2018-2019 Grand Jury Report: Community Facilities District Bond Funding in Riverside County Perpetual Debt Under Cfd*

All information collected that contains information regarding "Mello-Roos (CFD)" bonds issued by local governments.

All information collected that contains information regarding the utilization of "bonds issued" by local agencies. METHODOLGY "Reviewed hundreds of documents from five developers doing business in Riverside County including but not limited to Master Development Agreements Disclosure Agreements . Purchase Agreements" • Please provide all documents collected from developers doing business in Riverside County. FINDINGS Disclosures: 1. "Preliminary investigation showed that some disclosures are highly deficient or lacking altogether." Please provide all information related to the preliminary investigation of disclosure documents as referred to in 1. above. 2. "The disclosure documents reviewed by the RCCGJ contain, with few exceptions, ambiguous, complex or misleading language." Please provide copies of disclosure documents reviewed by the RCCGJ as referred to in 2. above. 3. "One developer has produced a model disclosure document." Please provide a copy of the "model disclosure document" produced by the developer as referred to in 3. above. 4. "Unannounced visits by the RCCGJ to sales offices revealed either a lack of knowledge or outright false and misleading information about CFDs being given by the sales staff to prospective buyers." Please provide copies of all information pertaining to the "unannounced visits by the RCCGJ" to sales offices as referred to in 4. above. Said information to include, but not be limited to, documents containing interview questions and interviewee responses. 5. "When the finance director was asked the same question, the reply was 'I don't know what those are'." Please provide copies of all information pertaining to the interview of the "finance director" as referred to in 5. above. Said information to include, but not be limited to, documents containing interview questions and interviewee responses. A False Economic Cost 1. "CFD's provide the home buyer initially, with what appears to be, a lower priced home. As a result, this allows them to qualify for a home loan for which they might otherwise not qualify." Please provide copies of all information and studies pertaining to the following: a. Cost comparisons of purchase prices of homes sold within areas subject to CFD assessments and purchase prices of homes sold within areas not subject to CFD assessments. b. Comparisons of home loan qualification requirements for properties located within areas subject to CFD assessments and properties within areas not subject to CFD assessments. 2. "The lender often fails to calculate the long term escalation of costs related to the special tax on the home and the long term consequence to the home buyer." Please provide all information and studies pertaining to the following: a. Lender calculations of costs related to special taxes on a home, and b. Lender calculations of the long-term consequence to the home buyer of costs related to a special as referenced in 2. above. Timing of Disclosure and Honesty 1. "On site investigations and interviews by RCCGJ of prospective home buyers were told when they asked about taxes: 'Oh just the usual.'" Please provide all information regarding on site investigations and interviews of prospective home buyers conducted by the RCCGJ as referred to in 1. above. This information is to include, but not be limited to, notes and reports documenting interview questions and responses, times of interviews, locations of interviews, persons interviewed, and RCCGJ interviewers. 2. "Some were lied to when they asked if a Mello-Roos tax was on the home. One sales person told a potential buyer, 'There are no CFD bonds on these homes'. There were actually three CFD's on each home." Please provide all information regarding the following: a. Documentation pertaining to the sales person comment to "a potential buyer," and b. Documentation pertaining to the CFD bonds on the homes referred to in 2. above with said information including, but not being limited to, the location of the homes, and the CFD assessments for which these homes were subject. 3. "Lengthy documents with obtuse language make it difficult for the average purchaser to comprehend their obligation until the tax bill arrives." Please provide copies of all documents collected by the RCCGJ that provide disclosures to purchasers or potential purchases of properties subject to CFD or Mello-Roos assessments as referred to in 3, above. 4. "Even knowledgeable buyers complained it was written in such a legalistic way that it was undecipherable." Please provide all information documenting interviews with knowledgeable buyers as stated in 4. above. Said information to include, but not be limited to, the individuals interviewed, the individuals who conducted the interviews, notes and other written items documenting the questions asked by the interviewers and the responses of those interviewed, and the time and place of the interviews. Escalators "These three bonds and the Ad Valorem tax amount to a seven percent escalation of all taxes.