Mello-Roos is the tax that is placed on a Community Facilities District – what does that mean? Thankfully, our friends at Western Resources Title have a created a helpful question and answer explanation for us!
What Is Mello-Roos?
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?
What is a Community Facilities/Mello-Roos District?
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.
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
- cultural facilities
- flood and storm protection
- 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
- recreation facilities
- parkway facilities
- open-space facilities
- elementary and secondary school sites and structures
- child care facilities
- natural gas pipeline facilities
- telephone lines
- facilities to transmit and distribute electrical energy
- cable television lines
- there are several other categories which may be financed under this Act; these are the most common.
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.
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.
Still have questions?
Watch this video by Danny Murphy & Associates to learn more about the Mello Roos tax:
Do you still have questions about Mello-Roos? Contact us here!
Danny Murphy & Associates