State Treasurer Kathleen Brown recently wrote an open letter to local officials describing circumstances in which the Resolution Trust Corp. will pay special taxes or assessments on property it controls.

Resolution Trust is the federal agency responsible for managing and disposing of the assets of failed thrift institutions.

After more than a year of discussions with Brown and the California Debt Advisory Commission, Resolution Trust clarified its position on how it treats special taxes and assessments on property in which the agency holds a mortgage or other security interest.

In a release discussing her letter, which is addressed to administrators of Mello-Ross special tax and assessment districts, Brown said it was important to understand Resolution Trust's policy because the integrity of local bonds can be protected only if taxes and assessments to pay debt service are collected on a timely basis.

Brown said real property owned by Resolution Trust conservatorships will be subject to all applicable taxes, including special taxes and assessments. Property owned by an institution in Resolution Trust receivership will be subject to all such taxes or assessments as long as they were imposed prior to Resolution Trust receivership.

However, Brown said, special taxes or assessments on property where an institution in Resolution Trust receivership holds only a mortgage interest -- rather than direct ownership -- will continue to be the responsibility of the property owner. Resolution Trust will step in and pay where it is necessary to protect its interest in the property, she said.

Brown also said local agencies will be required to seek the consent of the corporation before they initiate foreclosure actions on property in which Resolution Trust holds a security interest.

Notwithstanding Resolution Trust's policy, Brown closed her letter by stressing that local agencies should take whatever steps they deem appropriate, including foreclosure, to protect the creditworthiness of local bonds that are supported by special taxes or assessments.

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