Since the late 1960's, developers have often carved out brand new communities from scrub brush. The roads, electrical, sewer, schools, fire protection and more can far outsrip the ability of an existing city to pay for. Enter the Mello Roos tax.
Mello Roos assessments pay for roads, schools, parks and other big-ticket items that a city cannot pay for all at once. They can last 30 years or more.
Mello Roos 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
- maintenance and lighting of parks parkways, streets, roads, and open space
- museums and cultural facilities
- flood and storm protection services
- removal of any hazardous substances.
Facilities which may be financed under the Act include property with an estimated useful life of five years or longer;
- parks parkway, and open-space facilities
- elementary and secondary school sites and structures
- libraries
- child care facilities
- construction and undergrounding of water transmission and distribution facilities
- natural gas pipeline facilities
- undergrounding of telephone lines
- facilities to transmit and distribute electrical energy, cable television lines and others.
HOW LONG DO MELLO ROOS ASSESSMENTS LAST?
In short, as long as they are needed. Typically 25-30 years. They CAN be extended at any point in time by law.
HOW ARE MELLO ROOS ASSESSMENTS AFFECTED WHEN A 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 provided 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.
It is possible for a home owner to pay off their entire Mello Roos assessment in its entirety, as a means of making the property more attractive at sale time. This is an expensive option.
HOW MUCH WILL THE MELLO ROOS TAX BE?
The amount of tax may vary from year-to-year, but may not exceed the maximum amount specified when the district was created. They can range from $600/year to as much as $8,000 per year, and every one is different.
HOW DO I KNOW IF A PROPERTY IS SUBJECT TO THE TAX?
Ask your agent and title representative to both confirm the published taxes. They are listed as Community Facilities District (CFD) charges on the home's tax roll.
HOW DO THEY IMPACT MY ABILITY TO BUY A HOME?
First off, don't eliminate a home from your interest list because it has Mello Roos. Some Mello Roos assessments are minor (around $600/year) while other homes can have MULTIPLE Mello Roos (CFD) charges totaling over $9,000 per year. Those homes need to be priced to reflect the considerable tax burden they place on the new buyer. A $500k home with multiple MR taxes might have the same monthly payment as a $600,000. home! Consult your agent and escrow company for specifics.
For more information visit: www.clta.org
