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Taxpayers in Mission Viejo to Save up to $42 Million on Mello-Roos

Capo Unified school board votes to retire a Mello-Roos district four years early after years of "injustice."

Money from 87-1 Mello-Roos district helped pay for Aliso Niguel High. Patch file photo.
Money from 87-1 Mello-Roos district helped pay for Aliso Niguel High. Patch file photo.

Property owners in Mission Viejo and Aliso Viejo may save up to $42 million now that the Capistrano Unified school board has unanimously voted to end a special taxing district in those areas four years early.

For two Mission Viejo residents, it’s been a long, “tortuous” journey. Sharon Campbell and Wayne Tate are just two of the 16,000 landowners in Community Facilities District 87-1, the oldest Mello-Roos district in the Capistrano Unified School District, which includes parts of Mission Viejo and Aliso Viejo.

The districts are created when a developer is first building out a housing tract. It’s a financing tool that allows the builder to put in roads and schools and other infrastructure, then pass that cost on to future homeowners.

Trustees Wednesday did not get into the details as to why they decided to retire the taxes four years ahead of schedule, and instead made veiled references to “injustice” and to “right past actions.”

But Campbell and Tate know “the sins,” as Tate puts it, of 87-1 – or at least some of them.

Campbell started researching where her special taxes went about 10 years ago, about the time Mission Viejo residents noticed their schools deteriorating. That’s when she discovered a part of Aliso Viejo was also in her district, and all but $6 million of about $100 million were spent in Aliso.

“It became clear that something was wrong,” she said. “The question was, what were they doing wrong?  They kept changing their explanation."

She went on the hunt for the taxing district’s formation documents, the paperwork that would spell out where the money can and cannot be spent. Tate joined her efforts two years ago. They finally got them in May 2013.

One of the things they learned was that, unlike more modern Mello-Roos districts, 87-1 had no end date.

“It could be collected in perpetuity,” even though the bond floated to pay for the new schools would be paid off in 2020, Campbell said. They also learned millions of dollars were being collected above and beyond what was needed to service the debt.

That didn’t sit well, so they dug deeper.

The formation documents called for a new K-8 in Mission Viejo, but that was never built, Campbell said. It also required the district create a “review/appeal board” to make yearly adjustments to the tax levies as needed.

Campbell asked that the district produce proof of such board, but none was ever found.

Then there was the inequity with 87-1’s portion to help build the $38 million district’s headquarters, disparaged at the time as the “Taj Mahal.” Taxpayers from Aliso Viejo and Mission Viejo put up $14.3 million of the $19.8 million that came from Mello-Roos taxes. Eventually, the board had some of the other community facility districts refund some of that money back to 87-1.

Tate said the district had an internal legal opinion that says Mello-Roos monies can be spent outside of their districts’ delineated projects to the proportion that those other facilities serve students from those taxing districts.

But 87-1 money was poured into projects, like the new theater at Capistrano Valley High School, at a much higher share than the percentage of 87-1 students at those schools, Tate said, estimating the district “overspent” on projects at CVHS, Newhart Middle School and Carl Hankey K-8 to the tune of $16 million.

“Frankly, they’re still using it in violation of their own opinion,” Tate said. “If this somehow became legal, they were going to have some difficulties explaining what they did and didn’t do and why they did some things in face of some ongoing legal opinions.”

Instead, Campbell and Tate will happily accept four fewer years of taxes, which the district translates into nearly $2,000 per home, although the actual costs vary greatly on the value of the properties.

Tate estimates a personal savings of $6,000 for retiring 87-1 in 2016, noting that since he bought his house in 21 years ago, his assessment has doubled.

“I will give credit to the CUSD administration and the trustees to make the tough but right choice to end the CFD that’s had a long and tortuous history,” he said.

Campbell, too, is pleased.

"I would like this to be a lesson to help others. It may take 10 years, but never give up. This didn't happen overnight, it is because of unwavering persistence," she said.

Joe Promedio January 10, 2014 at 12:22 PM
Sounds like a thorough investigation could result in a class action lawsuit.
Penny Arévalo (Editor) January 10, 2014 at 12:34 PM
That thought crossed my mind, but wouldn't most of the money go to the lawyers then? Taxpayers probably ended up ahead by removing four years of taxes.

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