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Special Property Tax Lacks Robust Oversight, Accountability

Homes in the eastern Chula Vista neighborhood of Eastlake are among the thousands of properties paying Mello-Roos taxes in San Diego County. Undated photo.
Brandon Quester, inewsource / Google Earth
Homes in the eastern Chula Vista neighborhood of Eastlake are among the thousands of properties paying Mello-Roos taxes in San Diego County. Undated photo.
Special Property Tax Lacks Robust Oversight, Accountability
Special Property Tax Lacks Robust Oversight, Accountability GUEST: Leo Castañeda, reporter, inewsource

If you own a home in Carlsbad, San Marcos, or eastern Chula Vista there's a good chance you are paying Mello verse taxes their special taxes intended to pay for capital projects. How much homeowners actually pay varies from district to district and some people are paying hundreds of dollars more. Our reporter with her media partner explains. Edgar Guerrero is a military contractor and Navy veteran. He bought a home in the eastern Chula Vista neighborhood in 2010. At the time he knew he was buying a beautiful home in a quiet neighborhood a stone's throw from an elementary school and to near a well-respected high school. What he did not know was that he was also buying into a Mello Roos district. This was a foreclosed homes of the bank or the realtors did not explain anything to us. In San Diego County one of every 10 properties and is seven -- is in at least one Mello Roos district. They have paid almost $1 billion collectively in Mello Roos taxes over the last five years. Communities have -- that have built new housing have some of the highest concentration of Mello Roos. It includes is like Chula Vista and Saint Michael sent Valley center. With the help of a few resources he could find mostly the Internet and a handful of multiple community members Guerrero started researching his tax bill in 2012. He found it confusing line with limited auditing and oversight requirements. Understanding it was harder than learning how to fly military helicopters he flew in the Navy. At least in aviation there is a book and teachers that teach you and there is mentors out there that can help you so you are never lost. Here is how it often works. A developer that wants to build housing files paperwork to create of community facilities district because the developer owns the land the developer decides whether or not to impose a new tax on the land the money collected from the new homeowners are supposed to pay for the infrastructure associated with the new development in San Diego County Miller was money has been pledged toward new high schools in eastern Chula Vista, park maintenance and Saint Michael Scott and a new City Hall complex in Carlsbad. The law was written with few guidelines of how taxes should be. There is far less -- less oversight and transparency for Mello Roos taxes. That is the director of state and local finance for the California tax figures -- players Association. He said there is also not a lot of consistency in Belarus taxes which can affect how much people pay. For example one Mello Roos charges on the $7000 per property in 2015. Nehemiah in the Carlsbad unified school district charge an average of just under $24 that same year. The chances of that lack of consistent scan minimal oversight says it is time to take another look at the law. After nearly 40 years it is time for the legislature to come back and really address how partial taxes and Mello Roos taxes work. For his part he pays Mello Roos taxes for the Sweetwater high school and the Chula Vista elementary school districts Reporter: They have a combined average Miller's tax of more than $1400 last year. Guerrero says he understands and he Mello verse taxes and is happy support in his neighborhood schools but he would also like to see changes to the Mello Roos law to be sure the money is used properly that could include the citizens overnight -- oversight committee keeping an eye on how it is spent. Have a yearly audit just like the propositions have and just like our taxes have. I am a reporter with I news source. Leo joins us now. Thank you for coming in. Why is it that we actually have Mello Roos taxes in California. It goes back to the late tax revolt of the 1970s. That cut a lot of people's property tax bill but also made it difficult for the cities and school districts to for the infrastructure associated with new housing and schools. Roads sewers and parks. What they did was found a workaround special taxes still allowed them to text new developments. Two other states have that text? Notice California exclusive. That is something I heard from people who have owned the home in Texas or Virginia they get to California and their confronted by this thing and they have no idea about it. What is the name come from? It comes from these two legislatures. Henry Mello and Mark Roos. They got together and came up with that. Has a legacy now and a lot of ways. You actually get the money. Is at the developer or the local jurisdiction for the development is. That is a question. The developer will go to the school district. They will approve the tax the homeowners -- in some cases a small fire protection agency. You have a very small agencies managing the tax money. It is not the developer because the developer could go out of business. It is local jurisdiction that manages it. Can attacks be changed without a vote. Or does it just go up every year like property taxes, how does it work? One of the problems is that there is a ton of different varieties. They generally go up about 2% a year to keep up with inflation. They can be in theory restricted and cut back. The increase 2 to 3% of the year but if your house is being developed that starting amount could go 5 to 7% every year. If you buy a house -- a few houses five years newer than any other you might be paying 20 or 30% more than they are. Presumably legally the purchaser has to be informed as to what these taxes are but it may not be until the end of the purchasing process. They will know there district is legally required to tell them. What a lot of people are concerned about is that the information of that people have an idea of there is a high school down the street from me and this money is going to this high school and what we have found is that it is not always the case. Something will be explained in the future is how that money went to come into the hands of the agencies and how it is been spent. A while back we investigated and found that some home -- homeowners were over paying their taxes. Is not why some believe that really would be more oversight and transparency of these taxes? That is right. Back then in 2014 the look of the city of San Diego and part of the unified school district. They found that some homeowners were being overbilled. Because of the way that these taxes are assessed and the whole thing is off. They also found that a lot of this money was seen as kind of a slush fund and the district was using it for cafeteria signs that were maybe legal and what they thought the money was going to be used for. So there is a map of the users are paying what. You go see your address and see how much you paid of the last five years and a breakdown of where your money is actually going. Sometimes people pay into five or six or seven district so understanding it is key for people that get in our finances under control. Do you have any advice for people. What should they check up on? I asked them what they do it again no I do not know and they said they would be a lot more careful. They save the money is going to this school district They do the due diligence. Thank you so much for shedding some light on this. By the way you can find the interactive map on their website.

