Real Estate

August 12, 2010

Modesto agency vows to find way to end Mello-Roos fees for residents of Village I

Upset Village I taxpayers scored a partial victory Wednesday night when a Modesto school agency decided to not raise their property taxes again this year and to devise an "exit strategy" that eventually would end the extra school taxes they pay.

Upset Village I taxpayers scored a partial victory Wednesday night when a Modesto school agency decided to not raise their property taxes again this year and to devise an "exit strategy" that eventually would end the extra school taxes they pay.

About 40 community members showed up at the obscure Schools Infrastructure Financing Agency board meeting, responding to Mello-Roos tax concerns raised by Bee stories last month.

That agency had planned to raise Mello-Roos property taxes by 2 percent, as it has done each of the past 15 years. But after reviewing campus construction needs, school officials said they determined that a tax boost is not necessary this year.

That means most Village I homeowners will continue to pay an extra $390.30 in property taxes. Those funds go toward paying off bonds the agency sold to help finance four schools.

That tax will generate nearly $1.8 million this year. Nearly $52 million in extra property taxes has been collected from Village I residents since 1994, plus millions more were collected in one-time Mello-Roos fees from builders.

The agency planned to continue collecting extra taxes for an additional 27 years to pay off the $23 million in school construction bonds it sold.

That was not the original plan.

A 1994 mitigation agreement limited Village I's share of school construction costs to $52,735,600. That agreement also said that the Village I tax burden would be reduced if state school construction funds were received.

Nearly $32 million in state funds was collected, but the agency kept increasing taxes.

That stopped Wednesday when the agency's seven-member governing board froze taxes at the current level.

The board's president, George Rawe, assured the upset crowd that his goal is to "within the next couple months have a complete exit strategy."

That doesn't mean taxes will stop being collected, but it may mean the agency will stop spending what it does collect so the outstanding bonds can be paid off more quickly.

Rawe said the Sylvan Union School District board and the Modesto City Schools board both would meet soon to determine whether they need to build more school facilities.

Sylvan is expected to decide it does not need an additional Village I elementary campus. Modesto trustees must determine whether Enochs High's campus is finished.

Even if the school districts decide they don't need to spend more, some people in Wednesday's audience contend that the agency already has spent too much.

Several community members demanded answers to why the 1994 agreement was ignored in favor of a joint-powers agreement, which enabled school officials to nearly double how much could be collected from Village I property owners.

"Who hired the lawyer who changed the mitigation agreement?" asked Village I resident Jesse Gaskell. "He gave you so much more power. That lawyer helped you out good."

Orrick was the San Francisco-based law firm that wrote the joint- powers agreement being used to control the Village I Mello-Roos district.

Orrick also is the law firm used by the Empire Union School District, which also has a Mello-Roos district that is costing its residents millions more than expected.

Toby Wells, president of the Building Industry Association of Central California, said it appears the Sylvan and Modesto school districts used the joint-powers agreement as "an escape clause to get around" the mitigation agreement.

That 1994 mitigation agreement was approved by the Modesto High School District, Sylvan Union Schools, the city of Modesto and the Building Industry Association. Then the Sylvan and Modesto school districts set up the joint-powers agreement, in which the mitigation agreement's wording was altered.

"We want the history reconstructed so we can fully understand this," Wells said. "We need more of an explanation than 'because we said so.' "

Rawe warned that the more analysis done by staff members and lawyers, the more expensive things are going to get.

"That costs the taxpayers money," Rawe said. "How much are you willing to spend to analyze it?"

Wells countered by telling Rawe that "the people who put you in office expect you to be well-informed."

"If we have to get (our own) attorney, that's what we have to do," added Village I resident Harvey Edwards. He expressed anger that the mitigation agreement was changed, even though it clearly states that doing so would require the city and the building industry's agreement. "What's up with that?"

The Schools Infrastructure Financing Agency's next board meeting will be Sept. 8.

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