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Homeowners Overcharged Thousands In Special Property Taxes

Aired 6/12/13 on KPBS News.

An inewsource investigation has prompted the city of San Diego to review property tax bills for hundreds of homeowners.

— The city of San Diego is examining the property tax bills of an entire neighborhood after an inewsource investigation found at least two homeowners are being overcharged thousands of dollars -- one paying almost twice what he should.

The area includes 346 properties, 344 of them homes, in a new upscale development in the northeastern section of the city called Del Sur.

Special Feature Mello-Roos Database

Enter your address to find out whether you or your neighbor pays Mello-Roos.

The mistakes came to light after inewsource made public its interactive Mello-Roos map -- a tool property owners can use to see what they and their neighbors pay in Mello-Roos taxes.

Mello-Roos, named after two legislators, is an extra property tax levied on homes in many new developments to pay for new roads, schools and other infrastructure. It can range from $35 a year to several thousands.

inewsource discovered one home that particularly stood out, paying thousands more in Mello-Roos compared to its neighbors.

The homeowner, Larry -- who prefers to be mentioned by only his first name due to the confidentiality of his work -- pays almost $12,900 a year to just one Mello-Roos district. He was surprised when inewsource uncovered he is paying almost double the amount he should be paying in this extra tax.

“Holy cow!” he said, calling it a “miraculous discovery.” According to city tax documents, Larry should be paying $6,601 a year to this Mello-Roos district.

Larry is not alone.

“Your report really raised my eyebrows,” another Del Sur homeowner tweeted after using the inewsource map.

That homeowner noticed so many of the homes in his neighborhood, even on his street, paid dramatically different amounts in Mello-Roos.

Homes in the blue and red shaded areas are in Community Facilities District 4, called Black Mountain Ranch Villages at the time of formation. The neighborhoods of Avaron, Gables Crossing, and Verrazzano are included in that district.

The homes are in a city Mello-Roos tax district called Black Mountain Ranch Villages. Their Mello-Roos taxes are based on the square footage of their homes -- the bigger the house, the higher the tax.

One house in the neighborhood was paying $2,000 more in Mello-Roos than everyone else. inewsource tracked down the homeowners, who didn’t want to be quoted by name, and confirmed they had been paying $8,687 in a Mello-Roos fee while homes of the same size in their development only paid $6,601 a year.

inewsource obtained the building permits for both homes. In Larry’s case, the square footage used to calculate his Mello-Roos payment included his home’s garage, covered patio and pool cabana -- almost doubling the square footage of his actual house. The Black Mountain Ranch Villages district specifies that its Mello-Roos tax is only to be calculated based on the square footage of the house -- not including the garage or other buildings.

In the case of the other Del Sur home, there were two different numbers recorded for square footage on the building permit -- one was accurate, the other 2,000 square feet larger. The homeowner has been paying this Mello-Roos tax based on the larger square footage.

Within days of contacting the city of San Diego about the inconsistencies, the city’s Debt Coordinator Chuck Wilcox confirmed both homeowners were being overcharged -- in one case because the garage and other structures were mistakenly included in square footage, and in the other case -- the extra 2,000 square feet -- that was a typo.

“(We) appreciate you bringing this to our attention,” Wilcox said.

Prompted by inewsource’s discoveries, the city says it will refund the two Del Sur homeowners with interest for the years the mistakes were made and fix their tax bills going forward. A third party, David Taussig & Associates, handles the city’s special tax work, and Wilcox said it will also examine the other 344 properties in the Black Mountain Ranch Villages Mello-Roos district to ensure everyone is paying the correct amount.

If property owners believe they are paying the wrong amount of Mello-Roos tax, typically an appeals process can be pursued through the Mello-Roos district’s legislative body -- often a city or school board.

Take a minute and check out inewsource’s interactive Mello-Roos map. If you see something fishy in your neighborhood, contact us at taxes@inewsource.org.

Data journalists Kevin Crowe and Ryann Grochowski contributed to this report

Comments

Avatar for user 'sandiego92064'

sandiego92064 | June 12, 2013 at 7:57 a.m. ― 10 months, 2 weeks ago

KPBS. You might want to verify your information. Black Mountain Ranch Village is not in Del Sur. These are two difference Mello Roos Districts. Del Sur does not have a City CFD overlay.

