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Mello-Roos:
Mello-Roos
In purchasing your new home, your future monthly
payments will be made up of principal, interest,
real property taxes and insurance, but what is
the tax for the Community Facilities District,
otherwise known as a Mello-Roos District? The
LTA has answered some of the questions most
commonly asked about the Mello-Roos Community
Facilities Act.
What is a Mello-Roos District?
A Mello-Roos District is an area where a special
tax is imposed on those real property owners
within a Community Facilities District. This
district has chosen to seek public financing
through the sale of bonds for the purpose of
financing certain public improvements and
services. These services may include streets,
water, sewage and drainage, electricity,
infrastructure, schools, parks and police
protection to newly developing areas. The tax
you pay is used to make the payments of
principal and interest on the bonds.
Are the assessments included within the
Proposition 13 tax limits?
No. The passage of Proposition 13 in 1978
severely restricted local government in its
ability to finance public capital facilities and
services by increasing real property taxes. The
"Mello-Roos Community Facilities Act of 1982"
provided local government with an additional
financing tool. The Proposition 13 tax limits
are on the value of the real property, while
Mello-Roos taxes are equally and uniformly
applied to all properties.
What are my Mello-Roos taxes paying for?
Your taxes may be paying for both services and
facilities. The services may be financed only to
the extent of new growth, and services include:
Police protection, fire protection, ambulance
and paramedic services, recreation program
services, library services, the operation and
maintenance of parks, parkways and open space,
museums, cultural facilities, flood and storm
protection, and services for the removal of any
threatening hazardous substance. Facilities
which may be financed under the Act include:
Property with an estimated useful life of five
years or longer, parks, recreation facilities,
parkway facilities, open-space facilities,
elementary and secondary school sites and
structures, libraries, child care facilities,
natural gas pipeline facilities, telephone
lines, facilities to transmit and distribute
electrical energy, cable television lines, and
others.
When do I pay these taxes?
By purchasing an interest in a subdivision
within a Community Facilities District you can
expect to be assessed for a Mello-Roos tax which
will typically be collected with your general
property tax bill. These special tax payments
are subject to the same penalties that apply to
regular property taxes.
How long does the tax stay in effect?
The tax will stay in effect until the principal
and interest on the bonds are paid off along
with any reasonable administrative costs
incurred in collecting the special tax or so
long as it is needed to pay the expenses of
services, but in no case shall exceed 40 years.
What happens if a general tax payment is not
made on time?
Because the Mello-Roos tax is typically
collected with your general property tax bill,
the Facilities District that obtained the lien
may withdraw the assessment from the tax roll
and commence judicial foreclosure.
What is the basis for the tax?
Most special taxes levied on properties within
these districts have been structured on the
basis of density of development, square footage
of construction, or flat acreage charges. The
act, however, allows for considerable
flexibility in the method of apportionment of
taxes, and the local agencies may have
established an entirely different method of
levying the special tax against property in the
district in question.
How much will the Mello-Roos payment be?
The amount of tax may vary from year-to-year,
but may not exceed the maximum amount specified
when the district was created. In the case of
the purchase of a new house within a
subdivision, the maximum amount of the tax will
be specified in the public report. The
Resolution of Formation must specify the rate,
method of apportionment, and manner of
collection of the special tax in sufficient
detail to allow each landowner or resident
within the proposed district to estimate the
maximum amount that he or she will have to pay.
How is the special tax reflected on the real
property records?
The special tax is a lien on your property,
essentially like a regular tax lien. The lien is
recorded as a "Notice of Special Tax Lien" which
is a continuing lien to secure each levy of the
special tax.
How are Mello-Roos taxes affected when the
property is sold?
The Mello-Roos tax is assessed against the land,
but is not based upon the value of the property,
therefore, the possible increased value of the
property does not affect the amount of the tax
when property is sold. The amount of the tax may
not exceed the original maximum amount stated in
the Resolution of Formation. Any delinquent
payments must be satisfied before the sale of
the real property since the unpaid amounts are a
lien against the property.
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