Should Mello-Roos Payments be Tax Deductible?

(From Assemblymember Jim Silva)

Assemblymember Jim Silva (R -Huntington Beach) introduced legislation that would ease some of the tax burden of owning or buying property.

Assembly Bill 1552 codifies Mello-Roos fees as tax deductible. Since 1982, Mello-Roos fees have been used by some neighborhood communities as a way to fund projects without using traditional property taxes, which are limited by Proposition 13.

Recently, the Franchise Tax Board introduced a campaign to make income tax filings and deductions more complicated by seeking to eliminate a property owner's ability to deduct local benefit taxes for maintenance or other repairs, a common use of Mello-Roos fees.

This new policy will affect millions of homeowners across California and will cumulatively increase property taxes by as much as $140 million.

"The state is always looking for ways to capture more and more taxpayer money and this is a new low. By going after Mello-Roos fees, the state is actually taxing a tax. It is another way to go after Californians' wallets and must be stopped," Silva said.

Jon Coupal, president of the Howard Jarvis Taxpayers' Association, commented, "In the middle of the worst foreclosure crisis in 70 years, we must do everything possible to ensure homeowners retain the property tax deductions they've been receiving for the last 30 years. I support AB 1552 and applaud Assemblyman Silva for stepping up and fighting this blatant money grab."

Another county sues municipality over redevelopment merger

The Ventura County Star is reporting a familiar story being played out throughout California.  Redevelopment agencies have been attempting to merge their zones or areas into a single massive redevelopment area.

According to the Ventura County Star, Simi Valley merged three redevelopment areas into one last June.  Ventura County objected and has sued.  The County claims the area is not blighted.

Sound familiar?  It should!  Fullerton has done the same thing with their massive merger of redevelopment areas. 

The Fullerton Redevelopment Agency merged areas in 2009 and was sued by the County of Orange as well as a local resident and businessman.  Fullerton ended up paying millions for their greed to the County in property tax revenue that the County was going lose.  Over the next 45 years, the City could pay out as much as $500-million. 

Many of these legal battles may not be fought in the courtroom at all.  The California Supreme Court has been asked by the State's 425 redevelopment agencies to overturn the state legislation passed earlier this year which abolishes all redevelopment agencies unless they pay a "fee" to cover some of the lost revenue. 

It's somewhat satisfying to watch agencies fight one another over taxes.  The Cities, through their redevelopment agencies are like little Tea Parties trying to pay as little in taxes as possible.  It's really quite funny until you realize its all OUR money.  The City, County, and State took my money, squandered most of it on "overhead", and then gave what was left to another agency...

Special thanks to Redevelopment.us for bringing this story to my attention.

For more on Fullerton's Redevelopment Agency, CLICK HERE.

More Bad News for Redevelopment Agencies

In a two-part series penned by Jessica Garrison, Kim Christensen, and Doug Smith of the LA Times, there is a faint glimmer of a spot light on Fullerton’s Redevelopment Agency and the damage being done.

To recap, Redevelopment Agencies exist to clean up blighted areas.  There is very little the agencies can do that City Hall cannot already do except sell bonds without taxpayer approval.

Part I of the LA Times article has horror story after horror story of redevelopment agency mishaps, mismanagement, and outright corruption up and down the Golden State.  Some of the article’s facts and figures are mind numbing. 

“The Times found widespread instances of corruption, questionable spending and poor accountability at such agencies, which take in $5 billion in property tax revenues each year. Under state law, the agencies are allowed to keep any increases in tax revenue in areas they improve.”

“Auditors also found that the City of Industry reported to the state that it gave $2.5 million to schools and the county in 2006. The problem was the payment should have been $21 million.”

“A recent report by the Senate Office of Oversight and Outcomes concluded that no state agency oversees redevelopment. Instead, ‘oversight is left largely to the city council members and county supervisors who sit as local redevelopment agency board members.’”

Those are just a few of the findings which are followed up by Part II, titled Arrested Redevelopment.  Part II discusses the low-income housing element which should account for 20% of Redevelopment Agency spending. 

“State law requires municipal redevelopment agencies to spend 20% of the approximately $5 billion in property taxes they collect each year on building and preserving homes for poor and moderate-income people.

But affordable housing is not politically popular, and The Times found that many projects face inexplicable delays. Others end up worsening blight and hurting the people they were supposed to help. Land ostensibly set aside for affordable housing was in some cases turned over to commercial developers, raising questions about whether cities ever intended to build the housing in the first place.”

In a July 2010 article by Orange County Register reporter, Kristine Guerra, the Fullerton Redevelopment Agency was highlighted spending $22.7-million and evicting more than 600 people.  The Agency’s goal?  “…to revitalize the neighborhood, which has had old, dilapidated homes and high crime rates.” 

“The agency has bought a total of 30 properties in the Richman Park area. It also paid more than $1.6 million to relocate 117 households with nearly 600 residents, more than half of whom were 18 years old and younger. Part of the relocation cost is one-time financial assistance to the families.

Olson Company and Habitat for Humanity of Orange County are developing most of the properties into single-family condominium units that target very low-, low- and moderate-income home buyers.”

The bottom line, the Fullerton Redevelopment Agency has made our low-income housing shortage WORSE at the expense of the 600 residents and Fullerton’s taxpayers.