The Fall Out of An Unfinished Community

I recently made the following presentation to the Capistrano Unified School District regarding lowering an outragousely high Mello Roos Tax on the members of one of my HOA clients.

I recently made the following presentation to the Capistrano Unified School District regarding lowering an outrageously high Mello Roos Tax on the members of one of my HOA clients.  The local press covered the issue, and posted the presentation here and here.


Good evening. My name is Robert DeNichilo, and I am corporate counsel for the Pacific San Juan Community Association. I have been asked by residents of Pacifica San Juan to address you this evening, and I thank you for your time and attention.

First let me address the question of why are we here.  Pacifica San Juan comprises Community Facilities district 98-1 of the Capistrano Unified School District.  When the district was originally formed, the economy was in a very different state than it is today.  It was an era we now recognize as a housing bubble, and where demand far outstripped supply.  At that time, Pacifica San Juan was envisioned to be a community of 416 homes.  It was anticipated that such a community would have a large and real impact on the city, and in particular the school district and the services it provides its residents.

That was the environment where the rate of special tax to be levied was calculated.  An environment where it was envisioned that a 20 million dollar bond would be required to offset the impact of Pacifica San Juan on the school district, a number that was increased to 45 million dollars a few years later.  However, as we all know, we are in a very different situation today.

Rather than a community of 416 homes, Pacifica San Juan today, and for the foreseeable future, is comprised of 61 homes, only 54 of which have been sold and have families living in them.  Of these 54 homes, there are only 10 children attending school in the district.  Clearly this is a very different level of impact on the district than that which was envisioned when the CFD was created, and no one would have envisioned that it would take over 26 thousand dollars per student per year the residents have been taxed, or the 46 thousand dollars per student per year that I understand is being proposed, to offset the impact of the 10 children from Pacifica San Juan on the Capistrano Unified School District.

Despite the change in circumstances from what was anticipated at the time that the rate of special tax was determined, there has been no review of the real impact of Pacifica San Juan on the school district.

One impact is that there has not been any need for bonds to be issued.  In fact, until there is a significant change in circumstances it is unlikely any bonds will be issued. Further, once things do change, and development begins again, it is highly likely that any new developer will seek to change or eliminate the CFD, as the current rate of special tax negatively impacts on the marketability of the property.  In fact, it is my understanding that this may already be occurring in another community in the district.

We are in a unique situation here in light of the fact that no bonds have been issued in this CFD.  The Board is not hamstrung with debt that must be repaid by the special tax.  Rather, pursuant to Government code section 53330.5, this Board has the authority and power to reduce the rate of special tax currently being levied on the properties in Pacifica San Juan.  It is my understanding that this has been done by other districts where development in a community comes to a halt, as has happened in Pacifica San Juan.

The residents of Pacifica San Juan would like to work collaboratively with the Board to lower the rate of special tax on this CFD, with flexibility that may be required as circumstances change and development resumes.  In this light, pursuant to government code 53332, the residents will be filing petitions requesting that the Board adopt a resolution reducing the rate of special tax on Pacifica San Juan.  We look forward to working with you on this issue in the coming days.

Author: Robert M. DeNichilo

I am a partner in the law firm Nordberg|DeNichilo, LLP., specializing in the representation of community associations throughout southern California, For more information, please visit our web site at NDHOALaw.com.

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