I receive many questions from clients regarding Mello-Roos in Carmel Valley and surrounding areas.  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 following information is compiled from the County Tax Assessor's office and First American Title Insurance Company.

UNDERSTANDING MELLO-ROOS

Q:  What are Mello-Roos districts and how did they come about?

A: Mello-Roos districts are established by local governments at the request of a developer to finance specific public facilities and services such as schools, roads and libraries. Mello-Roos districts were authorized by state law in 1982. This law allows any public agency to establish a Mello-Roos district, which then can issue the necessary tax-exempt bonds and impose fees to pay off these bonds. These services may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks and police protection to newly developing areas. The tax a homeowner pays is used to make the payments of principal and interest on the bonds.

Q. What are my Mello-Roos taxes paying for?

A: Homeowner's 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. 

Q:  How are these community facilities bonds paid off?

A: These bonds are paid off by the property owners with the Mello-Roos district who are charged a separate fee on their property-tax bills.

Q:  What is a Mello-Roos fee and how long does it last?

A: Mello-Roos fee is a separate charge on the property-tax bill. This is in addition to the 1 percent property-tax rate allowed by Proposition 13. Mello-Roos fees may be levied only as long as they are needed to pay off the bonds. Typically, the duration is 20-25 years, but not to exceed 40 years.

Q:  How much are Mello-Roos assessment fees?

A:  Mello-Roos fees range from $174 to over $3,000 annually. The average fee is $1,488 per year.  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.  Where are Mello-Roos districts located?

A:  Mello-Roos districts are located throughout San Diego County and are normally found in large, new subdivisions such as some areas of Carmel Valley, Santaluz, Eastlake and other newer communities in San Diego.

Q:  How can I determine if a property is in a Mello-Roos district?

A:  The property-tax bill will identify Mello-Roos fees as a CFD (Community Facilities District) followed by a fund number and a fee amount.  If you are purchasing a new home, the owner/owner's agent should provide you this information.

Q. Are the assessments included within the Proposition 13 tax limits?

A: 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. 

Q. When are these taxes paid?

A:  By purchasing an interest in a subdivision within a Community Facilities District an owner can expect to be assessed for a Mello-Roos tax which will typically be collected with a homeowner's general property tax bill. These special tax payments are subject to the same penalties that apply to regular property taxes.

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 is the special tax reflected on the real property records?

A: The special tax is a lien on a 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 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. 

If you are interested in searching for homes in the San Diego community of Carmel Valley, researching the current value of your home, viewing our Carmel Valley real estate website, or learning more about the current housing market, give us a call anytime at  (858) 245-9905. 

Copyright © 2008 Susan Laxson. All Rights Reserved. "Understanding Mello-Roos".  Information from sources deemed reliable, but not guaranteed.