Supervisors adjust Serrano bond language
The latest chapter in the Serrano Mello Roos refund novella unfolded during the Dec. 14 El Dorado County Board of Supervisors meeting with a decision to make the reserve available only for Serrano infrastructure or, more likely, to either pay off the bond early or reduce future payments.
But the plan hinges on Serrano’s next move — acceptance or legal action.
Serrano’s claim for a refund of roughly $2.1 million in excess bond payments was denied in October, leaving the surplus still growing in county-maintained accounts. Roughly $430,000 of the $2.1 million of excess funds in the reserve account were paid by Serrano homeowners, with the balance, approximately $1.7 million through fiscal year 2009-10, paid by the developer.
Last week County Counsel Lou Green suggested a way to stem the reserve fund’s growth before it sprouts legs and storms into Tokyo Bay.
Before last week’s meeting, Serrano’s attorneys agreed in rough terms with county Auditor-Controller Joe Harn and Green to amend the bond indenture to allow future surpluses to be used as a credit against annual cost, thereby reducing the future tax burden, which increasingly shifts to the residents each year.
Serrano Government Affairs Director Kirk Bone previously predicted that Serrano residents would shoulder the entire Mello Roos tax burden within the next two tax years. That fact largely denies Serrano relief from past over-collection of Mello Roos taxes, and leaves the ground fertile for a lawsuit.
The board instructed county counsel to firm up the proposed amendment and include the board’s ability to stop the fund transfer if something in the complex annual fund shifts goes awry. Importantly, they also want a provision requiring Serrano to waive its right to make future claims on the surplus, thereby avoiding the possibility of a costly lawsuit.
Serrano bond attorney John Murphy asked that the fix be retroactive to the tax year of the refund claim, 2010-11, which would result in a roughly $380,000 savings to Serrano, and roughly $90,000 to be split among the 3,500 parcel owners in Serrano, which the board was inclined to grant.
District 3 Supervisor Jack Sweeney worried about the cost and potential legal implications of refunding the 2010-11 surplus. The cost of the court action would be paid out of the Mello Roos fund.
“I’m sympathetic to Serrano (who would qualify for a $380,000 refund), but the benefit is only $25.70 per household,” he said. “It’ll probably cost more than that to issue a credit.”
Green suggested the board require a superior court ruling to confirm the legality of a retroactive refund.
District 1 Supervisor John Knight moved and the board agreed that the Mello Roos formation documents should be amended to allow surpluses to offset the following year’s tax burden and allow a refund of the 2010-11 surplus subject to a “validation action” by the superior court.
The supervisors were unanimous that Serrano has to waive its right to future claims on the surplus accounts.
Sweeney voted against the 2010-11 refund, and requested a more detailed estimate of its cost when the matter returns to the board in January.
Afterward, Bone called the board action “a step in the right direction,” but added, “A more comprehensive solution is needed.”