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Avatar for user 'Joanne Faryon'

Joanne Faryon, KPBS Staff | June 12, 2013 at 9:27 a.m. ― 10 months, 2 weeks ago

Hello sandiego92064,

Black Mountain Ranch CFD 4 is in Del Sur, but not all of Del Sur is in that CFD. In fact, large parts of Del Sur are in two Poway Unified School District CFDs.
Here is a link to our interactive map.
http://maps.inewsource.org/mello-roos/
You can check out different sections of Del Sur and it will tell you which CFD's are attached to that home.
Thanks for your comments. Do you live in the area? Joanne

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Avatar for user 'sandiego92064'

sandiego92064 | June 12, 2013 at 11:02 a.m. ― 10 months, 2 weeks ago

What I would find valuable to taxpayers is if you would compare people's total tax bills; not just Mellow Roos taxes. Just what are they paying? Have you compared the difference that taxpayers are paying because of Prop 13? What does the person pay next door that has been residing in their home since 1980 and hasn't had their AV increased compared to the person that just purchased the same home and is paying taxes based on current market rate?

By the way - you really need to do a better fact check. I do live in the community and Del Sur is NOT Black Mountain Ranch. Del Sur is a distinct group of homes in CFD No. 14

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Avatar for user 'Joanne Faryon'

Joanne Faryon, KPBS Staff | June 12, 2013 at 11:25 a.m. ― 10 months, 2 weeks ago

Hello again,

Here's a documentary we produced on Prop 13
www.kpbs.org/prop13
It doesn't completely address your questions, but it's a good primer.
Call me if you have time - when CFD 4 was formed back in 2000 (long before the houses were built) that entire area was called Black Mountain Ranch. 858-349-8771
Are you paying Poway CFD 14?

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Avatar for user 'sandiego92064'

sandiego92064 | June 12, 2013 at 11:40 a.m. ― 10 months, 2 weeks ago

Thanks for the link to Prop 13. Your CFD information is still incorrect. Del Sur is CFD No. 14; not CFD No. 4.

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Avatar for user 'JeanMarc'

JeanMarc | June 12, 2013 at 1:36 p.m. ― 10 months, 2 weeks ago

Why don't you call her and explain instead of being rude on here?

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Avatar for user 'sandiego92064'

sandiego92064 | June 12, 2013 at 1:58 p.m. ― 10 months, 2 weeks ago

Two important reasons:

1) Because reporters/investigators misrepresent everything you tell them... Just like the headline --- "Homeowners Overcharged Thousands...." one homeowner so far!

2) It is not the public's job to do their job. Reporters/investigators are great at getting the public to do their investigating for them and then turn on those that provide accurate information by misrepresenting the facts

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Avatar for user 'Joanne Faryon'

Joanne Faryon, KPBS Staff | June 12, 2013 at 2:22 p.m. ― 10 months, 2 weeks ago

Hello sandiego92064,

It's two homeowners, not one. And each was overcharged thousands everyyear since they've owned the home. And I uploaded a map with a description of the areas CFD 4, Black Mountain Ranch Villages, include. Hope that helps. Joanne

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Avatar for user 'sandiego92064'

sandiego92064 | June 12, 2013 at 2:37 p.m. ― 10 months, 2 weeks ago

It is good that you put the map up so the residents of Del Sur will be able to confirm that this is NOT their CFD 14.

Thanks for clarifying visually.

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Avatar for user 'JeanMarc'

JeanMarc | June 12, 2013 at 3:25 p.m. ― 10 months, 2 weeks ago

What a crybaby...

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Avatar for user 'Earl_Lee'

Earl_Lee | June 12, 2013 at 3:26 p.m. ― 10 months, 2 weeks ago

sandiego92064,

But Del Sur also has the CFD #4 don't they? CFD #4 is for Poway Unified School district which Del Sur is also part of. So they do have CFD #4 don't they?

Or are you just stating that it's impossible that the PUSD (CFD #4) portion is not the CFD that was over billed?

For example, I live in Santaluz which has CFD #2 (Santaluz) AND CFD #4 (PUSD).

IMHO, these homeowners should feel a bit embarrassed and ashamed (which I assume they do already) that they don't know how to figure out what their tax obligation should be. It should NOT take an investigative journalist to tell you that you are paying double of what you are SUPPOSED to pay.

That's the problem with many Americans. They just pay whatever the government tells them they owe. They aren't involved enough with what their obligations and taxes should be. It's also how the PUSD was able to pull that deplorable Capital Appreciation Bond.... The truth is the typical homeowner in a Mello Roos CFD district has NO clue how long their Mello Roos obligation is.

I'd venture to guess the typical owner has NO clue when their CFD is even scheduled to get paid off, what the interest rate is, etc. It's a shame.

