Paying off Mello Roos

[ocrenter]

[quote=earlyretirement]

As well, besides the 2% annual increases, it looked like they can extend out these CFD payments beyond the scheduled termination date. I liked the fact once you paid it off it forever releases you of ALL CFD obligations.
[/quote]

ER mentioned a very important point. With PUSD engaging in what can only be described as simply very creative financing, it is quite likely that they’ll try to extend CFD obligations when the sh#$%$ hits the fan in a few years.

Just don’t do what this guy in Stonebridge did:

[img_assist|nid=17315|title=substation view|desc=|link=node|align=left|width=300|height=225]

So the owner pays off part of the MR. But then needs to sell in less than a year. The lot is a deficient lot due to the view of the substation in the backyard.

I would have simply spent some money to plant in some mature trees that would block off the substation view.

MR pay off is for folks that are done with all of the necessary home improvements and they are in for the long haul. It is not for everybody.

[earlyretirement]

[quote=ocrenter][quote=earlyretirement]

As well, besides the 2% annual increases, it looked like they can extend out these CFD payments beyond the scheduled termination date. I liked the fact once you paid it off it forever releases you of ALL CFD obligations.
[/quote]

ER mentioned a very important point. With PUSD engaging in what can only be described as simply very creative financing, it is quite likely that they’ll try to extend CFD obligations when the sh#$%$ hits the fan in a few years.

Just don’t do what this guy in Stonebridge did:

[img_assist|nid=17315|title=substation view|desc=|link=node|align=left|width=300|height=225]

So the owner pays off part of the MR. But then needs to sell in less than a year. The lot is a deficient lot due to the view of the substation in the backyard.

I would have simply spent some money to plant in some mature trees that would block off the substation view.

MR pay off is for folks that are done with all of the necessary home improvements and they are in for the long haul. It is not for everybody.[/quote]

Absolutely OC Renter! That was one of the MAIN motivations for wanting to pay it off. I didn’t do it immediately after buying because I figured with the low interest rate environment maybe they would refinance at a lower rate. Which they did.

But interest rates are so low I figured they can’t get much lower and as well with all the shenanigans with the PUSD, I didn’t know if by the time these CFD’s come due they will just extend out the CFD further into the future. While I don’t think it’s likely, who the heck knows??!

I mean realistically, what would homeowners due if by 2045 (or whenever the last payment is due) all of a sudden they say it needs to get extended 5 more years… what recourse do homeowners have? If anyone knows that answer, please post. The legal paperwork for the CFD’s was so long and complex that I think even most lawyers would get confused by the technical jargon in it. It’s almost as if some lawyers sat around a room when drafting these CFD’s and said, “let’s make the wording so complex and difficult that no one will really be able to decipher the meaning…..”.

And I TOTALLY agree with you that it doesn’t make sense for everyone. Especially in a transitional town like San Diego where people seem to come and go all the time based on job losses, weak economy, etc. I’d only recommend it for people that know for sure they will stay in the area for the long-haul or at least for many many years.

In a hot housing market like now, I think you will ALWAYS be able to sell and get back all you prepaid and probably more. But in a recession or difficult housing market who is to say how difficult it might be to recover these pre payments. Especially from people that might not plan to stay in the house “forever”.

I already knew that this was our “forever” house. It’s plenty big even anticipating for having another child if we do.

But for people in a similar type situation, it seems like a no brainer to me to pay it off ahead of time and get rid of the obligation.

[xgliu128]

without hitting AMT, I might think paying off mello roos might not be good based on some simple calculation. say 6K annual payment, pay-off amount is 10x, that is 60K, interest rate is 4%. 60K can become about 120K in 20 years. 6K annual payment with tax benefit will become about 4K annual payment. in 20 years, i will pay 80K total, still less than 120K.

but i agree long term uncertainty is another big factor…

[ocrenter]

[quote=earlyretirement]

I mean realistically, what would homeowners due if by 2045 (or whenever the last payment is due) all of a sudden they say it needs to get extended 5 more years… what recourse do homeowners have? If anyone knows that answer, please post. The legal paperwork for the CFD’s was so long and complex that I think even most lawyers would get confused by the technical jargon in it. It’s almost as if some lawyers sat around a room when drafting these CFD’s and said, “let’s make the wording so complex and difficult that no one will really be able to decipher the meaning…..”.

And I TOTALLY agree with you that it doesn’t make sense for everyone. Especially in a transitional town like San Diego where people seem to come and go all the time based on job losses, weak economy, etc. I’d only recommend it for people that know for sure they will stay in the area for the long-haul or at least for many many years.

