for consumers and taxpayers,but even when the bond is only for 20 or 30 years, the County does not take it off. The county, I heard, is making 13% on their money financing this for developers so they can continue spending money and putting us in debt!
Rick Scovel February 24, 2014 at 02:58 PM
Even though my wife and I purchased a home with Mello-Roos (with the Mello-Roos it still fit our mortgage budget) it was not desirable. I would rather have a higher mortgage price than have the developers cost-shift the neighborhood infrastructure costs to me, the buyer. As the buyer I can never recoup the Mello-Roos it has cost me over the past 16+ years. It is monies gone. Once the Mello-Roos is paid for and off the rolls and if and when I decide to sell the new buyer will not have those costs. It would be better to just have the developers infrastructure costs incorporated in the sale price of the home and if and when I decided to sell I could recoup those costs as they would be built into the sale price of the home. Time will only tell if once these Mello-Roos costs roll off my property tax bill will my home appreciate to compensate us for the bond payments made while owning the home.
John Johnstone February 24, 2014 at 03:51 PM
It is disturbing that developers and non residents are able to vote on Mello Roos. at the same time, home owners associations are the same way as far as landowners and non residents voting. Are you going to complain about that too? I would like to see housing be less expensive myself. But I can accept the idea that the burden of infrastructure for new subdivisions should fall on the new residents rather than the entire city. Developers should include in their advertising "the price of this house includes x in taxes, infrastructure fees, etc." and, building a lot of housing helps solve the affordability problem as housing becomes less of a scarce resource.
Mike P February 24, 2014 at 04:52 PM
Mello Roos definitely hurts a community when attracting new residents. When I was looking to buy in Orange County 10 years ago, my real estate agent steered us away from any area that had Mello- Roos. I remember her saying " 4 bedroom/ 3 bath, 2500 sq. ft and No Mello Roos." It was that big of a detriment.
Rick Scovel February 24, 2014 at 06:31 PM
Mike P... exactly. We purchased our home with the Mello-Roos because it was still within our budget ~ but it does not mean I agree with the principle of it ~ all it really was for is the developer benefit (lower home prices) but the buyer pay's for it (Mello-Roos) in the end with no recourse of recapturing that cost (in my case my Mello-Roos is more than my Property Tax).
Mark Dickinson February 24, 2014 at 07:56 PM
We purchased a new home from KB Homes in 2003 and was told we had no Mello Roos. We made the mistake of actually taking the home builder salesperson for their word. Some years later the county of Riverside sends us a bill for back taxes of Mello Roos. Mello Roos needs to go away... like a bad dream.
george gregory February 25, 2014 at 11:20 AM
not mello roos a development fee was charged here to the developer . some how the home owners will get this back and not the developer ? now our whole city will not benefit from this fee that was ear marked for health and safety projects , putting the burden on the existing home owners and city coffers to complete the now needed health and safety issues and needs
Tony Hidalgo February 25, 2014 at 10:52 PM
When we first bought our home in Rancho we were told that Mello Roos would last for 20 years. Its been 25 years. If they keep on refinancing the Bonds, it will go on forever. I don't see any new development. What's up????
Dawn Urbanek February 25, 2014 at 10:59 PM
Tony - That is illegal and is why the Capistrano Unified School District is having to end some Mello Roos - here are two articles- I am sure if you contact the Talega Board or Barbara Casserely they will help you end the overburdensome tax. http://sanjuancapistrano.patch.com/groups/eye-on-education/p/parent-barbara-casserly-makes-an-impassioned-plea-to-cusd-board --------------------------------------------------------------------------------- http://sanjuancapistrano.patch.com/groups/eye-on-education/p/cusd-board-to-reconsider-talega-melloroos-windfall-at-tonights-board-meeting
Libi Uremovic March 10, 2014 at 10:02 AM
i've started comparing the individual mello roos districts in beaumont - area 18 stetson .....their mello roos payments will total $79,000 for $837 worth of improvements - only 2% of their mello roos bond debt was used for their community ...... the city didn't follow the laws regarding mello roos - they just made up their own rules called: 'fair share' - charging future residences for city-wide improvements - http://banning-beaumont.patch.com/groups/audit-xxxxxii---stetson-area-18/p/mello-roos-debt-in-area-18 ------------------------------------------------------------------------------- the letter from the city of beaumont to the property owners in stetson can be read here: http://banning-beaumont.patch.com/groups/lloyd-whites-blog/p/the-stetson-cfd-letter
Mark Dickinson March 10, 2014 at 02:16 PM
@Libi. Wow! Talk about taking advantage of tax payers either past, present or future. This is criminal! I think any city, individual or company should be accountable and held liable for misrepresentation and misuse of Mello Roos funds.
Libi Uremovic March 12, 2014 at 08:13 AM
yea, it's illegal ... here's a breakdown of beaumont's area 14 ....they have liens on their property to pay $6 million/year for 30 years of additional property taxes for $3 million in area improvements ....the city makes $3 million/year profit off one development area - http://banning-beaumont.patch.com/groups/audit-xxxxxiii---area-14/p/area-14-bond-debt--special-taxes


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