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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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