In a hot housing market like now, I think you will ALWAYS be able to sell and get back all you prepaid and probably more. But in a recession or difficult housing market who is to say how difficult it might be to recover these pre payments. Especially from people that might not plan to stay in the house “forever”.

I already knew that this was our “forever” house. It’s plenty big even anticipating for having another child if we do.

But for people in a similar type situation, it seems like a no brainer to me to pay it off ahead of time and get rid of the obligation.[/quote]

Of course, very few people look at and plan for 2045, and how many of us will truly stay in the same home until 2045. This is what PUSD is banking on. They figure the great majority will just keep paying and not even realize the MR was suppose to stop.

[ocrenter]

[quote=xgliu128]without hitting AMT, I might think paying off mello roos might not be good based on some simple calculation. say 6K annual payment, pay-off amount is 10x, that is 60K, interest rate is 4%. 60K can become about 120K in 20 years. 6K annual payment with tax benefit will become about 4K annual payment. in 20 years, i will pay 80K total, still less than 120K.

but i agree long term uncertainty is another big factor…[/quote]

I would not do it just for long term uncertainty. How realistic is it that you’ll still be at the same house 30 years from now?

I agree with your calculation. Except to say most folks on the hook for a $6k MR generally have the income that pretty much guarantee they’ll be on the hook for AMT yearly as well. Unless you are one of the lucky few that can deduct most of it away.

[earlyretirement]

[quote=ocrenter][quote=earlyretirement]

I mean realistically, what would homeowners due if by 2045 (or whenever the last payment is due) all of a sudden they say it needs to get extended 5 more years… what recourse do homeowners have? If anyone knows that answer, please post. The legal paperwork for the CFD’s was so long and complex that I think even most lawyers would get confused by the technical jargon in it. It’s almost as if some lawyers sat around a room when drafting these CFD’s and said, “let’s make the wording so complex and difficult that no one will really be able to decipher the meaning…..”.

And I TOTALLY agree with you that it doesn’t make sense for everyone. Especially in a transitional town like San Diego where people seem to come and go all the time based on job losses, weak economy, etc. I’d only recommend it for people that know for sure they will stay in the area for the long-haul or at least for many many years.

In a hot housing market like now, I think you will ALWAYS be able to sell and get back all you prepaid and probably more. But in a recession or difficult housing market who is to say how difficult it might be to recover these pre payments. Especially from people that might not plan to stay in the house “forever”.

I already knew that this was our “forever” house. It’s plenty big even anticipating for having another child if we do.

But for people in a similar type situation, it seems like a no brainer to me to pay it off ahead of time and get rid of the obligation.[/quote]

Of course, very few people look at and plan for 2045, and how many of us will truly stay in the same home until 2045. This is what PUSD is banking on. They figure the great majority will just keep paying and not even realize the MR was suppose to stop.[/quote]

I totally agree with you ocrenter. I’ve found in life that the vast majority of the people out there are financially clueless. As well, they only think about today/tomorrow/next week. They don’t really project and think out into the long-term. Especially here in San Diego where many people kind of have the “live for today” attitude.

PUSD is fortunate that most of the property owners are almost “financially retarded”. (and no offense to the mentally disabled). These PUSD homeowners are also to blame for these ridiculous capital appreciation bonds. They can blame the Board but they also share in the blame for voting for such a horrible thing. Sometimes 1+1 really does = 2.

What the PUSD is simply banking on is homeowners continuing to be clueless as always and just keep paying these CFD’s. After all, most don’t even have ANY clue how long they are for, what the scheduled pay off date is, what the interest rate is on them or really ANY details at all. All they know is they see it on their property tax bill each year and they pay it each year.

Heck, I’d venture to guess that most PUSD homeowners don’t even have any clue what the APR is on their credit cards! LOL.

[xgliu128]

found an interesting presentation from PUSD about bonds issued.
http://www.powayusd.com/news/PDF_Files/2012-13/BondMeasurePresentation_Aug202012.pdf

slides page 49 contains might be the most controvercial bond

Prop C-Ser. B 2011

principle: $105,000,150 terms: 40-Years
total payment: $981,362,327 payment ratio:9.3463

anyone knows which item in tax bill is for this bond?

[ocrenter]

[quote=earlyretirement]

I totally agree with you ocrenter. I’ve found in life that the vast majority of the people out there are financially clueless. As well, they only think about today/tomorrow/next week. They don’t really project and think out into the long-term. Especially here in San Diego where many people kind of have the “live for today” attitude.

