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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.

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Alek J Hidell February 23, 2014 at 11:12 PM
No....they thought they could act like that in China--got away with it for years---but eventually Mao Tse Tung and his buds came into power. First order of business? absentee landlords and corrupt city councilmen were all publicly put to death......Good times....
Jack Smith February 24, 2014 at 01:07 AM
Thanks for the well written article Libi. You are so right regarding the city’s greed of double taxing all newly arrived home owners in Beaumont. The typical scenario goes something like this: 1) A few moneyed men create a limited liability corporation (LLC) and purchase cheap acreage in the Pass. 2) Deals are struck with the city government for special discounts and other exemptions in effort to attract developers. 3) In return for this special treatment by the city, the LLC – land owners – vote to allow the city to place bonded debt on each home built on this cheap acreage. 4) The city council sanctions an economic study to determine just how much extra taxes can be levied on each new home and still have the homes sell. The typical amount settled on is typically 1% of selling price thus doubling the state property tax limit as capped by proposition 13 in 1978………………………………………………………… Where do the millions of special tax dollars that are funneled directly to the city go? Some of it is spent to build up the infrastructure necessary to absorb the new residents, such as sewers, water and widened streets. This was the original intent of mello roos. Unfortunately here in Beaumont, it does not end there. Millions of dollars are siphoned off to pad the city’s general fund under the guise of administration expenses and legal fees. Millions are misdirected to projects never voted on by the citizens such as the infamous Bridge-to-Nowhere. Yes, Mello Roos CFD special taxes on homes is an end run around prop-13 and as such should go the way of the RDA and die a swift death.
Ken Mayes February 24, 2014 at 06:08 PM
Martha - not only will the Police and Fire Services portion of the Mello Roos run into perpetuity but they will increase at a rate of 5% annually. Its going to be most interesting to see how 911 handles calls to Wildomar being as how the new citizens are paying extra for a service almost impossible to gauge.
Alek J Hidell February 24, 2014 at 06:17 PM
We can shake this corruption to its very knees with a boycott of property taxes.... It would have to be the great majority, but it could be done. A taxpayer revolt threatens govt worse than an armed one.
Ken Mayes February 24, 2014 at 07:47 PM
Alek - there are several ways to go on the CFD's in Wildomar. Seeing as none of these homes have been built as yet the imposition of a building moratorium could end the shenanigans before they get going. It is also imperative that any new buyers are made aware that these homes have CFD's and how much its going to cost them. The City of Wildomar would like them to believe its only $590 per home the first year, with 1/2 increasing by 2% annually and the other 1/2 increasing 5% annually, but fail to mention the $2,000+ additional tax that is going to pay off school bond and water district debt (water district is probably going to purchase the bonds like they have on other projects) . If no one buys these homes problem solved.

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