The positive thing is there ARE some responsible parties that have refinanced their bonds with record low interest rates. For example, my CFD #2 (Santaluz) has actually decreased from last year to this year as it was refinanced at a lower rate.

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Avatar for user 'Joanne Faryon'

Joanne Faryon, KPBS Staff | June 12, 2013 at 3:44 p.m. ― 10 months, 2 weeks ago

Hello Earl_Lee,

Yes, Del Sur has a number of different CFD's - and chances are if you live there, you pay into more than one CFD. You might pay into a Poway Unified School District CFD AND a city CFD OR two Poway Unified CFD's. It all depends on how the developer financed the infrastructure. We plan to do much more reporting on this issue. I think a lot of people don't understand the system, but to be fair, it is a very complicated system. Even the term Mello-Roos - it doesn't appear on your tax bill. Instead you'll probably see something like CFD or Community Facilities District. That's one of the reasons we made our map.
http://maps.inewsource.org/mello-roos/

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Avatar for user 'sandiego92064'

sandiego92064 | June 12, 2013 at 3:47 p.m. ― 10 months, 2 weeks ago

Earl_Lee

All I can tell you is that Del Sur is Poway Unified CFD No. 14. The property tax bills for Del Sur (CFD No. 14) do not have any CFD No. 4 on them.

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Avatar for user 'Earl_Lee'

Earl_Lee | June 12, 2013 at 5:49 p.m. ― 10 months, 2 weeks ago

Thanks for taking the time to post back. I just mistakenly assumed that the CFD #4 was Poway and that all the districts that were part of the PUSD had that CFD #4. It's good to know that isn't the case.

I for one think it's WONDERFUL you are going to do more reporting on this issue. I think you should do follow up stories on the CFD on topics including how/when they are refinanced at a lower APR. And to congratulate the areas that have refinanced at lower interest rates & ask tough questions why other areas have NOT refinanced at today's record low interest rates.

It would also be interesting to read about when each CFD area is scheduled to have their debt retired & paid off in in full. As well, it would be interesting to read about under what circumstances the taxes can be extended past the original expiration dates.

I totally agree with you that it can be a complicated system but quite honestly the homeowner should have spotted that they were paying so much more than usual. It should have been a dead give away the % of their total tax they were paying relative to their existing property tax as well as the value of their home.

Anyone that does any amount of due diligence on this issue can see the way they structured these is all quite murky. Look at the verbiage on some of the documents and even a skilled lawyer would probably get confused on the documents with the jargon they use.

I agree with sandiego92064's general premise that this probably isn't happening on a wide scale. It honestly sounds like these were legitimate mistakes by the City of SD. I doubt they would be widespread problems or that there was an intent to cheat taxpayers out of $$.

But I do applaud you for finding out about this & the scary thing is that these taxpayers could have went many years without finding out about it.

I dealt with Chuck Wilcox with the City of SD (mentioned in your article) earlier this year when I prepaid off my CFD taxes. He was an absolute pleasure to deal with. He always got back to me in a timely fashion and was a total professional while I was dealing with him.

This is another part of the story you might want to explore and let your audience know about. The fact that one has the ability to pre-pay off their CFD obligations ahead of time. You don't have to wait until 2041 to pay off your PUSD obligation!

It does NOT make sense for everyone but for those that know they will stay in their "forever house" it makes sense to prepay off their CFD obligation today. It might be interesting to note that once you pay off your CFD taxes, it forever ends your obligation to pay in the future. The CFD could get extended in the future, but it won't matter for those that pre paid off their CFD. Those people are forever released from those Mello Roos taxes.

I think that people should do all they can to understand Mello Roos taxes & ways in which they can limit their future obligation and tax exposure.

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Avatar for user 'Earl_Lee'

Earl_Lee | June 12, 2013 at 6:11 p.m. ― 10 months, 2 weeks ago

FYI. This is a really good read and worthwhile for anyone with CFD tax obligations to read:

http://www.orrick.com/Events-and-Publications/Documents/1180.pdf

The biggest problem I have with Mello Roos is there seems to be a lack of transparency with these taxes and quite a bit of information that you try to find out and you might ask different entities and get different answers.

I don't plan on moving out of our house so it made sense to me to pre pay off ALL CFD obligations (Especially the PUSD after the Capital appreciation bond shenanigans).

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Avatar for user 'Earl_Lee'

Earl_Lee | June 12, 2013 at 6:14 p.m. ― 10 months, 2 weeks ago

My experience paying off my CFD #4. I hope it's helpful to other owners.

