4S Mello-Roos will take 30 more years (2040) to payoff

User Forum Topic
Submitted by fragile on September 16, 2010 - 5:08pm

I just found that the 4S Mello-Roos won't payoff until 2040!

4S home buyers were told that it's a 25-yrs Mello-Roos, but no one ever asked '25 yrs starting from when?', because most people assume it starts when they buy the house. If you bought a house in 4S in 2002, and think you've paid 8 yrs so far, and you only have 17 yrs to go, you're wrong! Your 25-yr period hasn't even started yet. It won't start until 2015 when the 4S area is completed.

Here's how to find out:

go to:

http://californiataxdata.us/

click "Find Property" tab at the top. Select "Search By Address". Enter a property address. You'll see the parcel number. Click on the parcel number to see the tax database. Look for "Poway Unified School Distric Community Facilities District No. 6", then click on it to see detailed data.

For example, a random house in 4S shows:

POWAY UNIFIED CFD#6 IAA
http://californiataxdata.us/displaytaxde...

POWAY UNIFIED CFD#6
http://californiataxdata.us/DisplayTaxDe...

How Long To Pay?
The special tax shall be levied for a period of twenty-five (25) fiscal years after the last bond series is issued, but in any case not after fiscal year 2045-46.

All houses in 4S have the CFD#6 special tax. Those that were built in later phases have the additional CFD#6 IAA special tax, and can increase 2% each year

If you click on the 'Contact' tab, there's a contact number that you can call to verify. I have actually called them myself. The important key is in this phrase "The special tax shall be levied for a period of twenty-five (25) fiscal years AFTER THE LAST BOND SERIES IS ISSUED". The question is "When will the last bond series issued?". The answer is 2015. The 4S community is projected to be completed in 2015, that's when the last bond series is issued.

Most 4S home buyers assume that they'll pay the Mello-Roos 25 yrs from the year they purchase the house. They're wrong. The 25 yrs starts from THE YEAR THAT THE LAST BOND SERIES IS ISSUED, NOT FROM THE YEAR OF PURCHASE. If you add 25 yrs to 2015, you'll get 2040. That's the year the Mello-Roos will payoff! Also note that there's a 5 yr padding, if more fund is needed by 2040 they may collect up to 5 more years i.e. cannot collect after 2045.

These are ridiculous facts that I just found out, and would like to share with home buyers out there. 4S is a nice place to live, but we should be aware what and how long we're paying for.

Submitted by desmond on September 16, 2010 - 5:43pm.

If you own in 4S, I would keep it quiet, you would just be alerting future homeowners not to buy in 4s.

Submitted by bearishgurl on September 16, 2010 - 6:28pm.

In the course of my business last month, a local realtor told me that some of the MR bonds in Otay Ranch (South County) also won't be paid off for 40 years. I was incredulous when he said this but now not so much. From what I understand from this thread, the bulk of the 4S buyers did not initially understand the documents they signed at the time of signing. And the 4S salespeople did not bother to properly explain them. I've maintained all along that this practice of non-disclosure routinely happened in new development offices at the time of closing. Buyers were likely so enamored with purchasing *new* construction that they paid no attention to this small, but important detail, even if it was "glossed over" to them at the time of closing.

Submitted by equalizer on September 16, 2010 - 9:04pm.

Only a tax lawyer working for GS could devise or understand something so egregious. How is thing any different than anything that happened in Bell?
Wait, the schools are still screaming poverty. Only in this state could you have this amount of taxation, yet PTA turns kids into marketing slaves first day of school.

Where is that Tea Party when you need them?

Submitted by enron_by_the_sea on September 16, 2010 - 9:25pm.

When I bought my house (no, I am not in 4S) the escrow company sent me about 200+ page report covering exciting topics such as earthquake fault zones, landslide inventory report, right to farm disclosure, naturally occuring asbestos zzzz.....

