COMMUNITY COMMENTARY: Mello Roos taxes are going up

Those who own property in the Encinitas Ranch might want to take a closer look at your Mello Roos Taxes. They are going to increase.
Encinitas City Council voted 3-1 April 27 to allow the Encinitas Ranch Golf Authority, or ERGA, to pay themselves a “contingency fund” of $100,000 a year for the next five years or more, before paying the full amount of the CFD bonds.
This means the golf course and Carltas Development Corporation will be passing more of ERGA’s portion of the CFD bond debt of $400,000 per year on to you.
By way of a brief explanation, CFD stands for Community Facilities District — the portion of the bonds that paid for the roads, utilities, etc., that you as property owners in the Encinitas Ranch are paying through your Mello Roos taxes.
As background, the Carltas Company borrowed from the taxpayers of Encinitas 50 percent of the sales tax generated in the first five years by the commercial development along El Camino Real. This “sales tax loan” was approximately $1.3 million. Carltas Company is the development arm of the vast Ecke family land holdings.
According to the Encinitas Ranch Development Agreement between the city and Carltas, the loan was to be paid back with interest by June 2013. Carltas Corporation paid the installments for the first $500,000 and the remaining $800,000 was to come out of the ERGA surplus net revenues. ERGA made the installments for 2008 and 2009, but came to City Council in 2010 saying they could not afford to make further payments.
The ERGA board is made up of members of JC Resorts; the Carltas Company representative; the Encinitas city manager, the Parks and Recreation director; the director of Engineering and other city support staff. Bill Dean of Leucadia is president. It is a private-public for-profit business partnership. Its finances are spelled out in a complicated formula under the development agreement. ERGA operates independently, without City Council oversight.
ERGA announced that they needed to establish a “contingency fund” of $500,000 in case there is a “catastrophic event” in the future regarding the golf course. The questions here are: Why establish this contingency fund now? And where does ERGA plan to get the money for this contingency fund when it cannot make the payments on the sales tax repayment loan?
The sales tax loan was a loan between the city of Encinitas and Carltas Company, the owner of the golf course. It states in the development agreement: “Failure of the golf course to produce sufficient Surplus Golf Course Net Revenue to repay all or a part of the sales tax advance in no way releases Owner (Carltas) of the obligation to repay said advance.”
Carltas requested to invoke a condition in the development agreement that reads, “City will consider in good faith extending the payment period” of the loan. At the March 23 meeting, City Council directed City Manager Cotton to “negotiate” with Carltas Corporation to allow ERGA and Carltas to have a five-year suspension of repayment of the sales tax loan.
On April 27, Carltas got their loan extension with only ERGA’s revenue stream (which is uncertain) as collateral. If at sometime in the future there is a default, and Carltas Development can’t pay their bills, it will all fall on the city of Encinitas. Carltas gets to defer their obligation until June 2016, 2017, 2018.
By giving this benefit to Carltas, what Encinitas projects go unfunded while Carltas foregoes their obligation to pay their debt of $650,000 on time?
The request by ERGA for establishment of a “contingency fund”?
City Council allowed ERGA to pay themselves the $100,000 per year contingency fund before paying the debt on the CFD bonds. Which means, the Ranch property owners get to pick up the shortfall on the Community Facilities District Bonds — whatever part of the $400,000 payment that ERGA cannot afford to make while paying itself. This “contingency fund” appears to be a bailout. It creates a revenue stream for ERGA should they default on other financial obligations.
Questions property owners in the Encinitas Ranch might want to ask: How much more money will I pay? How many more years am I paying increased taxes?

Share

Filed Under: Community Commentary

RSSComments (9)

Leave a Reply | Trackback URL

  1. anonymous says:

    I was very disappointed when the Council voted to extend loan terms and also to increase the slush fund. With so many other local needs, couldn’they have found other ways to use these funds that would benefit ALL Encinitas residents, not just a wealthy family and its board members?

    Like so many issues lately, this one is fraught with conflict of interest with the overlap of govenment and special interests intertwined. Who is looking out for Encinitas taxpayers?

    Thank you Sheila Cameron for your insight.

