Beyond The Obvious Financial Burden, The Nasty Underbelly of Elk Grove's Mello Roos Fees

April 28, 2018 |

Mello Roos.

Anyone who has lived or owned a house in California long enough has heard the term and has a degree of familiarity with its meaning. And in most cases, it has taken on a negative connotation.

My first exposure to the term was in the early 1990s when as a new Californian, I was considering a purchase in the Riverside County community of Temecula. When scouting possible new housing developments there, I noticed several billboards and large weekend newspaper advertisements in bold print saying NO MELLO ROOS fees.

Before long, I learned what it meant. In its simplest form, it was a funding mechanism conjured by California legislators a few years following the passage of the Proposition 13 to help government entities fill funding gaps created by the historic change to real estate taxation.

Over the years the term Mello Roos has come to mean for many people higher property taxes.  For many Elk Grove residents,  Mello Roos fees can mean substantially higher taxes.

An examination of houses build before incorporation, and even for some a few years following, the tax burden is substantially less than those built anytime after 2006. In fact, the first major development conceived after the city's 2000 incorporation, Laguna Ridge, or as some call it, Maderia, is laden with Mello Roos fees.

In fact, it is the Mello Roos fees imposed on residents in that area that is paying for, what one city official calls it, The Living Room, or more commonly known as the Civic Center special planning area and the new swimming pool. That's right, an amenity that will be enjoyed by all members of the community is being footed by Laguna Ridge homeowners.

I have seen the effects of Mello Roos Fees in my personal experience. A house purchased in 1994, pre-incorporation, had a lower tax burden, in real dollars, not a percentage, than a smaller, lowered valued house purchased in 2014. The difference is the 1994 house had no Mello Roos Fees while the 2014 purchase had Mello Roos fees.

The big difference is the 1994 house was built pre-incorporation, and the other had Mello Roos fees attached to it before the first person slept a night in the dwelling. From a personal perspective, I am not complaining because I knew the fees when purchasing, but you must suspect many people purchasing news houses in areas like Laguna Ridge are not fully aware they are shouldering most of the cost of The Living Room.

As a case in point, one of EGN's regular contributors relocated recently from Wilton to the City of Elk Grove. When the retired couple was exploring houses, they considered Laguna Ridge but were turned off by the Mello Roos fees which one house they were considering were over $350 a month, before property taxes and other citywide Mello Roos and assessment districts. They ended up, not surprisingly, buying a pre-incorporation residence that had a lower tax burden. 

Put another way, on a percentage basis, Elk Grove Council Member Steve Detrick, who lives in an exclusive gated private community on a private lake that was built before incorporation could, as a percentage, be paying far less in fees than Mayor Steve Ly and Council Member Stephanie Ngueyn both residents of District 4 (post incorporation subdivisions). Heck, Detrick might be paying less that Ly and Nguyen in real terms given the annual growth limits under Proposition 13.

It is no mistake when the Elk Grove City Council has their many votes on assessment districts for new developments, they never are called Mello Roos fees. The city uses the less ominous, more benign term Community Facilities District, but the effect is the same. Homeowners are saddled with higher taxes for the privilege of living in The Grove than owners of a home built before various points in time.

While a discussion of Mello Roos fees and how they overburden particular property owners is a worthy discussion, there is also a darker undertone of the fees. That realization came while attending a political event for one of the current four city council members.

The person I was chatting with noted they lived in Laguna Ridge having relocated to Elk Grove for retirement in the last few years from the Bay Area. Not surprisingly he found great value relative to Bay Area and liked "the small town feel," which may not be as nice once you read on.

Being aware of the Mello Roos fees, I asked him what he thought about the assessments. The gentleman said he was aware of them and did not mind noting the friendly neighborhood, the coming amenities, and curiously, he enjoyed paying the higher fees.

It was the last part that was stunning. The man, who like me is Caucasian, but a few years older went on to say the higher fees kept "undesirables" out of the neighborhood.

I can't say for certain as I am not a mind reader, but having been white all my life, and he also being white, I know the code he was using. Put another way, he was saying it keeps Blacks, and possibly Mexicans, and for good measure nowadays, white trash as described in J.D.Vance's Hillbilly Elegy or any other group of people - fill in the blank - out of his neighborhood.

What was equally as shocking was he said this in the presence of a younger, well known political assistant who is not white. I can't say for sure if this other person heard or comprehended what was said, but as soon as the man uttered those words, the political assistant quickly left.

This single conversation is not to say Laguna Ridge homeowners pay their excessive Mello Roos fees solely to exclude others from their neighborhood. Nonetheless, experierience has shown me that when someone is code talking like this, there are probably many more who think the same way. Call it gated community snob appeal with a twist of racism and a skosh of classism mixed in for good measure.

Now, this is not to suggest that the city of Elk Grove is imposing Mello Roos Fees to create neighborhoods inaccessible to classes of people. However, the net effect could be that even in more affordable developments in the future, the over-reliance on Mello Roos fees can become exclusionary.

We are not unsympathetic to the various demands the city has and the struggle for funding, but these Mello Roos fees need to be viewed through a different prism. The first thing to consider is because the city dropped its development fees so low - to as allow for fatter profit margins for their friends in the development community - the imposition of the Mello Roos fees is now on autopilot to make up for that loss of this revenue while at the same time acting as a deterrent to "undesirables" owning homes in Elk Grove.

But hey, lowering those fees earned the city council a free dinner, and a plaque to display like a kid wearing a plastic sheriff's badge for being named the most business-friendly city a few years back from Region Builders.  

The city council should be mindful as they and their development gumbas relentlessly pursue one Mello Roos fee after another they are creating an exclusionary city, while at the same time squandering money chasing a broad range of hair brain schemes ranging from erecting useless tourist-oriented wayfinding signs to spending $400,000 of taxpayers money to study how many office cubicles are needed at city hall, not to mention the whole soccer stadium debacle.

Time to sharpen your pencils on several fronts wouldn't you say. 

Dan Gougherty