Somewhere in that, there was one page saying our Mello Roos for the CFD was expiring in 2016. This was bond issued in 1991 due to be paid off in 2016 per the escrow company.

Recently I digged deeper into this and found that the 1992 bonds mentioned above, were in fact refinanced in 1998. So the new bonds will be paid off in 2020 instead of 2016. -- However my escrow company never really pointed that out to me.

So I can believe what the OP says. Disclosures on these things seem to be quite sloppy. (Maybe an opportunity for an enterprising hungry lawyer...)

Submitted by LAAFTERHOURS on September 17, 2010 - 6:37am.

I assume Del Sur is independent of 4s Ranch on the MR bonds. Any idea on the status of the bonds in Del Sur, Santaluz, SEH or the newer parts of La Costa?

Submitted by all on September 17, 2010 - 8:27am.

LAAFTERHOURS wrote:
I assume Del Sur is independent of 4s Ranch on the MR bonds. Any idea on the status of the bonds in Del Sur, Santaluz, SEH or the newer parts of La Costa?

This is how I do it:
1. take any house in the target neighborhood and get the parcel number (address might work, but I found parcel# to be more reliable).
2. Look it up on the tax collector's website (https://www.sdctreastax.com/ebpp3/)
3. Find MR symbol(s) in the property tax roll and google it (or bing it if you are affiliated with MS). You may or may not find statements and reports.

It's amazing what kind of stuff people put online and allow indexing. I once stumbled upon the county voters records for the past few years.

Here is the list of all fixed charge assessments in the county.
http://www.sdcounty.ca.gov/auditor/trb09...

It includes the total amount, the number of parcels affected and who to call for more details. It does not tell you the maturity date.

To the OP - you can get your payoff statement from the administrator for $100. The fee applies towards the payment if you decide to pay off your MR within 30 days. If you wait longer than 30 days you forfeit your $100.

Submitted by PKMAN on September 17, 2010 - 9:26am.

MR is just wrong!!! As much as 4S was very attractive to me (ideal location, ideal home size, ideal price, ideal community...), I ultimately made a decision not to buy a home with MR, and I'm very glad that I stuck to it.

Furthermore, I believe majority of people are claiming MR as property tax, to be deducted from their income, knowing full well that they're not supposed to do that. If ever audited by the IRS....

Submitted by all on September 17, 2010 - 9:52am.

PKMAN wrote:

Furthermore, I believe majority of people are claiming MR as property tax, to be deducted from their income, knowing full well that they're not supposed to do that. If ever audited by the IRS....

Parts of MR can be deducted. The way I read the most recent annual report most of the fee is deductible.

Submitted by fragile on September 17, 2010 - 11:42am.

To find out the MR in Del Sur (or other area of interest), you can follow this link:

http://californiataxdata.us

follow the steps described in the original post. For example, selecting a random property in Del Sur would give me this info:

http://californiataxdata.us/DisplayParce...

The Del Sur area has 2 MR named CFD#14 and CFD#14 IAA, about $3400/year each.

You can click on a row to drill down to see the details, but if there're no links you have to look it up. To look it up, click on the "Find Bonds" tab at the top, and you'll see a list of bonds:

http://californiataxdata.us/bond.aspx

Look for CFD No. 14 and CFD No. 14 IAA. The Maturity Date is 9/1/2036 for both of them.

CFD No. 14:
http://californiataxdata.us/BondDetail.a...

CFD No. 14 IAA:
http://californiataxdata.us/BondDetail.a...

Submitted by PKMAN on September 17, 2010 - 12:09pm.

captcha wrote:
Parts of MR can be deducted. The way I read the most recent annual report most of the fee is deductible.

Yes, but only the portions that are used for maintenance & repair of certain public infrastructures, not the building of these infrastructures. Furthermore, you'd have to proof the the amount (you plan on deducting) are indeed for the maintenance, repair... If you cannot prove, you cannot deduct.

See:
http://www.ftb.ca.gov/individuals/faq/ne...

Submitted by all on September 17, 2010 - 12:14pm.