I called Dolinka LLC that is in charge of administrating CFD #4. They are the entity whose phone # is on the property tax bill. I called them several times over several days & no one ever answered the phone. It always went to voicemail.
Finally about 4 days later someone called me back and said he would email me the details to pay it off.

He did email me this below. (He also gave me a general pay off quote of $15,000 to $20,000 for the CFD #4). I get charged about $1,000 a year on my annual property taxes for reference.

And he said that as it stands now the CFD #4 doesn't end until 2041 and might get extended for further into the future. I imagine they will do the maximum % increase each year as well.

They did confirm once you pay it off it releases you from further obligation if they extend the bond.

Prepayment of Annual Special Tax Lien Procedure

1. All requests for prepayment amounts must be received by the PUSD in writing no less than 30 days prior to the date in which the party wishes to prepay and must include the following information:

a. The name of the party wishing to prepay;
b. The address of the property;
c. The development the property is within;
d. The valid Assessor's Parcel Number;
e. The Tract and Lot number; and
f. The Annual Special Tax the party is wishing to prepay (i.e. infrastructure or schools).
g. A payment of $100.00 for each prepayment to be calculated. The check(s) are to be made payable to “Poway Unified School District” and is/are to be included with the written request.

All prepayment requests are to be sent to:

PUSD
c/o Kari Zipp
13626 Twin Peaks Road
Poway, CA 92064

2. The School District will forward the request for prepayment to Dolinka Group, LLC. Dolinka Group will provide the requesting party with the prepayment
amount within thirty (30) days and send a letter informing the requesting party of such amount. A copy of the response will also be sent to the School District.

3. All parties wishing to prepay must send a check in the prepayment amount made payable to "Poway Unified School District" in writing and send to the School District at the address listed above. The prepayment should include a copy of the letter requesting the prepayment and a copy of Dolinka Group's response to the request.

4. When the School District receives the prepayment, the School District will send a copy of the prepayment check and accompanying paperwork to Dolinka Group so the parcel can be removed from the Special Tax levy for the following Fiscal Year. The School District will then send the prepayment to the Fiscal Agent to be deposited for the purpose of calling bonds or to be used by the School District at a later date to construct facilities. The School District will also record a "Notice of Cancellation of Special Tax Lien" on the property at the County of San Diego Recorder's Office.

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Avatar for user 'Earl_Lee'

Earl_Lee | June 12, 2013 at 6:30 p.m. ― 10 months, 2 weeks ago

Sorry for so many separate posts but this system limits the # of words I can post so I have no alternative to post separate posts.

Anyway, I was happy to get the exact pay off and it came in at the lower end of the estimate of around $15,000 to pay off my CFD #4 (PUSD).

Keep in mind I read from another post on another Internet forum that the PUSD has now instructed the Dolinka Group NOT to give general pay off quotes now without paying a fee. I'm NOT sure if that is true or not but I wouldn't doubt it.

I also paid off my CFD #2 for Santaluz and the process was similar. Another entity handles the pay off for the CFD #2.

The procedures for that are to send in a $500 check to this address below:

David Taussig & Associates
5000 Birch Street, Suite #6000
Newport Beach, CA 92660

You need to send in a $500 check made payable to the entity listed above. Also, include your Parcel # and request for a payoff quote for CFD #2.

I did that and about 10 days later in the mail I got an exact pay off quote. I went ahead and paid it off.

They did give me me an estimate on the phone before I sent in the check. I asked them if they could check and give me a ballpark figure of a similar sized/priced house in my area. I guess they can only give you a ballpark "pay off quote" estimate if there was a recent pay off of CFD in the area. For me there was so they told me between $45,000 to $50,000.

When I got the exact pay off quote in the mail it was about $46,000 which I gladly paid to forever end my obligation to pay Mello Roos taxes.

I mentioned Chuck Wilcox in my previous post. There was some confusion because they made some mistake in my pay off quote. It was a bit confusing but the way I was explained was that the City works with the County in releasing the obligation. So they told me the easiest way to solve it was pay an additional $2,000 and they would get it worked out with the County and then send me a refund check a few weeks later.

It was a bit confusing but Mr. Wilcox, the City's Debt Coordinator explained that was the cleanest way to handle it. He assured me that I would get a refund check. True to his word, I did get that $2,000 refunded to me shortly after that.

As well, almost immediately on my property tax bill online it showed as $0.00 for CFD #2 which was a GREAT feeling.

