As you peruse the real estate ads searching for your dream home, you have undoubtedly come across many ads touting that there are no "Mello-Roos" in connection with that particular property. But what exactly does that mean?

HISTORY OF MELLO-ROOS

In 1978, California enacted Proposition 13, which limited many local public agencies' ability to finance new infrastructure projects. Before Proposition 13, state and local governments used income from property taxes to build new roads, schools and other necessary community facilities in order to continue growing residential areas. In order to create another way for such projects to be financed, Senator Henry J. Mello and former Assemblyman Michael Roos won passage of the Mello-Roos Community Facilities Act in 1982, which allowed for the creation of Mello-Roos Community Facilities Districts as a way to assist cities, counties and school districts with new infrastructure by imposing a special tax on real property owners within the Districts.

 WHAT ARE MELLO-ROOS TAXES USED FOR?

The taxes may be used for both services and facilities. Services may include police protection, fire protection, ambulance and paramedic services, recreation program services, library services, and operation and maintenance of parks, parkways and open space. Facilities which may be financed include parks, recreation facilities, elementary and secondary school site and structure, libraries, child-care facilities, natural gas pipeline facilities, telephone and cable television lines, streets, sidewalks and sewers.

HOW MUCH ARE MELLO-ROOS TAXES?

Though the amount may vary from year to year, it will not exceed the maximum amount specified when the district was created. In the case of a new home within a subdivision, the maximum amount of 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.

 DOES AN INCREASE IN PROPERTY VALUE AFFECT MELLO-ROOS?

Mello-Roos taxes are assessed against the land, they are not based upon the value of the home, therefore, an increase in property value does not increase the amount of tax.

ARE ALL NEW-HOME COMMUNITIES SUBJECT TO MELLO-ROOS?

No. For example, sometimes a new neighborhood is built within an existing community. As public facilities are already in place, the properties are not subject to Mello-Roos taxes.

In order to avoid unplanned financial outlays, be sure to ask your real estate agent to explain all the taxes and fees associated with any property you are considering in your pursuit of the American Dream of homeownership.

For more information on Mello-roos CLICK HERE