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James V. Lacy

Dana Point threatens foreclosures to collect Mello-Roos taxes

Dana Point’s recent actions threatening to foreclose on four homeowners at The Strands beach development for failure to pay Mello-Roos taxes was predicted. By me! And that prediction and my opposition to those taxes in the first place probably cost me re-election to Dana Point’s City Council in 2006.

Howard Jarvis once told me that Mello-Roos fees were nothing more than a fancy legislative trick to get around the taxpayer protections of Proposition 13. I had worked for Jarvis as a young staff member during the passage of Prop. 13, a campaign where the politicians and the wealthy establishment pulled out all the stops to defeat the property tax reduction measure that has protected California homeowners from high taxation since 1978. But when Prop. 13 passed, the establishment didn’t just roll over. They sued all the way to the U.S. Supreme Court. And the Legislature started coming up with all sorts of cute illegalities to collect tax revenue otherwise lost. One of those cute deals was to start collecting “fees” rather than taxes. Another was to empower so-called “Mello-Roos” districts to collect money from homeowners right on their property tax bills, in an area to “pay for infrastructure”, allegedly for things like roads and sewers. But Mello-Roos was really an end-run around Prop. 13, another way to build government and tax collection.

And developers loved Mello-Roos, because rather than paying for roads and sewers themselves in a new development and simply adding that cost to the house itself, they could instead pass these building costs onto a bond district created under Mello-Roos, let government collect the money to repay them, and artificially reduce the costs of the house to be sold. In 2006 I was approached at City Hall with the City Manager present by a partner in The Strands development, Sanford Edward, who told me he was seeking a new Mello-Roos district for his budding and beautiful development at the Strands beach. The tax was calculated to be in the upper tiers of Mello-Roos fees statewide. Remembering Jarvis’ admonition about Mello-Roos, I mentally balked. Edward told me I had nothing to worry about, because “even Republicans like Mimi Walters support Mello-Roos”. That comment did not build my enthusiasm. Subsequently, I opposed the Mello-Roos tax district in Dana Point, because I thought the fees were too high, they evaded Prop 13’s intentions, — and also because I foresaw that if a homeowner defaulted in paying the tax, the only recourse for the city would be to seek foreclosure on it’s own citizens! I felt that was taking government power too far, and I still do. And I still believe it better that developers absorb these costs as normal commercial transactions and simply pass them on to consumers, rather than buy in to the Legislature’s anti-Prop 13 tricks.

Jim Lacy and Howard Jarvis, 1978

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