Friday, November 2, 2012
Some San Diego homeowners are willing to pay hundreds of dollars extra in property taxes every month for newer and better-equipped public schools.
SAN DIEGO While the San Diego Unified School District pleads with residents this election to increase their property taxes a few hundred dollars a year to pay for school repairs and upgrades, other school districts in the county are raising taxes without a public vote.
These districts are using a state law called Mello-Roos that allows special districts -- nearly all in new developments -- to charge homeowners thousands of dollars a year to build schools, buy buses, even pay for iPads.
Take Del Sur, a new community in the city of San Diego near Black Mountain Road. Its upscale mediterranean homes range from less than $400,000 to up to a million dollars. It has miles of trails and community pools.
Its biggest selling point? Del Sur is in the Poway Unified School District.
Kimberly Ashton, whose son attends Del Sur Elementary, is ecstatic with the area and doesn’t mind paying extra taxes to live there.
“We love the neighborhood, love the school and agreed it’s well worth it,” she said. “It’s like a private education.”
But if public education is supposed to be an equalizer, Mello-Roos can be a heavy finger on the scale.
These fees can pay for fully-equipped schools with swimming pools, multiple playing fields and the latest technology. They are in stark contrast to the ones in districts like San Diego Unified, where educators are trying to raise enough money to update aging buildings. Mello-Roos is not an option in dense, older urban neighborhoods.
There are more than 240 Mello-Roos districts in San Diego County. They pay not only for schools, but infrastructure, such as roads and sewer lines, or services, such as fire protection.
About one in every 10 local property owners is charged a Mello-Roos fee; some more than one. Fees range from $50 to as much as $13,000 per home per year, depending on many factors, such as square footage and type of home.
San Diego County residents paid $113 million last year in Mello-Roos fees for school districts, almost double the $58 million they paid eight years ago. Two fast-growing districts -- Poway Unified and Sweetwater High School District -- accounted for more than half of last year’s total, collecting $40.5 million and $23.6 million, respectively.
Bond specialists and the districts say Mello-Roos is necessary to build new infrastructure in developing areas of the state. Residents interviewed for this article largely agreed, but some have recently started raising questions about how the money is being spent and how accountable the process is.
A need for new taxes
Since the passage of the landmark tax-limiting Proposition 13 in 1978, most school districts in developed parts of the state have had to wait until desperate classroom overcrowding or gross deterioration convinced the public to raise taxes to pay for school construction or maintenance.
Prop. 13 also made it difficult for developing areas of the state to accumulate enough property tax revenue to build new schools.
Enter Mike Roos and Henry Mello, California legislators who championed a work-around called the Community Facilities District Act in 1982. Nicknamed Mello-Roos, the act allowed landowners, usually a small group of developers, to create districts that had the power to issue debt and collect taxes to pay for that debt. The bonds they sold would pay for new school construction, other new infrastructure or upgrades. The taxes to cover those bonds, passed on a vote by the developers, would be paid by the people who bought the newly-constructed homes in the district.
“It has been essential in terms of California staying on the move,” said Roos, who is now a public affairs consultant in Los Angeles.
Robert Haight, an attorney who has worked on Mello-Roos financing for 24 of the 30 years the law has been in existence, says one of the most important components of Mello-Roos is that it places the costs of building new infrastructure on the new communities, not on existing ones.
He also pointed out that not all Mello-Roos districts are building high-dollar schools.
“In terms of amenities, it’s all over the place. I’ve seen some ... finance schools with nice swimming pools,” he said. “Some others finance portable classrooms.”
Another major component of the law is that, in most cases, Mello-Roos only can be used for tangible materials. It can be major construction or small, physical items such as laptops or iPads, that have a shelf life of at least five years.
“The good news is, the proceeds of Mello-Roos bonds can only be used for capital facilities. So, generally, Mello-Roos bonds fund the construction of hard assets going into the ground,” Haight said. “They don't fund retirement or salaries or working capital.”
New schools and iPads
Some parents in South County’s Sweetwater Union High School District are raising questions about how the district is spending their tax dollars in general -- including Mello-Roos money. The uproar started earlier this year when parents found out the district bought iPads for the whole seventh grade class. It used Mello-Roos funds for part of the purchase.
Sweetwater has 17 Mello-Roos districts and is considering an 18th, primarily in the part of Chula Vista east of Interstate 5. Fees range from about $50 to almost $3,000 for a single family home per year.
“Many started questioning, ‘Does an iPad really fit that (five year life)?'” said Bernardo Vasquez, who sits on a bond oversight committee in the district and whose son attends Eastlake High School. “And a lot of parents were saying, ‘no, it doesn’t.’”
So far, Superintendent Ed Brand has defended the district’s Mello-Roos spending overall, saying the expenses were legal and approved by the district’s board of trustees. As for the iPads, he said they should take students from seventh through 12th grade, and are necessary because they eventually will replace textbooks.
Brand added the district only used Mello-Roos funds to pay for iPads for students from Mello-Roos areas.
In Poway Unified, the area with some of the highest Mello-Roos fees in the county, those funds have gone to build cutting-edge schools.
Here’s how Mello-Roos works: a school district and developer agree to build a new school. To pay for it, the district issues bonds. The cost of those bonds is passed on to homeowners in the form of taxes. Usually, the school is built as the houses are sold because a new school helps to sell a new house.
Haight, the bond specialist, said typically developers work with school districts to design new schools. “The nicer the schools,” he said, “the more robust the sales program is.”
Before the purchase of a house in a Mello-Roos district is completed, the buyer must sign a document that discloses the special taxes, and how much those taxes could end up costing them years down the line.
But how much do buyers pay attention to those disclosures?
“That’s the age-old question,” Haight said.
“Each homeowner has to sign one of those things and knows full well what they’re getting into,” Haight said. “Now, fast forward a couple years later, times are tougher, it’s very natural to question all of your taxes that you’re paying, especially when federal, state and local authorities are asking for more.”
Experts and state officials say Mello-Roos bonds are secure because they’re backed by the land in the district, and the property owners provide a steady stream of revenue with which to make debt service payments.
The school districts can then raise that tax by a maximum of 2 percent each year, without a public vote.
But, Mello-Roos districts that pay for things like schools and technology must disband by a certain date. There’s no true limit on that date, but Haight said most districts are set up to last 35 to 40 years.
In Poway Unified, Mello-Roos fees range from about $300 to $13,000 per household per year. For the most part, parents don’t mind financing what many around the county would consider extravagances.
Rocky Roy, whose son is in kindergarten at Del Sur Elementary, pays more than $5,000 a year in Mello-Roos fees. He thinks the benefits of the program are great, but he isn’t sold on how decisions are made.
"I don't really agree with the idea that developers can just dictate what's going to happen and what they're going to have here,” he said. “I think it should definitely have more of a democratic process and have the parents involved."
John Collins, superintendent of Poway Unified, said he didn’t have time to be interviewed for this story.
Vasquez, in the Sweetwater district, said he would advise people to pay close attention to the Mello-Roos disclosures. But, he also said it’s important to pay attention to where the money is actually being spent.
Parents in his district, Vasquez said, are still pressing the superintendent for details.
“The schools out here are in need of some upgrades,” he said. “If it’s not going towards those schools, where is it going?”
This story was written by Kevin Crowe, of Investigative Newsource, and reported by Crowe and Joanne Faryon, of KPBS.