City of Beaumont officials are planning an "information social" Thursday evening at Beaumont Civic Center.
Community Facility District taxes - also known as Mello-Roos for the authors of state legislation that enabled them - are a focus at the Thursday event, in part because Beaumont resident Nathan Hultgren brought them up at a December meeting of the Beaumont city council.
Mello-Roos taxes came to Beaumont in the mid-1990s, according to a city web page titled "Benefits of CFD (Mello-Roos) Taxes."
More than a decade earlier, the California Legislature passed the Mello-Roos Community Facilities Act of 1982 to provide local governments a method of financing public improvements and services.
Hultgren, 28, and his wife, 27, have a 10-month-old boy and they are planning to sell their home and move out of their Mello-Roos district because they can no longer afford their monthly tax bills, Hultgren said.
"It's cheaper to sell my house at a $25,000 loss than it is to stay and continue to pay the Mello-Roos," Hultgren said. "I would save more than $70,000 by moving out of the Mello Roos, even including the $25,000 loss."
Hultgren works in downtown Riverside for Riverside County. His wife is a credentialed teacher who couldn't find work. She stays home and cares for their child.
"We're talking about an issue that's a very hot topic that . . . concerns thousands of homeowners in Beaumont," Hultgren said in a recent interview. "All homeowners who own a home built on 1993 or after, are affected by these CFD bonds.
"There's a number things that are very concerning about these bonds. One, these bonds started off way too high. When you look across different cities in our region, very comparable cities, like the city of Yucaipa, their rates are more affordable, more reasonable," Hultgren said.
"We're talking in the realm of $1,000 to $1,500 per home. But in the city of Beaumont, we're looking at Mello-Roos in between $1,500 and more than $4,000 per home. And a lot of these homes are well over the $3,000 range, not including regular taxes," Hultgren said.
"So when you add regular taxes, we're well over $5,000, $6,000 on a $170,000 assessment. But that's not the end of it. The CFDs in the city of Beaumont are increasing by a minimum of 2 percent every year.
"If my Mello-Roos was $3,000 this year, that means it's $3,100 next year even if my home value decreases. And that's going to go up for 30 years. So today my Mello-Roos is about $3,200 but a few years down the line it's going to be I believe $5,000, a year, not including regular taxes. If you include regular taxes and assuming my home value goes up every year, we're talking $9,000, $10,000 a year in taxes, which is ridiculous," Hultgren said.
"And a lot of folks in Beaumont, once they bought their house, they realized, yes, Beaumont does have high taxes, but they have no clue that their Mello-Roos is increasing every year, and they have no clue what Mello Roos even is or why it's there.
"And this is very alarming to me, because if you didn't know that it was there, it could increase your monthly payment as much as $300 a month. And if you're maxed out purchasing a home, that will make or break your family. Some people can't afford that monthly payment if it jumps up 300 bucks a month," Hultgren said.
"That's why I spoke Dec. 6. It's a lot of money.
"We bought our house at a good price. We bought it in November 2009 for $219,000, so it was very reasonably priced. But we didn't know about the Mello-Roos and that was kind of the kicker for us," Hultgren said.
"Our disclosure statement was more than 150 pages. We had multiple paper signing sessions. I did read the disclosure but I didn't understand it. I had assumed it was the full tax rate. But it wasn't, it was just my Mello-Roos. That's how high it was.
"The tricky thing about the disclosure is, they won't disclose your current year Mello-Roos. It's a 15-page formula on how to calculate current year value," Hultgren said.
"They give you the value that it was when it started in 2006, and the city of Beaumont assumes you're automatically going to add 2 percent and compound it off the previous year until you get to the current year. And then that would give you the bulk of the Mello-Roos, and there's the service portion that's determined by city council, so you would have to research even further to see what the service fee is for that year, and that increases with CPI, so it's a very complex formula and it's hard for regular folks to understand it. . . .
"I didn't understand at first, but when I got my tax bill, I thought the county had improperly billed me. I thought they had billed me twice. That's how far off these Mello-Roos taxes are. They double your taxes pretty much. In our case, our Mello-Roos is more than our taxes.
"When our current bond started it was $2,555 of Mello-Roos," Hultgren said, pointing at a print-out table of figures. "This is year one here, $2,555, and this is where it's headed, $4,720.
"This is just our Mello-Roos here. We pay $3,182, and towards the end of the bond we're going to be paying $5,359. These are real numbers. I showed these to Alan Kapanicas, the city manager, and he's like 'Yup, you calculated everything right.'
"If they had told us the true taxes, we wouldn't have qualified for the home.
"We had a FHA safe loan, a government-regulated bond. We did everything responsibly, and we got into a safe loan, but if our lender had the correct numbers they would have found out that our debt-to-income ratio would have been too high including the Mello-Roos," Hultgren said.
"So our payment ended up ballooning by about $250 a month, so our total monthly tax payment was more than $500. We paid our first year $6,000 just in taxes. Technically we shouldn't have qualified for that amount."
The Hultgrens live on Freesia Way, a new street in the Sundance Community subdivision. They were among the last move-ins when they bought their place in 2009.
"There are 20 homes on that street, built 2006 and 2009," Hultgren said.
Many of Hultgren's neighbors on Freesia Way are surprised with the amount of Mello-Roos taxes they are paying, Hultgren said.
"Two are in the short-sale process, and one is a standard sale, mine," Hultgren said.
"We're moving because our taxes are increasing every year. We're going to move somewhere that doesn't have Mello-Roos. We just want to pay our regular taxes.
"The city of Beaumont, people move there because it's a quaint, small town, and people move there because they want to get a good deal on housing. I think it's important to let all potential homeowners know as well as the folks that live there, why the taxes are so high," Hultgren said.
"I don't have anything against Mello-Roos, but when it's done in excess, that's when the city crosses the line. Something needs to be done.
"One thing that's very alarming to me is that the city of Beaumont has a very high population of seniors in the community, lots of 55+ communities, and these folks are living on a fixed income. Their Mello-Roos are rising every year.
"This is wrong. This is affecting our grandmas and our grandpas. Not just young families. That's wrong too. Some people may know about Mello-Roos, but they may not know they're rising every year," Hultgren said.
"Something needs to be done to stop these increases and bring them back down to reasonable levels. I just want to call out the city council to do that, to protect their residents. That's why we put them in office. To protect our residents, and they're struggling because of the burden placed on them.
"It's a lot of money the city takes in. If you look at the Beaumont general budget, the city took in $17.1 million citywide in CFDs, and their bonds, the pay-off CFDs, they only had to pay $13.5 million in fiscal year 2010-2011," Hultgren said.
"There was admin costs of $3 million. Where does the extra money go?"
Hultgren said he plans to make the following recommendations at the Thursday information social event:
- Refinance the bonds to keep the Mello-Roos tax from rising further.
- Lower the service tax portion of the Mello-Roos to $100 a year and freeze it instead of $300 and raising it every year another 3 percent.
- Stop creating and activating CFD areas that require the buyer to pay for the infrastructure. Let the developer pay for this.
- Require all new home developers to post current year Mello-Roos tax rates.
City of Beaumont officials plan to host information socials on a quarterly basis, Starr said.
The event, scheduled 6 p.m. to 8 p.m. Thursday Feb. 9 at Beaumont Civic Center, is billed as "City with a Heart Pre-Valentine's Day Information Social with Hot Cocoa."
Beaumont Civic Center is at 550 E. 6th St. For more information, call (951) 769-8520. For information on upcoming events, visit the city's website at www.ci.beaumont.ca.us.