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Mello-Roos Law Allows Vote Of One To Decide On New Taxes

inewsource breaks down the Mello-Ross tax law and explains how one person, sometimes a developer, can be the sole voter deciding on new taxes.

— On Nov. 21, 2000, Harlan Friedman marked an "X” on a ballot giving the city of San Diego the power to issue $25 million in bonds and charge hundreds of homeowners thousands more in property taxes.

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Friedman was the sole voter in that election. At the time, he was a consultant for Black Mountain Ranch, a developer in north San Diego. A state law, the Community Facilities Act, commonly called Mello-Roos, gave Friedman the power to solely decide whether the city could levy the new tax.

Friedman’s vote has so far impacted 346 property owners in Del Sur, an upscale development in Community Facilities District (CFD) 4. Mello-Roos adds an average of $3,545 in extra property taxes a year to each home in this Mello-Roos district. The city began reviewing those bills after an inewsource investigation found two homeowners were being overcharged.

Copy of Official Ballot that formed Community Facilities District 4 in San Diego.

The vote was not a momentous moment in Friedman’s life. He said he’s helped create as many as 10 Mello-Roos districts in San Diego and Riverside counties.

“I don’t remember voting or not voting,” he said.

A landowner vote versus a public vote is standard in forming Mello-Roos districts, according to an inewsource analysis of county voter registration records. It’s a typical -- and legal -- sidestep around Proposition 13, the tax-limiting law passed by the voters in 1978 that mandated all new local taxes designated for specific purposes, like schools, are subject to a public vote.

Here’s how Mello-Roos works:

Let’s say a developer owns vacant land somewhere in San Diego and wants to build 1,000 new homes. The city requires the developer to pay for the roads, water and sewer lines and other infrastructure needs. The school district in the area can also ask the developer to help build a school.

California's Legislative Analyst Office lists what type of vote is required to raise taxes.

Mello-Roos allows the developer to form a CFD with either the city or the school district or both. A CFD can issue bonds and collect special taxes that will pay for the new roads and schools. And it requires a vote.

But most proposed developments don’t have residents, and the Mello-Roos law says if there are fewer than 12 registered voters in a district, then only the landowners vote. Sometimes it’s a single landowner, or the landowner's agent, like Harlan Friedman, who casts the only vote.

When residents eventually move into the neighborhood, the Mello-Roos tax is disclosed.

“When you buy the house, you take on the obligation [of Mello-Roos],” said SDSU real estate lecturer Mark Goldman. He added, “It's not like people in the neighborhood can get together and vote not to have Mello-Roos. It’s already in place.”

inewsource examined CFD records provided by the San Diego County Registrar of Voters dating back to 1994.

“When a CFD is being formed, the local government body or one of their representatives comes to our office to determine how many individuals, how many registered voters live in that proposed area,” registrar Michael Vu said.

In total, there were 244 requests mostly from cities and school districts for voter information for new or expanded CFDs. Of those, 209 had no registered voters in the district. Only 10 had more than 12 voters.

If the CFD is formed with only a landowner vote, the registrar is no longer involved and keeps no further record of the CFD process.

There are currently 232 CFDs collecting taxes in San Diego County. inewsource was able to trace voting records to at least 120 of them. Of those, 113 had no registered voters when the request for voting information was made.

According to a summary of the Mello-Roos law, if a proposed CFD has fewer than 12 registered voters in the 90 days preceding its formation, the landowners are the only voters.

CFDs collected nearly $200 million in Mello-Roos taxes in San Diego County last year -- $80 million went to three school districts: Poway Unified School, Sweetwater High and Chula Vista Elementary.

The highest concentration of properties paying into Mello-Roos are found in areas of expansion, such as North County and Chula Vista. Many of those neighborhoods pay into more than one CFD or Mello-Roos district.

For example, in Del Sur, the neighborhood where Friedman’s vote led to the taxation of hundreds of homes, homeowners also pay into a Poway Unified School District CFD.

Friedman says Mello-Roos is a fair tax because the developer is “saddled putting (in) all this infrastructure.”

“The homebuyer gets all the infrastructure on day one and they should pay for it,” he said.

Find out if you’re in a Mello-Roos district and whether you’re paying this extra tax by going to our interactive map at www.kpbs.org/taxes

Data journalist Kevin Crowe contributed to this story

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