Mello-Roos: The Homeowner’s Tax That Helps Fund New California Communities
New communities often have trouble funding the important public works and services that established communities take for granted.
Schools, libraries, fire departments, and parks, just to name a few, can cost hundreds of millions of dollars to build, and properly funding these facilities is never easy.
Mello-Roos fees, which are unique to California, are designed to help new communities pay for these expenses. If you live in California, you need to understand these fees and how they will impact your property taxes. You also need to understand their purpose, their amount, and how long they will last.
Mello-Roos Fees: Helping to Build New California Communities
The Mello-Roos Community Facilities Act of 1982
To understand Mello-Roos fees, it helps to start at the beginning. In 1982, the California legislature enacted the Community Facilities Act, which allowed communities in the state to fund public works and services. In a nutshell, California law limited the rate of local property taxes, hindering the ability of local governments to raise funds for schools, fire stations, police forces, and similar needs.
The Mello-Roos Community Facilities Act of 1982, which was authored by Senator Henry Mello and Assemblyman Mike Roos, provided new ways to fund public needs by allowing additional taxes for specific reasons.
What is Mello-Roos?
A Mello-Roos fee is a separate charge that comes on your property taxes in addition to the fees that homeowners are already paying. These additional funds are then used to pay for a wide range of public services, including parks, roads, libraries, police departments, schools, and more.
How the Mello-Roos Fee Works
In most cases, a Mello-Roos fee is established at the request of a major developer who sees the need to finance important public facilities. This usually happens in new communities or development areas where certain facilities, such as a libraries and parks, are lacking. The public agency will then issue a tax-exempt bond to pay for the public needs, which are funded over a specific number of years. While these fees are commonly associated with residential property, commercial and industrial properties can also be subject to Mello-Roos fees.
To officially implement the fees, residents must approve the measure by a two-thirds vote. In some cases, the number of voters is extremely small; in this case, the required election is voted on only by property owners in the specific district or area.
Determining if a Property is in a Mello-Roos Community
If you are considering a home in California, you’ll obviously want to know if it will be subject to Mello-Roos fees, as this can significantly impact your total tax burden. To find out for certain, you will likely need a copy of the property’s tax bill. However, you can also contact the county assessor’s office in your area. While you can always consult your real estate agent, it helps to verify this information on your own.
What is the Typical Cost?
The amount that you will pay in Mello-Roos fees varies. In most cases, there is a formula that is used to determine the amount, and this formula is based on the square footage of the home. The total amount of the fee is actually established before the home is built, so it is not necessarily based on the current value of the property, but rather the total square footage.
How are the Fees Collected?
To make paying your Mello-Roos fees more convenient, they are most often paid as part of your general property tax bill.
Dealing with Late Mello-Roos Fees
Unfortunately, not paying a Mello-Roos fee can result in significant consequences to you and your home. Because these fees are collected as part of the property tax bill, government officials can begin the foreclosure process if the fees remain unpaid. They are also subject to the same penalties that apply to typical property taxes, so it’s essential that you pay these fees if they apply to your home.
How Long Do Mello-Roos Fees Last?
These additional tax payments are intended to help new communities grow by providing adequate funding for important facilities. They are not, however, intended to last forever. In most cases, the Mello-Roos fees last about 20 years, but California law does allow for Mello-Roos fees to last as long as 40 years. However, if you purchase a new home, you do have the option of paying off the total fee right away. This is a large initial payment, but it could free your finances in the future.
Can Mello-Roos Fees Increase?
Mello-Roos fees can increase, but this unique tax is limited. It can only increase at a minimum of 2% per year for a period of 25 years. It is possible, however, that the tax burden will decrease. If state funding or other forms or income become available, the total tax load could be reduced. This additional funding could also be used to purchase new facilities, depending on the area’s needs.
Older Communities May Implement Mello-Roos Fees
While this form of funding is generally used for new communities, some older communities can implement the fees as well. Some communities have applied the special taxes to include homes that were not previously subject to the Mello-Roos fees. This is usually done when property taxes fall short of the required amount needed to pay for community needs. Many communities also renew the fees when they expire, although a vote is required for renewal.
For More Information, Contact Your County Assessor
If you have questions about Mello-Roos in your area, you should call your local county assessor’s office. They will be able to provide contact information for each Mello-Roos district, and you can use these contact for further details on property taxes in your area.
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