Mello-Roos Bonds Abused by Greedy Developers

Your three-part series on Mello-Roos Community Facilities Districts (CFD) seemed like an indictment. The Mello-Roos Community Facilities Act of 1982 and its numerous subsequent amendments is a result of the taxpayer revolt that led to the passage of Proposition 13 and the basic philosophical change that new development has to pay for all infrastructure improvements in a community, whether they are of direct or indirect benefit.

The act is a useful tool for public agencies, including school districts, to provide needed capital outlay for facilities and infrastructure at a reasonable cost. While somewhat more expensive to administer than general-obligation bonds, they are much easier to initiate in cooperation with developers, and the taxes paid are deductible from federal and state income taxes, the same as your regular property taxes.

Your articles did not point out that in some CFDs, such as Irvine Unified School District’s, the special tax rate is less than the amount the property owners would have paid for existing debt. This was the result of an amendment carried by then-State Sen. John Seymour at my request in 1986. This amendment froze the assessed value of property in the CFD at the time of formation for levying existing debt-service taxes, so that new home buyers were not paying twice for school facilities. This amendment brought the Irvine Co. to the negotiating table, and the resulting “mitigation agreement” provides for meet-and-confer sessions to ensure that the CFDs are properly administered.

Unfortunately, as noted in the series, there are some unscrupulous consultants, attorneys and financial underwriters who are driven by the lucrative fees and do not properly evaluate the risks of any given CFD.

As a strong proponent of Mello-Roos bonds, I will continue to recommend the formation of CFDs where it makes economic sense to do so.

DAVE KING, Dave King & Associate School Planning Services, Tustin