The Handbook of Municipal Bonds

CASE STUDY 11

Dreamworks Tries to Issue Tax-Exempt Bonds

Rich Saskal Far West Bureau Chief The Bond Buyer

 

 

 

Tax-exempt bonds were part of Los Angeles officials’ dreams to have movie studio Dream Works SKG build a studio as part of the Playa Vista development. The proposal became public in 1995. At the time, city officials said they planned to issue $280 million in so-called “Mello-Roos bonds” to support the entire Playa Vista project, a massive residential and commercial real estate development plan near Marina del Ray on the city’s west side.

Mello-Roos bonds, named after the California lawmakers who sponsored the legislation to create them, are land-secured financings that are repaid by special taxes levied on landowners within a special district created for the purpose.

They require voter approval, which is typically secured before development begins when the land in the proposed community facility district is under the control of a single landowner or a handful of landowners. They were devised as a way to finance the infrastructure required for new development without tapping existing taxpayers. Mello-Roos bonds typically finance streets, storm drains, sewers, gas and electrical lines, and utilities beneath the streets—the public infrastructure needed to make development possible. In the Playa Vista Dream Works bond issue, the bonds were also planned to finance the creation of marshlands as part of the environmental remediation required for the project.

Director Steven Spielberg ...