Council Backs Concept of Special Tax District for Housing Development

Besieged by homeowners demanding immediate action, a divided San Diego City Council Monday gave conceptual approval for the creation of an assessment district whose proceeds would be used to finance construction of roads, sewers and other infrastructure needs in the Tierrasanta Norte development.

The district, which would produce $23 million in taxes paid by homeowners, would be the first of its kind if the council formally approves it at a May 9 hearing.

The council set the hearing in a 5-4 vote, with council members Ron Roberts, Gloria McColl, Ed Struiksma, Bruce Henderson and Judy McCarty voting for the Lusk Co.’s request. The group is the same coalition of five moderate to conservative Republicans who have allied to make some important city policy decisions in the past.

The assessment district would allow Lusk to remove the cost of financing the infrastructure construction from home prices and pass it on to homeowners through an alternative mechanism. The maneuver allows Lusk to keep home prices lower and makes it easier for home buyers to qualify for loans.

Under the plan, the city would issue bonds secured by the building lots of the project. The proceeds would be used to buy the improvements from the developer, and homeowners’ payments would be used to pay off the bonds.

The decision came despite a recommendation from City Manager John Lockwood’s office to turn down Lusk’s precedent-setting request because the city has not yet established a formal policy on the issue. Eleven other builders have requested the establishment of assessment districts that would generate more than $270 million.

Dozens of Tierrasanta Norte home buyers, many of whom claimed that Lusk had threatened to hold up closure of escrow on their homes pending approval of the assessment district, attended the council meeting. Some said they had sold their homes and were living with relatives because they could not move into the houses that they thought they had bought.

“If (the assessment district) does not pass, we will be forced out of this house,” said Dominique Conner, who barely qualified for a loan. “I feel that we are the hostages, and you guys are going to be forced to pay.”

Nearly all the home buyers said they understood that there would be an additional assessment when they agreed to purchase the homes.

Councilwoman McCarty, who represents Tierrasanta, led the fight to approve the assessment district, arguing that Lusk had priced its homes based on its understanding that the assessment district would be approved, and that home buyers were caught in the middle of a dispute between the city and the builder. The council agreed last June to consider the assessment district idea at Lusk’s request.

However, Councilman Bob Filner said that Lusk should be faulted for “holding these people captive to get this mechanism.

“This is a hell of a good deal to shift the whole cost to the homeowner--present and future,” Filner said.

Filner was joined by Mayor Maureen O’Connor, Councilwoman Abbe Wolfsheimer and Councilman Wes Pratt in opposing the plan.