PKMAN wrote:
captcha wrote:
Parts of MR can be deducted. The way I read the most recent annual report most of the fee is deductible.

Yes, but only the portions that are used for maintenance & repair of certain public infrastructures, not the building of these infrastructures. Furthermore, you'd have to proof the the amount (you plan on deducting) are indeed for the maintenance, repair... If you cannot prove, you cannot deduct.

See:
http://www.ftb.ca.gov/individuals/faq/net/909.shtml


Maintenance, repair and interest. Most of the fee covers the interest. The annual report gives you the breakdown.

Submitted by all on September 17, 2010 - 12:16pm.

fragile wrote:
To find out the MR in Del Sur (or other area of interest), you can follow this link:

http://californiataxdata.us

That website is for PUSD only. Won't work for SEH.

Submitted by waitingitout on September 17, 2010 - 1:10pm.

For fun, I read through some of the CFD #14 IAA disclosures for Del Sur. Buildout sure looks a long way off of the projected dates that went by awhile ago. The resort hotel and championship golf course plans listed were more recently scrapped. I wonder how all this affects the issuance of the bonds for the unfinished phases.

I couldn't help but laugh at the portion mentioning that most buyers at the time (2006) were using creative financing means and that there might be risk in this.

DDT, toxaphene and old military ordinance as far as 6 feet down (some is inert practice stuff) were listed.

Hm.

Submitted by Aecetia on September 17, 2010 - 6:35pm.

"Furthermore, I believe majority of people are claiming MR as property tax, to be deducted from their income, knowing full well that they're not supposed to do that. If ever audited by the IRS...."

Eventually someone will be audited and the IRS will realize what a windfall this is with back penalties due, etc. It would be easy to threaten the person audited with criminal prosecution for fraud. It could be really ugly.

Submitted by temeculaguy on September 17, 2010 - 9:03pm.

The irs wont bother with it, they really could care less because the dollar amount isn't worth the labor costs. If someone has 1k a year of mello roos and 80% of it is deductable, yet they deduct the whole thing, then they deducted 200 that they shouldn't have. It was not malicious, their bill would be a whole $50 to the irs, yet it cost the irs a grand in labor to deal with it, just not worth it. Same goes for your vehicle registration, you are supposed to subtract the non value based portion and deduct only the remainder, most people just deduct the dollar amount they see on their vehicle registration card in their glove box and the irs doesn't really care.

Plus there are more people inflating their charity deduction than the mello roos folks.

They will likely just change the tax code to allow mello roos as a deduction, since it basically is treated that way now. They already changed the code to allow the deduction of PMI.

Mello roos sucks, but if you are a buyer of resale property, you can factor the payment, then figure the dollar cost and reduce your offer by that amount. If you have to pay the same amount for a mello roos house vs a non mello roos house, the go with the non, but if there is a discount because of it, if that discount makes the two houses cost the same as far as the monthly payment, then live where you want to live.

Submitted by ahewitson on July 24, 2011 - 8:16am.

fragile wrote:
I just found that the 4S Mello-Roos won't payoff until 2040!

4S home buyers were told that it's a 25-yrs Mello-Roos, but no one ever asked '25 yrs starting from when?', because most people assume it starts when they buy the house. If you bought a house in 4S in 2002, and think you've paid 8 yrs so far, and you only have 17 yrs to go, you're wrong! Your 25-yr period hasn't even started yet. It won't start until 2015 when the 4S area is completed.

Here's how to find out:

go to:

http://californiataxdata.us/

click "Find Property" tab at the top. Select "Search By Address". Enter a property address. You'll see the parcel number. Click on the parcel number to see the tax database. Look for "Poway Unified School Distric Community Facilities District No. 6", then click on it to see detailed data.

For example, a random house in 4S shows:

POWAY UNIFIED CFD#6 IAA
http://californiataxdata.us/displaytaxde...

