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.
