The False Premise: “You Followed the Statute”

EXPOSING THE CFD TAX SHIFT: The Illegal Developer Exemption and the Legal Cover-Up

This page documents a systematic and illegal tax-shifting scheme executed by the El Dorado Hills Community Services District (EDHCSD) and concealed by highly paid outside legal counsel. During the formation of Services Community Facilities Districts (CFDs) 2018-01 and 2019-01, the EDHCSD Board majority intentionally bypassed its own legally mandated taxing policy (Policy #6120) to grant private developers a permanent $0 tax rate on undeveloped land. In direct violation of the Mello-Roos Act (Gov. Code § 53312.7), which dictates that a District must adhere to local policies requiring all property to bear its “appropriate share,” the Board shifted 100% of the multi-million-dollar public maintenance burden onto the backs of local homeowners.

To protect this developer tax shelter, the District utilized ratepayer funds to hire Special Counsel to publicly issue a fabricated “clean bill of health,” deliberately omitting the foundational policy violations—a legal sleight-of-hand that was later inadvertently exposed on tape by the District’s own current attorneys. The documentary evidence, statutory codes, and video confessions housed below are formally incorporated by reference into a District Policy #5090 complaint which will be the basis of additional filings if not properly adjudicated.

The “Services CFD” Trap: A Taxpayer-Subsidized Marketing Tool

CFDs 2018-01 and 2019-01 are not bond-debt districts; they are Services CFDs created to fund the ongoing, perpetual maintenance of public property, including streetscapes, medians, and parks.

Under the District’s enforcement of these CFDs, all newly developed property—down to a single residential home—is immediately “required” to be subjected to this perpetual tax. Yet, by illegally exempting massive tracts of undeveloped developer dirt from paying a single cent, the District effectively transformed this public tax into a subsidized marketing tool for corporate developers.

The developers rely heavily on these pristine, community-funded streetscapes and parks to create high-end “curb appeal.” This allows them to market and sell their adjacent model homes and future undeveloped phases at premium prices. Ultimately, the developers extract all the real estate value of a beautifully maintained master-planned community, while shifting 100% of the landscaping and maintenance costs onto the backs of individual families from the moment they receive their keys.

Forensic Timestamp Guide: The CFD Cover-Up and Admission

To assist the outside reviewers, regulators and independent auditors in reviewing this evidence, please refer to the following critical timestamps proving that Special Counsel misled the public regarding statutory compliance, and that the District’s current counsel later admitted to the exact policy violations.

Part I: The Legal Cover-Up (Special Counsel Michael Colantuono – Dec. 12, 2024)

[01:03]: The Fabricated “Clean Bill of Health” Special Counsel Colantuono states on the public record: “I have reviewed the documents that your district used to form your CFD… and have no concerns about them. You followed the statute.“ He makes this claim while deliberately omitting the fact that the CFDs were formed in direct violation of the District’s legally mandated taxing policy (Policy #6120). By suppressing this foundational violation, he provided false legal cover for the District’s illegal developer tax exemptions.

Part II: The Confession (BBK Attorney Lutfi Kharuf – May 8, 2025)

[00:31]: The “Fruit of the Poisonous Tree” Defense When confronted with the District’s policy violation, current BBK attorney Lutfi Kharuf attempts to argue that the Rate and Method of Apportionment (RMA) is the “controlling document” for the tax. He ignores the fact that under Gov. Code § 53312.7, an RMA cannot be legally adopted in the first place if it violates the District’s foundational policies.
[00:56]: The Direct Confession of Conflict After a Board Director reads the mandatory language of Policy #6120 aloud, the BBK attorney drops the defense and openly admits the violation on tape, stating: “I understand where you’re coming from, and I completely understand the conflict there… I agree with what you’re saying.”
[01:08]: The “No Benefit” Absurdity Scrambling to explain why developers were illegally exempted, the BBK attorney guesses that perhaps it was determined there was “no benefit provided to the undeveloped parcels.” Because this is a Services CFD paying for neighborhood streetscapes and park maintenance, this excuse is factually absurd. Developers directly benefit from the taxpayer-funded beautification of the master-planned communities where they are actively selling their adjacent real estate at premium prices.

Part III: The Fiduciary Capitulation (EDHCSD Board & Management – April 9, 2026)

[00:25]: The “Willingly Pay” Confession In a stunning admission, District staff openly acknowledges that the illegal $0 tax rate exists simply because developers refuse to pay their share. Board President Mattock states: “I don’t know your all experience about developers wanting to vote to willingly pay… we have a very weak negotiating position.” * [00:53]: The Fear of Developer Litigation Immediately following this, Director Martinelli justifies the ongoing violation of District Policy #6120 by expressing fear of the developers, stating: “I wonder how that would… affect those developers… or what kind of litigation [would happen] if we were to decide to change things up and tax…”