Empire taxes to grow

School officials leave Mello-Roos in place

August 12, 2010 

Empire Union School officials listened to community demands for relief from expanding Mello-Roos property taxes, but they took no action Thursday night.

That means taxes will rise an additional 2 percent this year for every property in the southeast Modesto district.

As a result, many homeowners there will be billed $449.91 in special property taxes.

Trustees could have voted to stop that automatic increase, but school officials said that without it they are not sure they can afford to cover the district's continually increasing bond payments.

"We're going to need some heavy-duty number crunching to determine that," said Empire Superintendent Bob Price, who has led the district for 18 years.

The district's property owners have been paying extra property taxes — known as Mello-Roos fees — since 1988. Voters there initially approved taxes to fund $13 million for new schools, however, that debt has been expanded and refinanced repeatedly over the decades.

Property owners have paid more than $43.3 million in extra taxes to cover the debt. But the way the bonds were structured locked taxpayers into paying extra taxes for an extra 22 years.

Unless trustees act to stop the automatic tax increases, district property owners will end up paying $123 million in taxes — most of it for interest payments to out-of-town investors.

"I'm devastated you have allowed this to happen to our district," longtime community member Janet Sterns told school board members. "You each got us into this. You need to get us out."

She was among 22 upset community members at Thursday's meeting.

Price was scheduled to give a report about the Mello-Roos taxes but instead listened to comments and collected questions to be answered later.

Concerns about the financial ramifications caused by Empire's Mello-Roos taxes and the way they have been spent were detailed in a Bee story Aug. 1.

The district spent just $25.6 million of the tax money on school construction, with the rest going toward interest payments and fees charged by those who set up and managed the bond sales.

Some of those bonds have a "no call" provision that requires every cent of promised interest be paid, thus preventing the debt from being paid off early to save money.

"Do you know what you're doing to your constituents?" asked retired teacher Karen Peterson. She criticized the district's officials for not understanding the financial documents they signed. "Why wasn't somebody checking?"

Others blasted school leaders for the way the taxing authority was expanded.

The district used a middle-of-the-summer, low turnout election in 2001 where only mail-in ballots were accepted to win approval for expanding the tax. That vaguely worded ballot measure asked voters to raise indebtedness by $15 million "without increasing the existing voter- approved special tax."

But that tax has risen 2 percent every year since.

"It's legalized corruption," charged Bill Bailey, who lives in Modesto's Copper Creek community, which is part of the Empire district. "Taxpayers should require an investigation on all this."

Community resident George Miller criticized trustees for approving foolish and expensive building projects.

An expanded district office — including the boardroom where trustees meet — was among the projects paid for with the extra taxes.

The district used Mello-Roos funds to partially fund three new schools. Enrollment has declined dramatically since, so the district closed one campus last year. More closures are possible.

The five school board members told the audience that they made spending decisions based on the best information they had at the time and for the good of students. Several said they didn't understand much about how bonds and Mello-Roos works.

"We found out a lot of this the same time you did by reading The Modesto Bee article," said Trustee Doug Bentley. "You can bet we're going to look into this."

None of the trustees, however, promised to stop spending the Mello-Roos funds the district collects.

"We still have an obligation for the kids in our district," board President Loretta Stein said. She assured that the district will gather information "within the next couple of months" to determine what options are available.

That wasn't good enough for some audience members.

"You guys are trying to just smooth over the situation," said Linda Blair, who lives in Copper Creek. "Let's have a deadline."

Price said the topic will be discussed again at the board's Sept. 9 meeting.

Bee staff writer J.N. Sbranti can be reached at jnsbranti@modbee.com or 578-2196.

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