Special Property Tax Lacks Robust Oversight, Accountability
If you own a house in a relatively new neighborhood, chances are good you pay Mello-Roos taxes. Those are additional property taxes intended to pay for specific capital projects like schools and roads.

If you own a house in a relatively new neighborhood, chances are good you pay Mello-Roos taxes. Those are additional property taxes intended to pay for specific capital projects like schools and roads.

San Diego County property owners have paid almost $1 billion since 2011 in Mello-Roos taxes, and not all are created equal. Homeowners in the same neighborhood can pay vastly different amounts. Some people may pay into one Mello-Roos district; others pay into as many as seven separate districts.

inewsource will explore how these special tax districts have grown in San Diego County. To do that we’re launching a new searchable map, which allows you to see how much you pay in Mello-Roos, and to compare your bill with your neighbors’.

Mello-Roos   searchable database.
Mello-Roos searchable database.

While you search the map, consider these San Diego County numbers for 2015-2016:

— There are 246 districts, called Community Facilities Districts, in the county that collect Mello-Roos taxes.

— 57,157 properties pay taxes in more than one district; 4,519 pay into as many as six, including 11 that pay into seven.

— San Marcos has 92 distinct Mello-Roos districts, more than any other city in the county.

— Chula Vista is another hotbed for Mello-Roos, with 56 individual districts, many of those east of Interstate 805.

— The district charging the highest average Mello-Roos tax is in Carlsbad. It charged an average of $66,633 per property, although that district only had 16 particularly large parcels.

— The district with the lowest average was also in Carlsbad, part of the Carlsbad Unified School District. It charged an average of $23.84.

— Property owners paying into six districts paid an average of $2,914.

Mello-Roos taxes were created in 1982 in a response to the tax revolt of the late 1970s that culminated in the passage of Proposition 13, which capped property tax rates and, as a result, slashed government budgets. The new tax, named after two state legislators who authored the law, fueled a continuation of the building boom of the 1970s and 1980s.

In San Diego County, Mello-Roos money has been pledged toward middle and high schools in eastern Chula Vista, park maintenance in San Marcos and a new city hall complex in Carlsbad.

Some taxpayer advocates think Mello-Roos, an arcane and often little understood tax law, should be on the front burner for discussion.

“After nearly 40 years, it’s time for the legislature to come back and re-address how parcel taxes and Mello-Roos taxes work,” said Rob Gutierrez, director of state and local finance for the California Taxpayers Association.

Gutierrez’s concerns include the lack of accountability in Mello-Roos. The taxes are sometimes managed by small school districts or cities, rather than by a county tax assessor. Some Mello-Roos agencies are passed off to outside contractors. And unlike bond measures or traditional property taxes, there are no audit requirements for Mello-Roos money.

