Mello-Roos Tax Assessments: What You Need to Know

tax

The Community Facilities Act—also known as Mello-Roos—was enacted by the California legislature in 1982 to enable local governments to create Community Facilities Districts (CFDs) in order to obtain additional public funding . Named for the tax Act’s co-authors Sen. Henry J. Mello (D-Watsonville) and Assemblyman Mike Roos (D-Los Angeles), counties, cities, special and school districts, and other authorities use CFDs to pay for certain public works and services.

The Mello-Roos Act simply provides local governments with another way to obtain funding after Proposition 13 restricted local governments’ abilities to increase property taxes in order to finance public facilities and services in 1978. Mello-Roos differs from Proposition 13 in that in that Mello-Roos taxes are equally applied to all properties whereas Proposition 13 tax limits are based on real property values.

Community Facilities Districts (Mello-Roos Districts)

Property owners in a CFD are subject to a special tax to enable the district to obtain public funding through bond sales for certain infrastructure improvements and/or services.

Tax Uses

Mello-Roos taxes are paying for services and facilities such as:

  • Police and fire protection
  • Emergency services
  • Recreation programs
  • Libraries
  • Parks and open space
  • Museums and cultural facilities
  • Flood and storm protection
  • Hazardous material removal

Facilities purchased with Mello-Roos funding must have an estimated useful life of at least five years in order to qualify.

Tax Assessments

Individuals who purchase homes in a CFD are subject to Mello-Roos assessments which are commonly collected with general property taxes. Whereas the tax amount may vary each year, it may not exceed the maximum amounts specified upon creation of the CFD, which are recorded along with the method of apportionment (density, construction square footage, acreage, etc.). Homeowners will continue to pay these taxes until the bonds’ principle and interest—and administrative fees—are paid, but not longer than 40 years.

Finally, as the Mello-Roos tax is assessed upon the land, changes in property values will not affect the amount if the property is subsequently sold; however, unpaid or delinquent payments require settlement before any sale because the tax is recorded as a property lien.

For more information about Mello-Roos or any other California property questions, please contact us.