LOS ANGELES--The Temecula Valley Unified School District in California has begun foreclosure proceedings in a Mello-Roos special tax district after certain property owners failed to make more than $1 million of tax payments.

Special tax payments from Community Facilities District No. 89-1, also known as Redhawk, secure a $12.8 million Mello-Roos bond issue sold in 1990.

Temecula officials said in a statement last Thursday that the bond reserve fund contains enough money to make interest payments on the bond issue due this September and next March. But, the district cautioned, "there has been substantial nonpayment" of special taxes due last December and April from property owners in the district.

Of $1.17 million in special tax payments due, $1 million remains delinquent, said James Brooks, assistant superintendent at the school district. Delinquent taxpayers are W.W. Dean & Associates, a San Mateo-based developer, and Medici Investments and Ecko Land Co., two developers located in Irvine, Calif., said Todd Thakar, a lawyer at Stradling, Yocca, Carlson & Rauth. "We're taking this very seriously," said Mr. Brooks. "I think that my district, like many others, is concerned with their name in the market."

The foreclosure process could take several years. While participants are hopeful the delinquent payments will be made, there is a possibility of a bond issue default if the problems are not settled before the reserve fund is depleted, said Ken Williams, managing director of Stone & Youngberg, the original underwriter on the issue.

The district withdrew $457,382 from the bond issue's reserve fund to make bond interest payments due in March. The reserve fund now totals $960,708.

The Redhawk bond issue was sold to fund construction of a school, infrastructure improvements, a water pump, and day-care facilities. The district was expected to include 4,200 homes in 26 neighborhoods when completed, but the pace of construction has failed to meet expectations.

The Redhawk district, which has received previous publicity, has a complicated ownership history. It was originally owned by Great American Development Co., which was put under Resolution Trust Corp. receivership last Aug.9 when the federal agency took over the San Diego-based Great American Bank. Redhawk was then sold to RDHK Ventures, which is headed by W.W. Dean. Great American and W.W. Dean have sued each other over the sale of the property and are currently involved in litigation.

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