When purchasing your new home, your future monthly payments will be made up of principle, interest, real property taxes and insurance, but you may also be obligated to pay a tax for the Community Facilities District, otherwise known as a Mello-Roos District.
This is an area where a special tax is imposed on those real property owners, where the district has chosen to seek public financing through the sale of bonds for the purpose of financing certain public improvements and services, which may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks, and police and fire protection for newly developing areas. The tax you pay is used by the district to make the payments of principal and interest on the bonds.
Mello-Roos is not included within the Proposition 13 tax limits. In 1982, legislation was passed that enabled local government with this additional financing tool for both services and facilities in areas experiencing new growth. The list of possible services and facilities is extensive, but in our area, it’s generally for infrastructure.
Mello-Roos taxes are typically collected with your general property tax bill, and are subject to the same penalties that apply to regular property taxes. Most special taxes levied on properties with these districts have been structured on the basis of density of development, square footage of construction, or flat acreage charges. The legislation allows for considerable flexibility in the method of apportionment of taxes by local agencies however.
The amount of tax may vary from year-to-year, but may not exceed the maximum amount specified when the district was created. The special tax is a lien on the property, and is assessed against the land, but is not based on the value of the property, therefore, the possible increased value of the property over time does not affect the amount of the tax when the property is sold.
When shopping for a home, many potential buyers are ‘Mello-Roos sensitive,’ because let’s face it, nobody wants to pay more. However, roads, sewers, street lighting, utility services, among other things have to be paid for somehow, especially in areas such as ours where suburban crawl and expansion is a real thing.
There are areas of newer development in our area that have Mello Roos assessments, and many areas that do not. If you are unsure as to whether a property you are considering has Mello Roos or not, ask your Realtor® for a current copy of the property’s tax bill, since assessments, if any, may vary.
Ray “the Realtor” Kutylo is the team leader of the SCV Home Team at Keller Williams VIP Properties. The Team brings experienced and professional service, commitment and value to every transaction, whether you are a home buyer or seller. Ray can be reached at (661) 312-9461 or by email at [email protected]. The views expressed are his own and not necessarily those of The Signal. CA DRE 00918855