COMMUNITY COMMENTARY: Mello Roos taxes are going up

Those who own property in the Encinitas Ranch might want to take a closer look at your Mello Roos Taxes. They are going to increase.
Encinitas City Council voted 3-1 April 27 to allow the Encinitas Ranch Golf Authority, or ERGA, to pay themselves a “contingency fund” of $100,000 a year for the next five years or more, before paying the full amount of the CFD bonds.
This means the golf course and Carltas Development Corporation will be passing more of ERGA’s portion of the CFD bond debt of $400,000 per year on to you.
By way of a brief explanation, CFD stands for Community Facilities District — the portion of the bonds that paid for the roads, utilities, etc., that you as property owners in the Encinitas Ranch are paying through your Mello Roos taxes.
As background, the Carltas Company borrowed from the taxpayers of Encinitas 50 percent of the sales tax generated in the first five years by the commercial development along El Camino Real. This “sales tax loan” was approximately $1.3 million. Carltas Company is the development arm of the vast Ecke family land holdings.
According to the Encinitas Ranch Development Agreement between the city and Carltas, the loan was to be paid back with interest by June 2013. Carltas Corporation paid the installments for the first $500,000 and the remaining $800,000 was to come out of the ERGA surplus net revenues. ERGA made the installments for 2008 and 2009, but came to City Council in 2010 saying they could not afford to make further payments.
The ERGA board is made up of members of JC Resorts; the Carltas Company representative; the Encinitas city manager, the Parks and Recreation director; the director of Engineering and other city support staff. Bill Dean of Leucadia is president. It is a private-public for-profit business partnership. Its finances are spelled out in a complicated formula under the development agreement. ERGA operates independently, without City Council oversight.
ERGA announced that they needed to establish a “contingency fund” of $500,000 in case there is a “catastrophic event” in the future regarding the golf course. The questions here are: Why establish this contingency fund now? And where does ERGA plan to get the money for this contingency fund when it cannot make the payments on the sales tax repayment loan?
The sales tax loan was a loan between the city of Encinitas and Carltas Company, the owner of the golf course. It states in the development agreement: “Failure of the golf course to produce sufficient Surplus Golf Course Net Revenue to repay all or a part of the sales tax advance in no way releases Owner (Carltas) of the obligation to repay said advance.”
Carltas requested to invoke a condition in the development agreement that reads, “City will consider in good faith extending the payment period” of the loan. At the March 23 meeting, City Council directed City Manager Cotton to “negotiate” with Carltas Corporation to allow ERGA and Carltas to have a five-year suspension of repayment of the sales tax loan.
On April 27, Carltas got their loan extension with only ERGA’s revenue stream (which is uncertain) as collateral. If at sometime in the future there is a default, and Carltas Development can’t pay their bills, it will all fall on the city of Encinitas. Carltas gets to defer their obligation until June 2016, 2017, 2018.
By giving this benefit to Carltas, what Encinitas projects go unfunded while Carltas foregoes their obligation to pay their debt of $650,000 on time?
The request by ERGA for establishment of a “contingency fund”?
City Council allowed ERGA to pay themselves the $100,000 per year contingency fund before paying the debt on the CFD bonds. Which means, the Ranch property owners get to pick up the shortfall on the Community Facilities District Bonds — whatever part of the $400,000 payment that ERGA cannot afford to make while paying itself. This “contingency fund” appears to be a bailout. It creates a revenue stream for ERGA should they default on other financial obligations.
Questions property owners in the Encinitas Ranch might want to ask: How much more money will I pay? How many more years am I paying increased taxes?


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