Beaumont’s City Manager, Alan Kapanicas believes, as many city administrators probably do, the Mello- Roos law was supposed to replace the revenue they “lost” with the passage of Prop 13. I remember Prop 13 and the intent of the Mello-Roos laws quite differently.
Before Prop 13, property taxes were local governments’ primary revenue. In the 1970’s, property values in California were appreciating faster than ever before property taxes were doubling in 3-5 years and in some cases even faster. Many elderly homeowners were on fixed incomes and the higher property taxes were causing many of them to lose their homes while in retirement. Local governments planned their budgets and financing strategies on the expectation that revenues would continue to increase at similar rates. Prop 13 was supposed to freeze tax assessment of property values to the purchase value of the home. Local governments were required to get 2/3 voter approval to incur bond debt for improvement projects such as interchanges and utility plants.
A short time later, Mello-Roos laws were enacted to provide local governments alternative revenue sources. However, Mello-Roos bonds were sold to the public as a way to facilitate new development and growth in cash strapped jurisdictions. After the voters passed Prop 13, the legislators later passed Mello-Roos. These new special tax assessments have enabled cities to ignore the 2/3 voter approval requirement to issue bonds for projects such as freeway interchanges, water treatment plants, and infrastructure to support warehouse developers.
Before Prop 13, developers would invest up front in the necessary infrastructure and pass the cost on to the home buyers. The special tax assessments on Community Facility Districts (CFD) enable cities like Beaumont to act as a financing authority and issue bonds to provide the funding for the infrastructure. Future homeowners must agree to thirty years of CFD fees to pay the interest and principal on the bonds.
The CFD fees are divided into two categories on your annual tax bill, debt service and ongoing public services (police, fire, street lighting and maintenance). In my case, I pay $2500 for debt service and about $300 for public services. This $300 is an addition to the standard property taxes paid by all Beaumont property owners for police and fire. This $300 is supposed to cover the additional services required for the additional residents.
According to Mello-Roos laws, the funds are supposed to be used primarily to build infrastructure for the improvement areas in the district. Cities are still expected to raise tax revenue from all taxpayers who will benefit from the city wide projects. Mr. Kapanicas, as well as other City Managers, are misusing Mello-Roos fees as their sole revenue source.
Since the City of Beaumont established CFD 93-1 in 1994 there has been very few, if any, ballot measures asking voters to authorize debt for City projects. The school district and hospital district have used ballot measures to raise the revenue they need for their projects. I’ve heard Mr. Kapanicas promise hundreds of millions of dollars in freeway interchanges and utility plants but he has never discussed any funding source other than Mello-Roos taxes.
The Beaumont City Council has bought into Mr. Kapanicas’ plan to finance the entire city infrastructure on the backs of the new property owners and property owners not yet here. The real estate market crash should have taught our council this is not a sustainable plan and at some point the number of new property owners and their Mello-Roos fees won’t be able to support the debt the city has leveraged on our children’s futures.
As I predicted, in this week’s city council “workshop” Mr. Kapanicas presented the argument that citizens don’t really understand special tax assessment districts. He focused on my misunderstanding that CFD payments would have to extend past their original term to support other, non-CFD debt the City Council was authorizing that does extend beyond our CFD fees. He argued that property owners willingly accept the taxes and can choose to eliminate the fees by pre-paying them or moving out. He presented a “teeter-tooter” diagram of why our fees must increase by 2%.
He promotes this 2% as a very small increase and he is banking (pun intended) on most of us not understanding the power of compounding interest. My $2,500 payment will grow to $4,500 before the bonds are retired. He dismisses the request by 100 property owners in Stetson, to review our agreement with the Beaumont Finance Authority and to amend the powers granted to the BFA which is our legal right granted by the same Mello-Roos laws. Our City Council refuses to show the courage and honor to defend our legal right to amend our agreement. They refuse to show the leadership to direct their employee, our employee, to follow the intent of the law as well as the letter of the law.
The Council is comfortable with supporting an unsustainable financial strategy and refuses to direct the City Manager to find an alternative financial plan. Our effort to take control of our taxes is our way to convince the City Council to look for a more sustainable plan. The homeowners in Stetson, and probably all the other improvement areas of CFD 93-1, are expecting the City Council to defend our legal rights to negotiate an amendment to our agreement.
We will keep asking to see the original documents detailing the powers granted by the previous property owners. We will continue to press for an accounting of our tax revenue, bond payments and reserve funds. We will continue to demand the agreement with the BFA be amended to limit the total bond indebtedness to the bonds currently issued, not the amount originally agreed upon by the developer.
The power point presentation at this week’s City Council Meeting does not meet the response required by state law. The Beaumont City Council, doing business as the Beaumont Finance Authority, is required to hold a public hearing to discuss our request to adopt a resolution of consideration. The legislative body is required to respond within 45 days of receiving our petition. The petition was presented on January 7, 2014.