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.