PUSD is fortunate that most of the property owners are almost “financially retarded”. (and no offense to the mentally disabled). These PUSD homeowners are also to blame for these ridiculous capital appreciation bonds. They can blame the Board but they also share in the blame for voting for such a horrible thing. Sometimes 1+1 really does = 2.

What the PUSD is simply banking on is homeowners continuing to be clueless as always and just keep paying these CFD’s. After all, most don’t even have ANY clue how long they are for, what the scheduled pay off date is, what the interest rate is on them or really ANY details at all. All they know is they see it on their property tax bill each year and they pay it each year.

Heck, I’d venture to guess that most PUSD homeowners don’t even have any clue what the APR is on their credit cards! LOL.[/quote]

If I recall, I don’t think PUSD residents actually voted for the capital appreciation bonds. I think how it went down was they voted against further tax increases, and the PUSD board had to go out and find creative financing to complete the projects after the vote. How the board members justified it was very passive aggressive: aka, voters wanted the improvements, they refused to pay for it with higher taxes, so we were left with no choice.

What I find outrageous is the cost of these public funded projects. $150 million for Del Norte High? Hey, but that looked like a total bargain for the $1 billion for Palomar Medical Center. and remember, even at $1 billion they still ran out of money to build the maternity ward.

btw, I’m guilty of your last example. I have no idea what the APR is for my credit cards. 🙂 but then again, we are the worse type of customers for the credit card companies as we never keep a balance for them to make money off us.

[SK in CV]

[quote=xgliu128]found an interesting presentation from PUSD about bonds issued.
http://www.powayusd.com/news/PDF_Files/2012-13/BondMeasurePresentation_Aug202012.pdf

slides page 49 contains might be the most controvercial bond

Prop C-Ser. B 2011

principle: $105,000,150 terms: 40-Years
total payment: $981,362,327 payment ratio:9.3463

anyone knows which item in tax bill is for this bond?[/quote]

Unlikely it would appear on a tax bill. It’s a general obligation bond of the school district, not tied to any property.

[earlyretirement]

[quote=ocrenter]

If I recall, I don’t think PUSD residents actually voted for the capital appreciation bonds. I think how it went down was they voted against further tax increases, and the PUSD board had to go out and find creative financing to complete the projects after the vote. How the board members justified it was very passive aggressive: aka, voters wanted the improvements, they refused to pay for it with higher taxes, so we were left with no choice.

What I find outrageous is the cost of these public funded projects. $150 million for Del Norte High? Hey, but that looked like a total bargain for the $1 billion for Palomar Medical Center. and remember, even at $1 billion they still ran out of money to build the maternity ward.

btw, I’m guilty of your last example. I have no idea what the APR is for my credit cards. 🙂 but then again, we are the worse type of customers for the credit card companies as we never keep a balance for them to make money off us.[/quote]

The Board members of PUSD were DEFINITELY shady. No doubt I put the majority of the blame on them. NONE of them should ever hold public office again! The point I was making is what you touched upon, ocrenter. That the voters wanted the improvements, they refused to pay for it with higher taxes. But they listened when the PUSD said that they found a way to do it without raising taxes.

Palomar is a monster. I read today where they just laid off a bunch of employees. They still aren’t getting the traffic that they anticipated.

And people like you don’t count for that credit card APR I mentioned. LOL. I’m like you. I never keep a credit card balance and just pay it off each month so my APR is simple. 0% same like you.

But you get the gist of what I was saying…. it’s not pretty…

[ocrenter]

[quote=earlyretirement]

The Board members of PUSD were DEFINITELY shady. No doubt I put the majority of the blame on them. NONE of them should ever hold public office again! The point I was making is what you touched upon, ocrenter. That the voters wanted the improvements, they refused to pay for it with higher taxes. But they listened when the PUSD said that they found a way to do it without raising taxes.

Palomar is a monster. I read today where they just laid off a bunch of employees. They still aren’t getting the traffic that they anticipated.

And people like you don’t count for that credit card APR I mentioned. LOL. I’m like you. I never keep a credit card balance and just pay it off each month so my APR is simple. 0% same like you.

But you get the gist of what I was saying…. it’s not pretty…[/quote]

I hear ya. There’s no such thing in life as a free lunch. Of course nobody bothered asking “how” when the free lunch was offered. 🙂

http://www.smartvoter.org/2004/11/02/ca/sd/prop/BB/

Found the old proposition BB back in 2004 approved by the voters. Looks like they went over-budget by 1/2 a billion… whoopsie, what a silly mistake!