“There is far less oversight and transparency for Mello-Roos taxes,” Gutierrez said.

Today, roughly one in 10 properties in the county pays into at least one community facility district, the official name for Mello-Roos tax areas. That means 104,135 properties in the county pay Mello-Roos.

Some homebuyers don’t realize Mello-Roos is a separate tax.

Edgar Guerrero, a military contractor and Navy veteran, was one of those people when he bought a home in the eastern Chula Vista neighborhood of San Miguel Ranch in 2010.

Edgar Guerrero, a military contractor and Navy veteran in the eastern Chula Vista neighborhood of San Miguel Ranch, poses for a photograph in his home, April 14, 2017.
Megan Wood
Edgar Guerrero, a military contractor and Navy veteran in the eastern Chula Vista neighborhood of San Miguel Ranch, poses for a photograph in his home, April 14, 2017.

“This was a foreclosed home, so the bank didn’t explain anything to us,” he said. “The realtors didn’t explain anything to us.”

He started researching the details of his tax bill in 2012 when he heard concerns about the way the Sweetwater Union High School District planned to spend some Mello-Roos money. He found, however, that limited auditing and reporting requirements can make it challenging for homeowners to track Mello-Roos spending.

Most of Guerrero’s Mello-Roos education came from the internet and from a handful of community members who were already involved in school finance issues at Sweetwater. Understanding Mello-Roos was harder, he said, than learning how to fly the helicopters he flew in the Navy.

“At least with aviation and learning how to fly planes and helicopters there’s a book and there’s structure and there are teachers … so you’re never lost,” he said.

Guerrero, a member of the citizens bond oversight committee at Sweetwater, has called for more accountability with the district’s Mello-Roos money.

“(Citizen oversight committees) might not have a lot of influence, but they are the watchdog. They’re the ones that are going back to the community,” he said. “Mello-Roos should have something like that, have a yearly audit just like all the propositions have, just like our taxes have.”

Here’s a simple summary of how Mello-Roos generally works:

A developer who wants to build housing submits paperwork to form a community facilities district. Voters who own land in the prospective development vote to pay Mello-Roos taxes to fund roads, community buildings and schools. Because no one yet lives in the area, the developer is usually the only one to vote. So taxes are often established by a vote of one person.

Gutierrez, of the taxpayers’ association, said Mello-Roos tax rates can’t be set based on a percent of a property’s value, the way normal taxes are. That has led to some creative taxation.

He said he found one Mello-Roos district in Santa Barbara that taxed property owners for the number of bedrooms in a house. That can be difficult to determine in a college town.

“So you’ve got this property next to a college, (University of California, Santa Barbara), and, you know, where do college kids sleep on the property? Probably anywhere,” he said.

The district, in the Santa Barbara neighborhood of Isla Vista, changed its assessment in 2013-14 to charge $93.30 for every “room available for sleeping” within a home, according to Gutierrez’ research.

If you’re wondering about the area surrounding the major universities in San Diego County, there are no Mello-Roos districts near San Diego State University, University of California San Diego or the University of San Diego. California State University San Marcos has several nearby Mello-Roos properties.

More commonly, Mello-Roos taxes are based on square footage or the property type, such as an apartment or senior housing.

inewsource first looked into Mello-Roos taxes in 2012 and 2013, focusing on the Poway Unified School District. That investigation uncovered questionable spending of special taxes by the school administration, such as renovations at the district offices and upgrades at non-Mello-Roos schools.

inewsource also found that several homeowners were overbilled because of changes or inaccuracies in county records. One homeowner in the city of San Diego told inewsource he was being overcharged $6,300.

The city offered refunds to residents who were overcharged and corrected bills of those underpaying.

Over the next several weeks and months inewsource will dive into the data and stories surrounding Mello-Roos. We’re looking into why this tax ballooned into a system where homeowners pay into as many as a half-dozen special tax districts.

We’ll also look into how agencies charged with stewarding this money have actually spent it, and we’ll highlight limitations and contradictions with the oversight of these taxes.

To do all this, we need your help. We can’t look into every single Mello-Roos district in the county, so we want to hear from you about questions or concerns at, or find us on Twitter at @inewsource, or here on Facebook.

Click here to see how we crunched the Mello-Roos data.


inewsource Director of Data and Visuals Brandon Quester and Joe Yerardi contributed data to this report.