POWAY UNIFIED CFD#6
http://californiataxdata.us/DisplayTaxDe...

How Long To Pay?
The special tax shall be levied for a period of twenty-five (25) fiscal years after the last bond series is issued, but in any case not after fiscal year 2045-46.

All houses in 4S have the CFD#6 special tax. Those that were built in later phases have the additional CFD#6 IAA special tax, and can increase 2% each year

If you click on the 'Contact' tab, there's a contact number that you can call to verify. I have actually called them myself. The important key is in this phrase "The special tax shall be levied for a period of twenty-five (25) fiscal years AFTER THE LAST BOND SERIES IS ISSUED". The question is "When will the last bond series issued?". The answer is 2015. The 4S community is projected to be completed in 2015, that's when the last bond series is issued.

Most 4S home buyers assume that they'll pay the Mello-Roos 25 yrs from the year they purchase the house. They're wrong. The 25 yrs starts from THE YEAR THAT THE LAST BOND SERIES IS ISSUED, NOT FROM THE YEAR OF PURCHASE. If you add 25 yrs to 2015, you'll get 2040. That's the year the Mello-Roos will payoff! Also note that there's a 5 yr padding, if more fund is needed by 2040 they may collect up to 5 more years i.e. cannot collect after 2045.

These are ridiculous facts that I just found out, and would like to share with home buyers out there. 4S is a nice place to live, but we should be aware what and how long we're paying for.

What happens if I would like to pay off the bond in full? Let's say I wanted to buy a home in 4S and found out that my portion of the 2 bonds in that area was $60,000 for easy numbers. If I were to write a check and pay it off in full, would I be exempt from the timelines and the potential bond expiration in 2040?

Submitted by bearishgurl on July 24, 2011 - 1:35pm.

ahewitson wrote:
What happens if I would like to pay off the bond in full? Let's say I wanted to buy a home in 4S and found out that my portion of the 2 bonds in that area was $60,000 for easy numbers. If I were to write a check and pay it off in full, would I be exempt from the timelines and the potential bond expiration in 2040?

Why would you want to do that, ahewitson? Do you plan on keeping the property 29 years (until 2040)? Any potential buyer you later have for your house will EXPECT to pay these bonds for a property located in your area. You will not pay any more for the bonds by paying them twice per year on your property tax bills than if you pay them all up front. Nor do I think it would increase your resale value if you paid them off.

Submitted by mp7444 on July 24, 2011 - 8:27pm.

bearishgurl wrote:
You will not pay any more for the bonds by paying them twice per year on your property tax bills than if you pay them all up front.

Is that true, BG? Don't they pay more for interest for keeping the full-term bond?

Submitted by ocrenter on July 25, 2011 - 6:45am.

temeculaguy wrote:
The irs wont bother with it, they really could care less because the dollar amount isn't worth the labor costs. If someone has 1k a year of mello roos and 80% of it is deductable, yet they deduct the whole thing, then they deducted 200 that they shouldn't have. It was not malicious, their bill would be a whole $50 to the irs, yet it cost the irs a grand in labor to deal with it, just not worth it. Same goes for your vehicle registration, you are supposed to subtract the non value based portion and deduct only the remainder, most people just deduct the dollar amount they see on their vehicle registration card in their glove box and the irs doesn't really care.

Plus there are more people inflating their charity deduction than the mello roos folks.

They will likely just change the tax code to allow mello roos as a deduction, since it basically is treated that way now. They already changed the code to allow the deduction of PMI.

Mello roos sucks, but if you are a buyer of resale property, you can factor the payment, then figure the dollar cost and reduce your offer by that amount. If you have to pay the same amount for a mello roos house vs a non mello roos house, the go with the non, but if there is a discount because of it, if that discount makes the two houses cost the same as far as the monthly payment, then live where you want to live.

well put!