Pretty sad really. The voters get screwed if they vote yes for added property tax. The voters also get screwed if they vote no for added property tax. There is simply no oversight and no accountability for elected officials.

[earlyretirement]

[quote=ocrenter][quote=earlyretirement]

The Board members of PUSD were DEFINITELY shady. No doubt I put the majority of the blame on them. NONE of them should ever hold public office again! The point I was making is what you touched upon, ocrenter. That the voters wanted the improvements, they refused to pay for it with higher taxes. But they listened when the PUSD said that they found a way to do it without raising taxes.

Palomar is a monster. I read today where they just laid off a bunch of employees. They still aren’t getting the traffic that they anticipated.

And people like you don’t count for that credit card APR I mentioned. LOL. I’m like you. I never keep a credit card balance and just pay it off each month so my APR is simple. 0% same like you.

But you get the gist of what I was saying…. it’s not pretty…[/quote]

I hear ya. There’s no such thing in life as a free lunch. Of course nobody bothered asking “how” when the free lunch was offered. 🙂

http://www.smartvoter.org/2004/11/02/ca/sd/prop/BB/

Found the old proposition BB back in 2004 approved by the voters. Looks like they went over-budget by 1/2 a billion… whoopsie, what a silly mistake!

Pretty sad really. The voters get screwed if they vote yes for added property tax. The voters also get screwed if they vote no for added property tax. There is simply no oversight and no accountability for elected officials.[/quote]

Exactly. But then again I think deep down inside people probably knew there was some “catch” but as long as they could ‘kick the can down the road’ to the future taxpayers then they would rather do that then face some tough issues.

It’s not just government leaders that do that. Ordinary everyday citizens (taxpayers) are very guilty of that mentality as well.

Thanks for taking the time to post that BB. It’s an eye opener and just highlights the problems with these projects using taxpayer dollars. They NEVER finish on time and they ALWAYS go way over budget. And ultimately all they have to say is “oops…we need more money” and the taxpayers are on the hook.

That was the big part of getting my Mello Roos taxes pre-paid off. As well, I wouldn’t be surprised if there are too many people starting to pay them off if they ban the pre-payment in the future. The thing with these types of things is you just never know.

A few years from now I wouldn’t be surprised if they quietly stop accepting pre-payments on Mello Roos taxes. And the pay off dates conveniently get extended out further into the future. In such a scenario, the people that have paid them off already will be laughing all the way to the bank.

[all]

[quote=SK in CV][quote=xgliu128]found an interesting presentation from PUSD about bonds issued.
http://www.powayusd.com/news/PDF_Files/2012-13/BondMeasurePresentation_Aug202012.pdf

slides page 49 contains might be the most controvercial bond

Prop C-Ser. B 2011

principle: $105,000,150 terms: 40-Years
total payment: $981,362,327 payment ratio:9.3463

anyone knows which item in tax bill is for this bond?[/quote]

Unlikely it would appear on a tax bill. It’s a general obligation bond of the school district, not tied to any property.[/quote]

It’s funded by extending the payout of the original 2002 bond ($55 per $100K) for another 11-14 years.

[CA renter]

[quote=earlyretirement]

That was the big part of getting my Mello Roos taxes pre-paid off. As well, I wouldn’t be surprised if there are too many people starting to pay them off if they ban the pre-payment in the future. The thing with these types of things is you just never know.

A few years from now I wouldn’t be surprised if they quietly stop accepting pre-payments on Mello Roos taxes. And the pay off dates conveniently get extended out further into the future. In such a scenario, the people that have paid them off already will be laughing all the way to the bank.[/quote]

Totally agree with this. Very smart of you to pay off the Mello-Roos on your property; the fact that you plan to hold it for the long-term makes it a no-brainer.

What’s odd to me is that more people don’t grasp how valuable pre-paid Mello-Roos are when they look at houses. I would definitely pay more for a house where these bonds are permanently paid off, but have seen some people totally not grasp the value of this.

Also concur about people who want all kinds of high-quality public goods and services, but complain about having to pay for it. There is no public infrastructure fairly, no matter how badly people would like to believe in one. All too often, though, when the private sector and public money intersect, there is often a lot of fraud and abuse, and it seems especially bad where real estate and development are concerned.

[xgliu128]

Is original 2002 bond ($55 per $100K = tax rate 0.055% ) for all properties in PUSD?

Will it be able to cover the Prop C-Ser B 2011 bond total payment 1 billion dollar by extending 11-14 years?

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