Matt HeafeyWhat Are Mello Roos Taxes?

A Mello-Roos District is an area where special tax is imposed on those real property owners within a community facilities district. It is an area that has chosen to seek public financing through the sale of bonds for the purpose of financing certain public improvements and services.

Mello-Roos allows for flexibility in the method of apportionment of taxes. Charges for this tax vary, but will never exceed the maximum amount specified when the district was created. When there is a new purchase of a house in a subdivision, the maximum amount of the tax will be specified in the public report.

Mello-Roos is used to make payments of principal interest on the bonds, and is collected with the general property tax bill. It is also subject to the same penalties that apply to regular property taxes and it stays in effect until the bonds are paid off along with costs incurred in collecting the special tax or so long as it is needed to pay the expenses of services – not to exceed 40 years. The tax is assessed against the land – not on the value.

Although Proposition 13 tax limits are on the value of real property, Mello-Roos taxes are equally and uniformly applied to all properties. if you don’t pay it on time, then the facilities district that obtained the lien can withdraw the assessment from the tax roll and commence judicial foreclosure.

Frequently Asked Questions about Mello-Roos:

Q: What are my Mello-Roos taxes paying for?
A: As mentioned above, your taxes may be paying for both services and facilities. The services may be financed only to the extent of new growth.

Services include:

  • police and fire protection, ambulance, and paramedics
  • recreation, the operation and maintenance of parks, parkways, and open space,
  • library services, museums, cultural facilities
  • flood and storm protection services for the removal of any threatening, hazardous substance.

Facilities which may be financed under Mello-Roos include property with an estimated useful life of five years or longer:

  • parks, recreation, parkway, and open space facilities
  • elementary and secondary school sites and structures
  • libraries
  • child care facilities
  • utility lines (gas, electric, phone, cable)

Q: When do I pay these taxes?
A: 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.

Q: How long does the tax stay in effect?
A: 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 it exceed 40 years.

Q: What happens if a general tax payment is not made on time?
A: 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.

Q: What is the basis for the tax?
A: 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.

Q: How much will the Mello-Roos payment be?
A: 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.

Q: How is the special tax reflected on the real property records?
A: 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.

Q: How are Mello-Roos taxes affected when the property is sold?
A: The Mello-Roos tax is assessed against the land but is not based on the value of the property. Therefore, 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.

Reprinted with permission from the California Land Title Association.