News Room
City to sell municipal bonds
By Norene Fernandez-Tehachapi News
July 3, 2002
City has entered into agreements with Tower Tehachapi, LLC
The city of Tehachapi is anticipating to paybestwatch01.me sign a purchase agreement for the Curry Highlands Mello-Roos Community Facilities District with Tower Tehachapi, LLC on July 1. Curry Highlands, which is adjacent to the Blair Ranch residential development, is the last of the three Tehachapi Mello-Roos districts purchased by Tower. The other districts are located in Capital Hills and the Summit area.
Initially, the Mello-Rood bonds were used to help landowners raise funds for infrastructure improvements and new facilities. When the landowners passed the bond issue, they voted t tax themselves and property owners in the Mello-Roos districts or to sell the bonds to general funds for development improvements. However, upon passing the bond issue, if the landowners default on their taxes, it's the city's responsibility to foreclose to protect bondholders.
"Tower was willing to purchase the land in foreclosure sales," Mayor Philip Smith said. "What's at stake is the city has no liability through the general fund on this kind of arrangement because the property owner takes on the liability, not the city taxpayers." City Manager Jason Caudle said Tower acquires the properties with significantly less debt than before. One the property is acquired, it becomes more marketable for development, he said.
Although the general fund is not liable, the city is required to act as the administrator in making sure the landowners abide by the rules of the Mello-Roos bonds. As a result, the administration of the Mello-Roos bonds has cost the city for all three projects approximately $280,000 to date. According to Caudle, these fees have come from the city's general fund for accounting for the foreclosure project fees such as counsel, attorneys and court proceedings during the past 12 years.
"Tower has come in, saving the day, the bondholders are made whole and although the first landowners didn't pan out, they didn't lose as much as they could have," Smith said.
When the Mello-Roos bonds started out, they were really popular all over the state, he said, because it was extra cash flow to developers for property. The downside is the extra tax on new buyers on the properties until they're paid off, Smith said. However, the special Mello-Roos tax is only applied to those properties, the rest of the citizens are not taxed.