  2. W.C. Varones says:

    Obviously the council is allowing CarlTas to rip off the city, but I don’t get the part about Mello Roos.
    Isn’t Mello Roos a fixed amount that can’t be increased retroactively by council malfeasance?

  3. anonymous says:

    Ecke owns this city council and has since the city first incorporated. Contingencies should have been made for Ecke to use some of his excess land on Saxony as collaterol; forfeit the land for permanent public use as a mini-park if he defaults on the loan obligations. Shifting the burden onto the public is typical backroom accomodation – the rich get richer and the city council takes bribes under the table.

  4. Contracts says:

    A Mello Roos tax is for a fixed amount, and all homeowners who buy a home in such an area agree, in writing, in escrow, to pay it.correct. These have a unique feature allowing "excess" funds derived from the Encinitas Ranch Golf Course to potentially reduce the amount owed by the homeowner. It’s an annual calculation.
    The agreement re the tax loan provision also contains a clause allowing for the requested extension of the payback period. This was not a special favor, it was executing a clause in a contract which will result in the City gaining hundreds of thousands of dollars in interest earnings it would otherwise not have received.
    Once again Ms. Cameron shows that she either can’t rationally grasp simple clear concepts, or her antipathy toward the Ecke’s blinds her to all the facts.
    Please stop misleading the public with skewed opinion pieces!

  5. anonymous says:

    With regard to ‘Contracts,’ if this was so clearly articulated within the contract, why did they have to vote on it in the first place?

    If this concept is so simple and clear to grasp, why couldn’t the city employee who presented the case explain the formula or even add the columns and rows up correctly–even with rounded numbers?

    This entire deal stinks and has the look and feel of a Duke Cunningham bribe schedule, written on the back of a napkin!

  6. Contracts says:

    The City Council is the decision making body for the City of Encinitas, which is why the City Council made the decision to exercise the option. It benefited the City.
    Cameron asks questions like: "ask how many more years I’ll be paying more taxes" which shows she doesn’t understand the basic reality of the agreement. The real question would be " how many years will I get less of a discount on my agreed upon tax payment?"
    And again, since this is an annual calculation it clearly depends upon how well the golf course does that year. These are not complex concepts, but Ms. Cameron, and apparently you, can’t quite grasp them.
    Attempting to divert people’s attention with references to a Federal criminal is a cheap attempt to sensationalize your lack of thoughtful understanding of the issues at hand or the decision the City Council made.

  7. anonymous says:

    I disagree that this deal benefits the City. In fact, the first time that it was discussed, the Council voted to change the order of items so that it was at the end of the meeting and so that the majority of those watching the meeting from the audience and at home would have already left the meeting.

    Who does it benefit? Those Council members who get support from family members and other real estate developers during election time.

    We need to have more Council members who represent the interests of Encintias real citizens, not the builders and employee unions.
    All of these interests are so intertwined that the CarlTis employee had already left by the time the Encinitas employee gave the presentation on his behalf. It was a already a done deal!

  8. Contracts says:

    Dear Anon y mouse: You state that you disagree that this decision benefits the City, but give no logic or reason as to how or why you have reached that conclusion and instead go off on some moronic personality / agenda rant.

    Please learn that there is a meaningful difference between "critical thinking" and being an "unthinking critic", which is what you are displaying.

  9. anonymous says:

    Contracts,

    I invite all reading to watch the City Council meetings to decide for themselves if they think that this is a deal which benefits 60,000 Encinitas citizens/taxpayers, or a couple of dozen people from a family, the council members who they support, and a few of their key employees. Is it good policy to have high ranking Encinitas staff serve on the Board?

    This Encinitas City employee who represented the golf course in his presentation of numbers that did not add up, is a sad representation of all Encinitas city employees.

    I think that "Contracts" should think of who should be called "moranic" and "an unthinking critic" when 60,000 residents are asked to shoulder the risk and potential default for the clear benefit of a few. I see no upside for us taking on the risk for what appears to be a failing golf course or their LLC.

    I appreciate that Teresa Barth stated what many had noticed– that she could not approve such sloppy work. I do not find it "moranic" to ask for 5th grade math skills from this staff member who serves as a financial expert. Better still, let the owners ask for their own terms and stop using public resources for personal gain.

Leave a Reply




If you want a picture to show with your comment, go get a Gravatar.