Submitted by all on July 25, 2011 - 8:15am.

ahewitson wrote:

What happens if I would like to pay off the bond in full? Let's say I wanted to buy a home in 4S and found out that my portion of the 2 bonds in that area was $60,000 for easy numbers. If I were to write a check and pay it off in full, would I be exempt from the timelines and the potential bond expiration in 2040?

The administrator will remove you from the Special Tax levy. You have to deposit $100 to find out how much you must pay and you'll have 30 days to pay once you learn about the amount or you lose your $100.

Submitted by ahewitson on August 5, 2011 - 11:50pm.

bearishgurl wrote:
ahewitson wrote:
What happens if I would like to pay off the bond in full? Let's say I wanted to buy a home in 4S and found out that my portion of the 2 bonds in that area was $60,000 for easy numbers. If I were to write a check and pay it off in full, would I be exempt from the timelines and the potential bond expiration in 2040?

Why would you want to do that, ahewitson? Do you plan on keeping the property 29 years (until 2040)? Any potential buyer you later have for your house will EXPECT to pay these bonds for a property located in your area. You will not pay any more for the bonds by paying them twice per year on your property tax bills than if you pay them all up front. Nor do I think it would increase your resale value if you paid them off.

Here's a simple calculation for you BG. Let's say I was just going to stay in the house for half that time (15 years instead of 29 years). The starting Mello Roos is $5,000 with an annual increase of 2% each year. The schedule would look like this:

Years Mello Roos Running Total Mo. Cost
1st $5,000.00 $416.67
2nd $5,100.00 $10,100.00 $425.00
3rd $5,202.00 $15,302.00 $433.50
4th $5,306.04 $20,608.04 $442.17
5th $5,412.16 $26,020.20 $451.01
6th $5,520.40 $31,540.60 $460.03
7th $5,630.81 $37,171.42 $469.23
8th $5,743.43 $42,914.85 $478.62
9th $5,858.30 $48,773.14 $488.19
10th $5,975.46 $54,748.60 $497.96
11th $6,094.97 $60,843.58 $507.91
12th $6,216.87 $67,060.45 $518.07
13th $6,341.21 $73,401.66 $528.43
14th $6,468.03 $79,869.69 $539.00
15th $6,597.39 $86,467.08 $549.78

By these calculations, You'd only need to own this home for 11 years to break even on your original investment of the mello roos payoff. Additionally, even if you kept this property as a rental investment, you'd end up paying $114,202 after 20 years and $185,256 in 29 years. Who's to say that you'd keep the home for 30 years as a residence or rental or at all but 300% of the original $60,000 doesn't sound like too much fun to me.

Now, let's talk about selling your home. If you were trying to sell your $700,000 house and a prospective buyer was calculating their total monthly mortgage payment on a 20% down conforming 30 year fixed loan with a principal balance of $560,000. Their monthly payment will be $3,005 but if they were to budget monthly for the Mello Roos it would be $3,513 ($3,005 P&I + $508 MR). If a buyer was trying to determine whether they could afford $3,005/mo vs. $3,513/mo do you think my house without MR would be a more attractive purchase to them? Or 5 years later where that same payment would be $3,565 and so on. That $3,500ish payment would be as if your principal loan amount was $650,000 ($90,000 more) because of the MR amount.

I'd be interested to hear a compelling argument NOT to pay off your MR.

Submitted by bearishgurl on August 6, 2011 - 12:11pm.

ahewitson wrote:
...I'd be interested to hear a compelling argument NOT to pay off your MR.

ahewitson, your calcuations are based upon a few assumptions:

1. That persons who might be interested in making an offer of your home would factor in the MR into their monthly payment. Not all would. The reason so many of those properties with exorbitant MR originally and subsequently sold is because the buyer didn't factor the cost of MR into their monthly budget. The MR is typically only paid twice per year with property taxes and every buyer doesn't think like a "typical Pigg."

2. That you will not be able to make MORE substantial interest (than the 2% the interest on the bonds) in the future on the huge amount you are considering throwing away on "advance MR payments."

