As you begin the search for a new home and or start looking over your property tax bill, you might see something called or hear something about Mello Roos. You might then think to yourself, what the heck is Mell Roos and that is one odd term. So let’s dive into the world of Mello Roos.
First off, where the heck does the name Mello Roos come from. Most words or terms in real estate are simple and can be understood just from the word’s composition. Such words like probate, equity, pre-quall and so on are fairly simple. This funky term “Mello Roos” comes from the creators of the bill that turned into law in 1982. Senator Henry J. "Mello" and Assemblyman Mike "Roos". Now that we know where the crazy name came from, let’s explore what Mello Roos is.
The history of Mello Roos. Mello Roos was formed to help facilitate the funding of community service districts. When Prop 13 passed in 1978 it put a cap on the property tax assessment rate and intern cut taxes. The cut in taxes also defunded local areas and created a hardship when it came to development, community services and maintenance. To get around the Prop 13 the California legislature came up with the idea of allowing the formation of special community and facilities districts that could then impose a tax, levee or take out a bond on the area to fund the district’s maintenance and development.
There are 2 basic types of Mello Roos. The first type is for the development of an area and the second is for maintenance. You can also have both types on the same property. Mello Roos has definitely become more prevalent in new construction these days. There are a few factors that come into play with the issuance of the Mello Roos on a new subdivision but the basic reason is for the builder and city or county to apply the cost of infrastructure such as schools, lighting, sewers, parks and others, onto the homeowner through a Mello Roos bond. The builder and or city or county can decide to pay for the new infrastructure on their own or take out a bond. The bond repayment is then assessed on the tax rolls and paid back by the homeowners in that area over a period of time.
The second type of Mello Roos is the maintenance district. As subdivisions styles and designs have changed over the years we have seen an increase in the amount of landscaping in the entrance and within the “common space”. I am defining the common space as the area between the private parcels and public areas such as roads. These areas include sidewalks, sounds walls, center medians and other aesthetic areas. These areas need constant maintenance. The city or county will impose a Mello Roos that takes care of these areas as the area doesn’t have an HOA (which is another topic) and homeowners will not maintain them on their own.
Where I am located there are a few Mello Roos districts that come to mind. One is in the West Roseville Area that has the maintenance type of Mello Roos and the Lincoln Crossing area, where there can be hefty new construction Mello Roos bonds. In the west Roseville area they typically run around 80 to 100 dollars per year depending on location and subdivision. In Lincoln Crossing I have seen the Mello Roos be upwards of 500 dollars a month.
How this impacts the value of a home, can I pay them off early and other questions are for other blog posts, I could go on forever.
For more information about your Mello Roos and or property tax bill or rates please do not hesitate to contact me.
916 709 3329 text me for your real estate needs
548 Gibson Dr Ste 200
Roseville CA 95678