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A Question of Tax Fairness in CUSD

The amount of Mello-Roos fees going toward Capo Unified's "Taj Mahal" varies from housing tract to housing tract. Some officials want to spread the pain more equally.

The headquarters for the Capistrano Unified School District has long been chided as overwrought and overpriced – a “Taj Mahal” – but when it comes to paying for the digs, residents in the district do not feel the pain equally.

Costing $38 million to build, the Education Center has prompted several school board recall campaigns. 

To bankroll the project, the district used a financial tool that is similar to a mortgage and available to government agencies, which it pays off primarily with proceeds from landowners in special taxing districts known as Mello-Roos or Community Facilities districts.

Mello-Roos districts saddle the cost of roads, utilities and schools for new housing projects on their future homeowners. Each district is created and negotiated separately with the school district and other public agencies based on needs, the number of units and market forces.

Consultants recently looked at what residents across the sprawling Capo Unified district pay toward schools, and the portion of each bill that goes toward paying down the education center, opened in 2006 in San Juan Capistrano.

They discovered that one community facility district – the one that includes Mission Viejo and Aliso Viejo residents – has paid for the bulk of CUSD's headquarters: $14.3 million of the $19.8 million funded so far.

Cost per household varies greatly

Nevertheless, although Mission Viejo and Aliso Viejo property owners have footed the lion's share of the overall total, a group of taxpayers in San Juan Capistrano and Rancho Santa Margarita has paid more individually.

For example, from the total Mello-Roos fees paid to the school district by the 22,649 landowners in Mission Viejo and Aliso Viejo Community Facilities District No. 87-1, $635 per property has gone to support the ed center.

In contrast, Rancho Madrina has only 120 homes, but landowners there have paid an average $4,167 apiece for Capo’s HQ. Similarly, the 727 homeowners in one of Rancho Santa Margarita’s two Mello-Roos districts, No. 94-1, have paid $2,399 apiece.

How did such a hodgepodge of fees come into being? The district's consultant and a spokesman did not return a reporter's email seeking comment.

But the consultants recently recommended rebalancing the payments among each of 10 Mello-Roos districts, five of which have yet to contribute anything. The plan would have most property owners contributing $591 over the life of each community facilities district, which varies from district to district.

Under that proposal, people who have already paid more would see a credit returned to their area's Mello-Roos district to be spent on local school facilities.

Proposal to rebalance confuses

When the plan was presented to the school board last week, trustees seemed mystified.

“Why would we do this? What’s the benefit to CUSD to do this right now?” asked Trustee Jim Reardon.

Clark Hampton, deputy superintendent of business services, said recent refinancing of Measure A bonds gave the district pause to look at its community facility districts. He thought some tweaks could be made.

“In the totality of it, there would be some sort of equity,” Hampton said.

But Reardon challenged him on who gets to define what’s equal.

“There are many sins of the past and among them is the construction of this building and how we paid for it,” Reardon said. “The intent of this is to impose one view of fairness. … We’re imposing our view of what’s fair on top of a mistake made a decade ago.”

Trustee John Alpay also didn’t like the idea. Under the plan, Talega taxpayers would see their portion for the ed center jump from $442 to $591.

“Transferring money from San Clemente and giving it to Mission Viejo and Rancho Santa Margarita” isn’t fair to an area whose high school is in great disrepair, Alpay said. San Clemente High is "falling apart" and is in desperate need of new roofs.

Pitting region against region

“We’re taking more money out of San Clemente and basically subsidizing other schools,” Alpay said. “Given that there’s no money, you’re leaving less in the kitty to address issues at San Clemente High School or any other San Clemente school that the San Clemente CFD [Community Facilities District] serves.”

Trustee Ellen Addonizio, who represents a portion of Mission Viejo, saw it differently: “On behalf of residents in Mission Viejo and Aliso Viejo, we have been burdened and overburdened by the fees we’ve paid in previous times.”

The board decided the consultant should take another crack at what might be "fair." The item is not expected back before the board any time soon.

Areas without Mello-Roos districts include Capistrano Beach, Laguna Niguel and Dana Point.

CURRENT FIGURES IN CUSD MELLO-ROOS DISTRICTS

Community Facilities District (CFD)
 Location
Number of Units at Buildout How much $ per unit for the ed center How much $ per CFD for the ed center 87-1 Mission Viejo & Aliso Viejo  22,649  $635  $14.4 million 88-1 Rancho Santa Margarita  2,658  $0  $0 90-1 Coto de Caza  3,208  $0  $0 90-2 Talega  3,752  $442  $1.7 million 92-1 Las Flores  1,981  $0  $0 94-1 Rancho Santa Margarita  727  $2,399  $1.7 million 98-1 Pacifica San Juan  416  $0  $0 98-2 Ladera Ranch  7,908  $189  $1.5 million 2004-1 Rancho Madrina  120  $4,167  $0.5 million 2005-01 Whispering Hills  155  $0  $0
Reality Check March 28, 2013 at 01:28 AM
Unless these fees were negotiated under duress, I'm not sure what hindsight, fairness and equity have to do with it. No one buys property in these developments without first knowing the obligations under Mello-Roos. What has changed?
Robert Reidel March 29, 2013 at 06:19 AM
It appears to me that nobody is contesting the paying of Mello-Roos fees. Rather, I think the issue is how the CUSD has/does allocate the funds it receives from those various communities. When one looks at the Table, in raw numbers, it certainly does appear to clearly lack equity. Should Mission Viejo and Aliso Viejo really be funding the overwhelming lions share of the district office, that the entire CUSD community benefits from? The significance of hammering the funds obtained from some communities so heavily for the administration building, is that then those funds are unavailable for facility improvements to schools in those communities. Conversely, by the district not applying funds (or negligibly) from some of the funds, those communities retain those funds for dedicated use on their community schools. The district has the legal latitude to do this, however, it is good for the communities whose funds are onerously tapped for the funds to be aware of why there are no funds available to be spent on maintenance/improvement of their schools. With the passage of measure M by the voters, the stage is better set to pit area against area, and leave the constituents in a given area with little recourse. Also, recall that the district office was pitched to the CUSD constituents under the auspice that the funds to pay for it could be used on nothing else, and that no funds would be diverted from schools. So much for that assurance.
Capo Parent April 01, 2013 at 07:11 PM
RC Try doing some fact finding before making general statements. First off, you assume the written disclosure provided to homeowners for a Mello Roos aka CFD matches what is contained in the origination documents for the Mello Roos. Second, CUSD can manipulate how the Mello Roos will be collected and extended. For example, CUSD could charge the full amount for one Mello Roos from the inception before any bonds are sold, but not do the samething for another Mello Roos. This would be an example of "unfair taxation." What has changed is that the dirty secrets of Mello Roos and how Mello Roos are manipulated are now coming to light.
Capo Parent April 01, 2013 at 07:22 PM
Robert The issue with Mello Roos is not just how the Mello Roos funds are spent, but how the Mello Roos are interprested, how they are collected, how they are extended, and how they are terminated/allowed to expire (if at all). Take for example CFD 87-1. It is my understanding that CUSD has collected enough monies to pay off the bond for this CFD and retire the CFD. Instead, CUSD has continued 87-1 until 2017. It appears that for a number of years, if not from the inception, CUSD has collected roughly $2.3 million more than it needed to service the bond.

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