|CUSD Trustee Jim Reardon|
Results in Savings
By Jim Reardon, CUSD Trustee - Area 2
In many “newer” communities, Mello-Roos fees are a way to pay for school construction. When a developer still owns all the land, a Mello-Roos or “Community Facilities District” (CFD), is formed. This requires only that the developer and the "lead agency" such as the Capistrano Unified School District (CUSD), approve.
The advantage of CFDs is that rather than paying cash for the construction of needed schools which is a requirement in state law, the developer can commit to tax his property and the lead agency can then borrow the needed money, using the tax as the guarantee of repayment. These are generally 20-30 year bonds. The bonds are paid off by future homeowners based on a tax that is calculated on the size of their home.
In Ladera, a CFD was used to pay for a portion of Oso Grande Elementary School, Ladera Ranch Elementary School, Ladera Ranch Middle School, Chaparral and San Juan Hills High School. Since Ladera was built, the prevailing interest rates for municipal debt have fallen and the original bonds became "callable" (i.e.; could be repaid early). Fortunately, the school district was successful in recently refinancing Ladera's Mello Roos debt. On Thursday, July 16, Morgan Stanley submitted a winning bid for the outstanding district debt at the lower rate of 3.35 percent, resulting in a $9.17 million dollar present-value savings, or almost 10 percent of the amount refinanced. The original debt was incurred to pay for a portion of the construction of local schools. The savings can be used to enhance and expand local school facilities or reduce future increases in Mello-Roos assessments paid by Ladera residents .