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By Eric Heinz

On June 29, the Grand Jury of Orange County published findings and recommendations regarding Mello-Roos Community Funded Districts.

Throughout the county, the Grand Jury rendered findings that could shape the ways in which accounting and transparency for the tax revenue is handled. The taxes pay for school infrastructure and projects within Capistrano Unified School District, the city of San Clemente and entities in Orange County.

The Grand Jury’s findings stated, “There is a lack of transparency to homeowners relative to how CFD funds are being used. There does not seem to be appropriate oversight and auditing of CFDs and special tax expenditures within the County of Orange, (and) while the assumption is that the CFD debt would be repaid in a finite period of time, there is a mechanism available to controlling entities to extend debt obligations and thereby extend the CFD special tax in perpetuity.”

That final crack in the financing system prompted the Grand Jury to make a list of recommendations.

According to the document, CUSD taxpayers within Mello-Roos districts have tens of millions of dollars of outstanding construction obligations.

The CUSD Board of Trustees will meet Aug. 12 to discuss the taxation rates for each Mello-Roos CFD for the next fiscal year.

Recommendations from the findings for each local agency that established a CFD included creating an oversight committee and an audit committee to provide an “independent and transparent view of the manner in which CFD funds are being expended.”

Additionally, the recommendations stated an audit report should be made available to the taxpayers as well as a website for taxpayers to monitor the expenditures.

Jim Reardon, CUSD Trustee for District 2, said the oldest Mello-Roos CFD within CUSD has been in place since 1987. The most recent was put in place in 2005.

“Our situation in the past is the district has been cavalier in spending money from these districts and moved money around in ways that didn’t make sense,” CUSD Board Trustee Jim Reardon of District 2 said. “No one on the board today was involved in that.”

The board has the ability to increase the tax of 2 percent each year if it is necessary to do so, but the increments are based on the CFD’s ability to pay the debt on its specific projects, Reardon said. Each district is taxed as separate entities, called the coverage ratio.

Reardon said he has recommended to CUSD staff to not make any changes until the board can convene to discuss the Grand Jury findings and the cost of forming an oversight committee.

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