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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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