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Avatar for user 'Earl_Lee'

Earl_Lee | June 12, 2013 at 6:30 p.m. ― 10 months, 2 weeks ago

Again, it does probably NOT make sense for all home owners to pre pay off their CFD obligations. But I strongly believe that for those that will be around for the long haul this makes sense. It's a total "no brainer" to pay it off and forever end your Mello Roos obligation if you plan on staying in the house.

By law they can raise the CFD each year. I believe it's different for each CFD but it looked like the typical average is 2% per year. I do believe moving forward most CFD districts WILL raise the maximum % they are allowed to by law.

As well, it was unclear all the ways in which these Mello Roos taxes could get extended in the future. My fear was in 2041 the PUSD will say, oops....your CFD #4 obligation was SUPPOSED to end this year but we need to extend it out 5 more years. I'm not sure legally if this is possible but my attitude was "why take the chance"?

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Avatar for user 'Earl_Lee'

Earl_Lee | June 12, 2013 at 6:55 p.m. ― 10 months, 2 weeks ago

Also, I wanted to comment on something else since this topic is Mello Roos taxes.

We originally were going to buy a house in La Jolla. My wife did NOT like the idea of paying Mello Roos taxes. We have never lived in any areas before where they had an additional tax beyond the annual property tax. It truly felt like a rip off to her and at first she did not want to even look at any houses in Mello Roos (CFD) areas.

However, the more due diligence and looking we did, the more we found how much more desirable it was to raise kids in this area where we ended up buying (Santaluz). I found the school district more appealing, we could find a house that was more our style as well.

Buying where we did was the best decision we ever made. The weather is so much nicer being just a few miles inland vs. La Jolla or Del Mar where we originally thought we would end up.

I mention this because people often wonder if it's worth it to buy a property in a CFD area. I know from our experience it was TOTALLY worth it. I didn't want to have to end up sending my kids to a private school. Not just for the expense of a private school so much as the "bubble" it might have been for them. We wanted to send them to public schools that were excellent.

I know CFD areas often have a bad reputation of being "not worth the extra taxes" but I can honestly say it was the best decision we ever made buying where we did and it's well worth any Mello Roos taxes we pay. It was well worth the premium for us and we know tons of other parents raising families that also believe the same thing.

The only suggestion I'd have is for ALL homeowners buying in a CFD area to be intimately aware of all the details of their Mello Roos taxes. I still can't fathom how someone could be billed for almost 100% more than what they were actually supposed to pay and not notice it.

The positive thing is the exposure that an article like this can do for CFD awareness and I do hope you do follow up articles/stories on some of these things I mentioned above.

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Avatar for user 'Joanne Faryon'

Joanne Faryon, KPBS Staff | June 12, 2013 at 10:30 p.m. ― 10 months, 2 weeks ago

Earl_Lee,

You obviously know a lot about Mello-Roos and did your research before buying your home. Thanks for the info. And yes, you're right, the CFD can increase your tax by two percent yearly.
You also make good points about consumers deciding what's best for them. We're hoping our reports help to inform the public about Mello-Roos. It's a complicated subject and doesn't get a lot of news coverage.
We have another report coming Monday - its about how CFD's are formed. And we're working on another about accountability. Stay tuned. Joanne

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Avatar for user 'JeanMarc'

JeanMarc | June 12, 2013 at 11:18 p.m. ― 10 months, 2 weeks ago

Earl_Lee I have a question you may know the answer to. If I bought a home and paid all the CFD off on my parcel, does that mean if I sell the house the buyer will not have to pay mello-roos? It seems like this might be reflected in the sale price, but I am not sure. Just curious.

Thank you.

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Avatar for user 'Earl_Lee'

Earl_Lee | June 12, 2013 at 11:30 p.m. ― 10 months, 2 weeks ago

@ Joanne - I'm really looking forward to reading more of your reports regarding the Mello Roos issue. I've always thought that it's an issue that needed to get more exposure and that most homeowners living in a CFD area have no clue about.

@ JeanMarc - YES, once you pay off your Mello Roos taxes then your property is forever released from those CFD taxes. When you sell your house the new owner will NOT have to pay CFD taxes in the future.

In this kind of hot market, you can DEFINITELY get back all of your taxes that you prepaid. In fact, I've gotten several unsolicited offers to purchase my home. We aren't interested in selling our home and probably never will so we aren't interested but the people that made the offers obviously have checked with the City of SD tax rolls because they specifically mentioned, they knew we didn't have the CFD exposure. It shows as $0.00 on our online tax bill.

