Written by Attorney-Broker Michael T. Chulak
A Mello-Roos District is an area where a special tax is imposed on real property owners within a Community Facilities District. The district has decided to seek public financing through the sale of bonds for the purpose of financing certain public improvements and services. The decision is usually made by the developer of the homes within the district before the homes are offered for sale. These services may include streets, water, sewage, drainage, electricity, infrastructure, schools, parks, and police protection to newly developed areas. The tax paid is used to make the payments of principal and interest on the bonds.
Mello-Roos assessments are not included within the Proposition 13 tax limits
The passage of Proposition 13 in 1978 limited local governments in their ability to finance public facilities and services by increasing real property taxes. The "Mello-Roos Community Facilities Act of 1982" provided local governments with an additional taxing 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. Mello-Roos is a loophole, based on a technicality, that provides government another way to tax the people.
Mello-Roos TaxesMello-Roos Taxes may include payment for both services and facilities such as: police protection, fire protection, ambulance and paramedic services, recreation programs, 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 hazardous substances.
When purchasing a home or lot in a subdivision within a Community Facilities District, you can expect to be assessed a Mello-Roos tax which will be collected with your general property tax bill. These special tax payments are subject to the same penalties that apply to regular property taxes.
The tax will stay in effect until the principal and interest on the bonds are paid off along with the 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 more than 40 years.
The amount of tax may vary from year-to-year, but will not exceed the maximum amount specified when the district was created. In the case of the purchase of a new house or lot within a subdivision, the maximum amount of the tax will be specified in the public report.
The special tax is a lien on the owner's property, just 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.
Since the Mello-Roos taxes are assessed against the land, but is not based upon the value of the property, the possible increased value of the property does not affect the amount of the tax when the 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.
Call attorney Michael T. Chulak at 818-991-9019 or 800-565-2232 for a no cost initial consultation regarding any legal matter.