| 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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