Mello Roos Revenue Bonds

They've formed a financial backbone for California's suburban sprawl--helping for nearly a decade to buy new streets, schools, fire stations and libraries in dozens of emerging communities. Called Mello-Roos revenue bonds, they've been a $3.4-billion boon for local governments and developers, whose ability to pay for expansion was otherwise constrained by California's anti-tax revolt.

Irvine Unified School District trustees unanimously approved nearly $1 million in mello-roos tax relief at their Tuesday meeting. The district uses the tax, which falls on new developments in the city's northern villages to repay bonds issued to fund new school buildings. Since no major construction is planned for the coming year, board members said they could afford to reduce the tax.

Elected officials faced with taxing new residents to pay for roads and other public works usually have two choices--they can create either an assessment district or a Mello-Roos district. Both allow raw land to be used as collateral for bonds that are sold to investors. The proceeds are then used to pay for public facilities.

Los Angeles city officials began the initial steps Wednesday of a probe into potential methane gas and earthquake hazards at the controversial Playa Vista development. In response to criticism from project opponents, members of a City Council committee said they would outline the form and focus of the Westside environmental study at a meeting next week.

A federal proposal to strip the tax exemption enjoyed by investors who buy California's Mello-Roos bonds would "chill" county economic growth, public officials said Tuesday. "I think there are a lot of problems with Mello-Roos--I don't think of it as a panacea at all--but it's all we have right now to build infrastructure," said Orange County Supervisor Marian Bergeson.

Using Mello-Roos bonds to pay for projects in undeveloped areas can be risky even in Orange County, as was shown recently when two major firms failed to pay their tax bills for a site just northwest of Mission Viejo. Here's what happened at Portola Hills, a project of the Baldwin Co. and J.M. Peters Co.

High above the northbound lanes of Interstate 15, the fountains and waterfalls are working at the all-new Tuscany Hills development. The otherwise hardscrabble hills are alive with sprinkler-fed shrubbery. Curbs and gutters for 2,000 homes are in. And all the amenities have been paid for--thanks to a $14.1-million Mello-Roos municipal bond issued last year by the city government. But uncertainty looms at Tuscany Hills: Only 125 of the 2,000 homes have actually been built.

In a move hailed as a positive sign for the holders of Orange County bonds, the county said Tuesday that it will pay $20.3 million due today on bonds sold by 10 special tax districts in South County. "It's a step in the right direction. It's terrific," said Cathy Bando, an investment banker advising the county creditors committee, which includes bondholders. "But we're still pressing for a long-term debt repayment plan." The county's creditors, some of whom will be meeting today with William J.

Los Angeles city officials began the initial steps Wednesday of a probe into potential methane gas and earthquake hazards at the controversial Playa Vista development. In response to criticism from project opponents, members of a City Council committee said they would outline the form and focus of the Westside environmental study at a meeting next week.

In an emergency meeting Wednesday, City Council members decided to give themselves a few days to decide whether to sue the Capistrano Unified School District, alleging misuse of special tax money collected from city property owners. Just before the meeting, fuming council members had said millions of dollars in tax assessments from Mission Viejo have been funneled to school projects in Aliso Viejo.

The City Council met Tuesday to discuss the possibility of using Mello-Roos financing to help in the establishment of new communities built in the outlying parts of Brea. The city already has a Mello-Roos district set up at the Olinda Ranch development, where homeowners pay a special property tax for public improvements in that area.

A federal proposal to strip the tax exemption enjoyed by investors who buy California's Mello-Roos bonds would "chill" county economic growth, public officials said Tuesday. "I think there are a lot of problems with Mello-Roos--I don't think of it as a panacea at all--but it's all we have right now to build infrastructure," said Orange County Supervisor Marian Bergeson.

In a move that could slow residential development statewide and increase building costs in fast-growing areas, federal tax authorities have proposed to eliminate the tax exemption for investors who buy California's Mello-Roos bonds. The bonds--sold by municipalities, used by developers and repaid by home buyers--are designed to get around the restrictions of Proposition 13's property tax limit.

In a move that could slow residential development statewide and increase building costs in fast-growing areas, federal tax authorities have proposed eliminating the tax exemption for investors who buy California's Mello-Roos bonds. The bonds--sold by municipalities, used by developers and repaid by home buyers--are designed to get around the restrictions on property taxes imposed by Proposition 13.

In a move hailed as a positive sign for the holders of Orange County bonds, the county said Tuesday that it will pay $20.3 million due today on bonds sold by 10 special tax districts in South County. "It's a step in the right direction. It's terrific," said Cathy Bando, an investment banker advising the county creditors committee, which includes bondholders. "But we're still pressing for a long-term debt repayment plan." The county's creditors, some of whom will be meeting today with William J.

Declaring a loss of confidence in Orange County's ability to safeguard the special taxes it collects in Aliso Viejo, a group of residents Friday asked the state auditor to step in and manage the funds that are now going into the county treasury. "No one, to our knowledge, represents the interests of the residents of Aliso Viejo who pay Mello-Roos taxes," said a letter to state Auditor Kurt Sjoberg.

In Ross K. Baker's otherwise perceptive analysis of George Bush's intraparty dilemma (Commentary, Nov. 20), he makes the remarkable assertion that Bush's choice of Dan Quayle as his running mate is "inexplicable except as political tribute" to the Republican right. Many people believe Bush wanted Quayle mainly as insurance against impeachment.

Should California law be changed to protect people who buy new homes and then must pay higher taxes associated with Mello-Roos municipal bonds? Should state government more strictly control how and under what circumstances cities, counties and other agencies may issue these bonds? Those are two of the central questions to be faced Wednesday when state Treasurer Kathleen Brown convenes a special hearing of the California Debt Advisory Commission in Santa Ana. The meeting is scheduled for 9 a.m.

Cutting Interest Costs: To reduce interest costs of its Mello-Roos bonds, Orange County has quietly sold $240 million of low-interest debt to pay off high-interest debt sold by eight Mello-Roos districts in the southern part of the county. In addition, some of the bonds will pay for roads, fire stations and schools in planned communities in South Orange County.

A new study of Mello-Roos municipal bonds--a common financing tool for real estate development in California--suggests that the overall investment safety of the bonds remains high, despite the ongoing housing slump. The report's authors concede, however, that they couldn't collect information on all issuers, and warned that some data "may prompt some (investors) to believe that more Mello-Roos bond defaults may occur in the future." Among the report's findings, compiled by FRA Services Inc.