I have NO doubt at all should we want to sell our house, we would NOT have any problems at all in recouping that $61,000+ we spent pre-paying off our CFD's.

As a new buyer looking at houses in a CFD area, I'd definitely find the fact that a given house might not have any future CFD liability a HUGE plus. I just don't think that many owners pre pay them off.

In fact, we were waiting on the sidelines for several years waiting for the real estate market to crash here in San Diego. We looked at several houses and I always look up the properties on the tax websites and I never came across a property that we were interested in having their Mello Roos taxes paid off. I just don't think the education is there out in the public about these taxes.

As well, I think in a town like San Diego there are a lot of people that would take that $60,000 to $100,000 in Mello Roos prepayments and blow the money on things they THINK they need more or more important. (i.e. luxury car leases, expensive vacations, or other things they probably shouldn't spend their money on).

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Avatar for user 'Earl_Lee'

Earl_Lee | June 12, 2013 at 11:48 p.m. ― 10 months, 2 weeks ago

@JeanMarc - I forgot to mention something in my posts above. IMHO, I believe that if too many people find out about pre-payment of the Mello-Roos taxes and end up prepaying it, then the various CFD's might ban the ability to pay them off ahead of time.

In speaking to both companies that administer the bonds and handle the pre payments for both CFD #2 and CFD #4 they both said it is rarely done. In fact, I don't think they even want people pre-paying these Mello Roos off. I figured it was better to prepay it off now while they still allowed it.

While reading wording like this below, it didn't give me a good feeling.

"PREPAYMENT OF ANNUAL SPECIAL TAXES

Notwithstanding the foregoing, no prepayment will be allowed unless the amount of
Annual Special Taxes that may be levied on Taxable Property, net of Administrative
Expenses, shall be at least 1.1 times the regularly scheduled annual interest and
principal payments on all currently outstanding Bonds in each future Fiscal Year and
such prepayment will not impair the security of all currently outstanding Bonds, as
reasonably determined by the Board. Such determination shall include identifying all
Assessor's Parcels that are expected to become Exempt Property".

But I LOVED this part,

"With respect to any Assessor's Parcel that is prepaid, the Board shall indicate in the
records of IA No. 1 of CFD No. 2 that there has been a prepayment of the Annual
Special Tax obligation and shall cause a suitable notice to be recorded in compliance
with the Act to indicate the prepayment of the Annual Special Tax obligation and the
release of the Annual Special Tax lien on such Assessor's Parcel, and the obligation of
such Assessor's Parcel to pay such Annual Special Tax shall cease."

* Also a footnote to say that the $500 fee they charged me for the exact pay off quote for the CFD #2 I got that $500 applied towards my pay off so it's not like I lost that money. But it seems like they want to charge a high enough amount where it dissuades people from getting a pay off quote.

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Avatar for user 'JeanMarc'

JeanMarc | June 13, 2013 at 9:21 a.m. ― 10 months, 1 week ago

Earl_Lee you seem like an interesting guy to talk to about the housing market in San Diego. I also am holding off on buying a house here because we are in a bubble again. Interest rates are artificially low, pushing housing prices up. People are getting 3,5, and 10 year ARMs again... interest rates are going to go back to 5-6% and then all of these people refinancing or buying right now will be underwater. Also, when those ARMs adjust, they will suddenly not be able to afford their mortgage. It will be a mini 2008 all over again. Good for us looking to buy.

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Avatar for user 'Earl_Lee'

Earl_Lee | June 13, 2013 at 11:52 a.m. ― 10 months, 1 week ago

Hi JeanMarc. I'm NO expert on the San Diego housing market at all. However, I can say that I was fortunate enough to have figured out that real estate in San Diego was a GREAT time to buy back in mid-2011. I caught just about the absolute bottom in the San Diego real estate market.

I'm one of those guys that saw the housing crash coming many many years ago. I think several of us had our "aha" moments where we took a look what was going on and figured out that the market was going to crash. My "aha" moment was when I started seeing my maid that was cleaning my house that could barely speaking English buying a $400,000 house. Same with my gardener.

I mean these were people that could barely speak English, got paid cash so they had no documentation and just used stated income loans. I took a good look at that and started to do some due diligence how the banks were getting away with it. I started seeing that they were packaging the debt and selling it via CDO's, SIV's SCDO's and other monstrosities. I sold my house and ended up renting for many many years while the US real estate market crashed.

