CFDs, The City's Blank Check

Have you taken a close look at your latest tax bill? I did and two items caught my attention, $162 for The Beaumont Unified School District and $2,782 to the city of Beaumont.

First, The School District

The school district’s $162 was interesting because it is already much larger than the Measure Z proponents told us we would be paying when we were misled to vote for a measure that was supposed to address school safety, vocational education and classroom repair.

The proceeds from Measure Z bought us a state of the art sports complex for about $20 million while parking lot projects to address dangerous traffic conditions around Tournament Hills Elementary and Brookside Elementary have been delayed. Tournament Hills’ parking lot project is just now going out to bid, almost 5 years after Measure Z passed. Brookside’s traffic issues are no longer being considered for any improvements.

If you follow what I’ve been writing for years now, you know this is all old news but the $162 is important because it is more evidence (as if we need any more) that our elected officials and their primary campaign contributor, Bogh Engineering, misled us when Measure Z was on the ballot.

We were told that the cost to taxpayers would be under $25 per $100,000 home value. I recently looked into refinancing and found the value of our home is under $250,000. This would mean my share of the Measure Z debt is at about $65 per $100,000 value.

Last time the school board discussed their plans for a new $50 million plus high school, the $25 figure was brought up again while they discussed selling more Measure Z bonds to finance the project. I pointed out that homeowners were already over the $25. The administration argued the $25 figure was based on the value of the homes at the time of the election. When I do the analysis based on the original value of my house, $450,000, I am paying $36 per $100,000, still considerably more than what was promised. The district has sold only about half of the bonds the voters authorized and when they need the money for the high school, we will likely be paying closer to 4 times the amount we expected. 

Click here for more info about how we were duped into supporting Measure Z.  

And, The City

The $2,782 to the city of Beaumont is in addition to my standard property taxes and is more than half of my property tax bill . Since my last post about CFDs, I learned a disturbing fact. I assumed my CFD debt obligation is fulfilled after 20 years of payments; this isn’t true. As long as our city council refinances the CFDs bonds, we are all on the hook until the bonds are repaid in full. We've given our city council blank checks, good for as long as they want.

CFDs or Mello Roos were devised as a solution to the revenue California cities lost when Prop 13 was passed in 1978. Prop 13 was supposed to protect seniors on fixed incomes who were facing increased property taxes each year. Home values at the time were increasing on average 10% each year. Prop 13 proponents also hoped to control spending by irresponsible city councils. Since our elected officials were not willing to rein in spending, they had to find an alternative.

The Mello Roos And CFD fees, most of us in Beaumont are paying, were created to recapture the “lost” revenue to the city. Beaumont’s city council authorized their first CFD bonds almost 20 years ago and, as far as I can tell, there has been very little reduction in the principal on any of the CFD debt. We were told when we bought homes in the Beaumont developments that we would be paying the CFD “fees” for a term of 20 years. The developers, real estate agents, and city council members failed to tell us that if the city council decides to refinance the debt and extend the term of the debt, we are still responsible for the CFD fees beyond the 20 year term we signed up for.

As I learn more and more about our city’s finances and the decisions our city council make to cover their obligations, the incentive to approve more new home building permits makes more sense. CFDs, unlike property taxes, are fixed regardless if my home’s value drops, the developer’s representative who sold us our home told us CFDs are based on the size of the home.  New sales of larger homes generate more blank checks for the city while keeping our home values so low we are unable to move or even refinance. This forces more Beaumont citizens into bankruptcy and foreclosure every year. There is very little, if any, incentive for the city council to limit new home construction and to focus on raising our home values. Even after council members accept the estimates from water experts that we will run out of water in 5 years, they continue to authorize and encourage new home building.

The city needs to stop soaking new Beaumont home buyers and find a way to eliminate lifetime CFD taxes. We need council members to stop authorizing everything the “experts” recommend and start doing the due diligence they were elected to do. Their primary responsibilities should be protecting the public’s resources and focusing on our kids’ future. We need a new direction and a new strategy from our city council. If not, our home values will continue to drop or remain stagnant and more homeowners will lose their homes. We need a strategy for responsible growth that focus on bringing the right businesses here to increase sales tax revenue to Beaumont and stop mortgaging our kids’ future. I don’t believe warehouses generate sales taxes for the host city and distribution centers. These aren’t the businesses we should be trying to attract.

Final note:

I’ve learned there is a process to pay off your CFD debt early. The city requires you send a request to the city manager for an early pay off amount. I will be sending in my request and will keep you posted on my progress.