January 1 Changes to Mello-Roos Community Facilities Act and Marks-Roos Local Bond Pooling Act

Senate Bill 692, effective January 1, 2014, makes several changes to the Mello-Roos Community Facilities Act and the Marks-Roos Local Bond Pooling Act that are beneficial to public agencies seeking to fund public services and improvements.

The Mello-Roos Community Facilities Act allows counties, cities, special districts, and school districts to finance public works projects and a limited list of public services by levying special taxes (parcel taxes). A Mello-Roos Community Facilities District (CFD) may also issue bonds against these special taxes to finance the public works projects.

The Marks-Roos Local Bond Pooling Act allows public agencies to use Joint Powers Agencies (JPAs) to finance infrastructure. These JPAs issue Marks-Roos Act bonds and loan the capital to local agencies for public works, for working capital, and for insurance programs. The Marks-Roos Act allows a JPA to take title to, and sell, lands, structures, real or personal property, rights, rights-of-way, franchises, easements, and other interests in lands located within the state that the authority determines are necessary or convenient for the financing of public capital improvements.

Among other matters, SB 692 makes the following changes to the two Acts:

(1) Expands the list of public services that may be financed by a CFD to include the maintenance and operation of any real or other tangible property with an estimated useful life of five years or longer that is owned by the local agency or by another local agency through an agreement entered into pursuant to a specified statute. “Maintenance” is also expanded to include the replacement and the creation and funding of a reserve to pay for replacement.

(2) Adds leases to the list of property interests that JPAs can use to finance public capital improvements.

(3) A CFD can finance facilities to be owned or operated by a public agency other than the agency that created the district pursuant to a joint community facilities agreement or joint exercise of powers agreement. SB 692 declares that specified provisions in the Mello-Roos Act must not be construed to limit a JPA’s ability to exercise powers authorized by the Joint Powers Act.

(4) Federal law requires some property owners in a CFD to disclose certain information on a continuous basis through an information clearinghouse established by the Municipal Securities Rulemaking Board (MSRB). SB 692 allows a local agency to execute and record in a county recorder’s office a notice of the owner’s disclosure agreement for the purpose of providing notice to a subsequent transferee. The owner’s written consent must be attached to the notice. SB 692 requires a subsequent transferee of the property to be subject to the disclosure obligation.

(5) A certified public accountant (CPA) must certify that proceeds and investments kept in a fund for a CFD’s refunding bonds are sufficient to meet specified statutory requirements. In the case of a current refunding, SB 692 allows a “refunding fund” to be structured to avoid the necessity of providing a CPA certification of the sufficiency of the proceeds and investments in the “refunding fund.”