It pretty much played out how I said it would. There was a LOT of denial at the time. Everyone thought real estate only moved in one direction (i.e. UP UP UP). I explained to them why the market was going to fall but most didn't want to listen.

Alternatively, once the market crashed to obscene levels, you had "perma-bears" that thought real estate prices would fall to $0. If you went to sites like www.Patrick.net you'd have people arguing how good properties were worth almost nothing. Like their predecessors before them (perma-bulls that thought housing would go up forever). These 'doomsdayers' thought prices would fall forever. They again made the mistake of thinking that prices would only move in ONE direction (down down down).

The thing is. Things don't move in straight lines. I don't care if it's gold or oil or other commodities, real estate, stocks or bonds. Things don't move in one direction forever.

I'm DARN glad that I bought back in 2011. Back then at least there was some inventory to select from. In the past year there was barely anything to select from. It IS getting better lately as I see more for sale signs going up. But it's alarming how quickly it's selling. One of the houses in my development went into escrow 12 HOURS after listing it. And I'm not talking about chump change. These are houses over $1.25 million dollars.

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Earl_Lee | June 13, 2013 at 11:52 a.m. ― 10 months, 1 week ago

Part 2:

What we are going through now is NOTHING compared to the "bubble" we saw the last time around. Because the last time around it was largely caused by banks/lenders doling out credit to ANYONE with a heart beat. This time around there are LOTS of cash buyers, people have good FICO scores, income is all documented and most people are bringing large down payments to the table. (Quite different vs. the last time).

Still, what we are seeing now is NOT normal at all. Anyone that believes this housing market or this stock market is "normal" is deluding themselves. It is NOT normal. Far from it.

I tried picking up a few investment properties last year and earlier this year but I gave up. I was certainly NOT going to chase the market. I was making near all cash offers near/at the asking price only to see people bidding over asking prices and saw prices going up quickly. I certainly wasn't going to chase this market up with the conditions it is in with a still alarmingly high amount of people with NO equity/negative equity or near no equity.

You have this artificial situation where the Federal Reserve has created a situation where retirees and "savers" are being HORRIBLY punished with the low/NO interest rate environment. People that are in retirement or seniors that should NOT have all their eggs in one "basket" and should NOT be in volatile investments ARE in fact investing in these sectors that they should NOT be in for their ages/situations. Why? Because they can't make any return in safe investments.

They see the stock market continuing to go up so they jump in at the wrong time. I had lunch with an elderly friend the other day and she actually was telling me that she just bought Tesla stock! Another friend told me they just picked up a rental property. These people are all "chasing yield".

So as to your question if I think we are in a bubble? I'd say it isn't the same type of bubble as before. People need to understand the market dynamics and differences of today's price increases and the true "bubble years" increases. Quite different.

I'm actually one of those people that predicted that desirable areas like San Diego and other areas of coastal Southern California will see prices surpassing peak prices. However, I thought it would take a decade to 15 years. I did NOT expect to see housing skyrocketing upwards so quickly! That is NOT healthy at all.

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Earl_Lee | June 13, 2013 at 11:52 a.m. ― 10 months, 1 week ago

Part 3

The key principles of buying real estate to me are long-term in nature. I look at real estate as a long term investment. And when you are buying a home to live in, you have to ignore some of the noise and always trying to "time the market" and stick to basic fundamentals of buying which are don't buy more house than you can comfortably afford. As well, don't blow your entire savings on a down payment. Emergencies come up and "life happens". As well, if you aren't sure you will be in the area for the longer term then buying might not make sense.

When I buy a HOME to live in and raise my family I look at it less of an "investment" vs. a "HOME" where I will raise my family. I don't get caught up in stuff like, "what is my house worth today". I don't honestly care what prices do in the short-term. Yes, it's a better feeling seeing a Zillow estimate higher vs. lower but it doesn't change anything for me and I can comfortably afford my monthly obligations (mortgage, insurance, property taxes, etc).

I believe you should be more looking at those things. As well, I KNOW people are going to have some buyers remise that are buying today. There is so few inventory out there that people are forcing themselves into buying houses they aren't in love with. They are jumping on anything even if they don't love it. That's a recipe for disaster.

Absolutely I don't believe we will NOT see the kind of low prices like what happened during the last crash. We were in such a unique situations with all of the derivatives and toxic waste being sold. I don't see it ever getting that bad again.

I feel sorry for today's buyers because it's a strange market where so many people still have negative equity or near negative equity and therefore aren't putting their properties for sale, interest rates are near an all-time low yet there isn't much on the market forcing prices upwards.