Even if your intention is to keep and even live in the property for 11+ years, I think that is a shortsighted view. Life brings all kinds of twists and turns and frankly, NO ONE knows where they will be in 11+ years or even if they'll still be alive ... not even those who own their principal residences free and clear! I think if you are still young or relatively young, with a mortgage, you should leave your options open and be prepared to get your property ready to sell at any time.

In addition, if your property or the one you're considering purchasing (with the exorbitant MR encumbrance) is located within well-known CFD's by the buying public, those buyers who want to avoid paying MR will not even look at it or consider visiting your area to shop in. Your comments in your listing may state that seller has paid off the bonds to a certain date or paid them off entirely, but will potential buyers see this if they know 99% of 92127 is located within one or more CFD's and thus don't even look in that area? And for the potential buyers who do see your comment, how much over the sales price of your neighbors (who still owe their MR) will they be willing to pay for your property (to "reimburse" you for your advance payment)? Do you think you can "recover" up to $60K, or even $30K or $10K of your advance payoff of the bonds upon sale??

I just don't see an "advance payment" of MR working out financially for a property owner. Instead I see loss. Even if you put the $60K into upgrades, I see most of it lost in 4S, due to massive distress. I believe this area has a ways to go before it is out of the woods.

Submitted by svelte on August 7, 2011 - 7:48am.

enron_by_the_sea wrote:

Somewhere in that, there was one page saying our Mello Roos for the CFD was expiring in 2016. This was bond issued in 1991 due to be paid off in 2016 per the escrow company.

Recently I digged deeper into this and found that the 1992 bonds mentioned above, were in fact refinanced in 1998. So the new bonds will be paid off in 2020 instead of 2016. -- However my escrow company never really pointed that out to me.

From these two paragraphs, I now know the development where you live. :-)

That development did indeed have the MR refinanced and, as a result, some homeowners saw quite a significant drop in their MR tax.

There were at least a couple of owners in the area that had prepaid their MR, thinking they were being financially wise by avoiding the auto 2% increases. Well, the refi eliminated the yearly 2% increases also. So the owners that prepaid were SOL.

That is why I would not recommend pre-paying.

This is a very popular topic on this site and it comes up every few months. If one googles "site:piggington.com mello roos" or something similar with the particular aspect you're interested in, you'll get oodles of threads to read through.

Two that are particularly interesting...this one gives the link to the govt write-up on MR deductibility:

http://piggington.com/mello_roos_fees

And this one explores whether they can be prepaid:

http://piggington.com/san_elijo_hills_an...

(ps - there are at least a couple of developments in north county where original owners were given the option of prepaying the MR when they purchased. About a quarter did in one development. I haven't done it, but it would be an interesting case study to see if their resale value has proven to be higher)

Submitted by bearishgurl on August 7, 2011 - 12:58pm.

I looked at your old links, svelte. It reminded me that I have actually reviewed many homeowner's tax bills with the various CFD's listed. Some of these owners owned the same property for more than 20 years. It is true that MR for a school district CFD continues to be collected from the affected property owners (in the form of MR bond pymts) long after the needed schools are built. I recently posted on the "deficit reduction" thread that MR was used to build schools but not run them. That is incorrect. Schools located within CFD's have better and newer facilities which are maintained better, i.e. landscaping, carpeting, indoor lockers, lockers with built-in locks, swimming pools, larger gymnasiums and cafeterias, indiv sinks in restrooms, separate auditoriums or theatres, bigger, better stadiums, separate showers in the locker rooms, etc. All this costs more $$ to maintain than the older "bare-bones" campus not located within a CFD. However, I do not believe that MR is used for teacher or administrator salaries.

Property owners who pay MR to school district CFD's may ALSO be paying voter-approved construction bonds to the SAME school and community college districts on the "regular" portion of their property tax bill (that every property owner in their school district pays). The MR bonds they pay to their district are OVER and ABOVE any voter-approved construction bonds and other allocated portions to their school district on the "regular" portion of their tax bill.

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