The banks and lenders actually played it VERY intelligently not releasing the "shadow inventory" on the market like so many perma-bears said was going to happen. That never played out. Some perma-bears are still waiting for prices to fall back like before and they will probably be waiting forever for that to happen.

But there ARE some severe problems out there in the world. Things have drastically improved with the economy, job market, stock market, etc. But part of the run up in real estate is a domino effect of the stock market. People feel/are much richer today with the recovery in the stock market.

Many people are liquidating some of their stock portfolios and putting it in real estate.

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Earl_Lee | June 13, 2013 at 12:05 p.m. ― 10 months, 1 week ago

I think it's a bit hard to understand the true picture of what is happening as well. The #'s are a bit misleading. For example, while it's GREAT that people have more money for down payments (I'm not counting FHA, VA type programs that are still able to put down a ridiculous low down payment). I'm speaking about more mainstream mortgages.

I met a few people that recently bought. Funny Del Sur is mentioned because that is one of the areas where I met someone that bought in. He was an engineer that I met last year and he told me he closed on a house there. I think he had a decent down payment but it seems he spent his entire savings for his down payment to buy this house.

I ran into him the other day and he STILL hasn't furnished his house! He said he doesn't have the cash to furnish his place and other than a bed and some basic furniture he can't afford it as he blew all of his cash on his down payment.

Heaven forbid he have some life emergency or medical problem or even something happen with the house. It's VERY easy for people to fall behind the "8 ball" here in San Diego that may look ok from the outside of the house but once you step behind the curtains....it's an entirely different story.

JeanMarc - you can go to one of the respected real estate boards like http://piggington.com/forum which has a LOT of great real estate information and full of many intelligent real estate investors. You can read some of the posts there and you can learn quite a bit.

I wish you the best.

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JeanMarc | June 13, 2013 at 2:13 p.m. ― 10 months, 1 week ago

Thanks a lot Earl_Lee I have been reading on biggerpockets.com for the last few months, it is all about real estate investing. I will now look at your link too. Thanks!

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Earl_Lee | June 13, 2013 at 6:59 p.m. ― 10 months, 1 week ago

You're welcome JeanMarc. Biggerpockets has some pretty good information on it. But I like sites like Piggington as they are local sites and most of the people are all local to the San Diego area. This way you get a much better feel of what is going on locally.

So much of real estate is local and drastically differs just based on each individual city.

I've met several people in person from that website and there are some smart 'cookies' on that website. Many of us on that website foresaw the real estate crash, exited and then subsequently bought at the bottom at 2011.

It's been fun talking to some of them and hearing their "aha moments".

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Earl_Lee | June 14, 2013 at 8:32 p.m. ― 10 months, 1 week ago

Joanne,

I know many of us that live in CFD areas (or those thinking about buying in a CFD area) would LOVE for you to do some future stories on these topics below.

1) When is the original expected/planned pay off date of these Mello-Roos taxes in each area?

2) In what specific circumstances can these CFD taxes be extended out from their original targeted/planned pay off dates?

3) Which CFD areas have refinanced the bonds at today's record low interest rates? To note the CFD's that HAVE refinanced at today's record low interest rates? And list specifically why the ones that haven't refinanced at today's record low interest rates haven't done so already? If they haven't, is there any legal reason why they can't refinance at today's record low rates?

4) I'd love to see the original balance of each CFD tax along with a year by year balance of how much has been paid down each year and what the current balance is?

5) Are there any CFD areas where they can already project out that they will need to be extended past their ORIGINAL pay off dates?

I'm sure there are other interesting topics but many of us would appreciate if you did stories on these topics above. Thanks in advance and looking forward to reading your stories on these Mello Roos issues.

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kentlayton | June 16, 2013 at 7:46 a.m. ― 10 months, 1 week ago

I paid a "mud tax" it is a tax for the ground under the doc where a boat is parked. This mud tax is something that all boats in San Diego County are required to pay. I recently found out that I was exempt from this tax that I paid for 20 years. The tax is computed to be 1% or the $ worth of the boat. I was a permitted live aboard for 20 years and just bought a house about 2 years ago. The rules are such that if your only home is your boat and your are permitted by formal documentation and fees to O side harbor that you do not have to pay that tax. I contacted " Dan McAllister" and his office ( a very nice lady) stated that there are no refunds.! that is not right, Can you help me. Dr.Kent Layton 619 922 3817 I got ripped off for 20 years, they accepted the payment and say they don't have to refund the $?????????

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