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UNDERSTANDING MELLO-ROOS TAXES

What Home Buyers need to Know

When buying a home in California, your monthly payments will be made up of principal and interest on your loan, property taxes and insurance and possibly additional taxes known as Mello-Roos - also know as CFD's (Community Facilitiies District). Mello Roos assessments are  common throughout in California, including the Inland Empire – in Riverside, Corona, Lake Elsinore, Murrieta, Temecula, etc. The Community Facilities District Act was a law enacted by the California State Legislature in 1982.  The name Mello-Roos comes from its co-authors, Senator Henry Mello (of the Monterey area) and Assemblyman Mike Roos (of Los Angeles). The Act enabled “Community Facilities Districts” to be established by local government agencies as a means of obtaining community funding.

What is a Mello-Roos District?

A Mello-Roos District is an area where a special tax is imposed on the homeowners within a Community Facilities District 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 these bonds.

 What are my Mello-Roos assessments paying for?

You might be paying for both services and facilities. Services may include: police and fire protection, ambulance and paramedic services, recreation programs, library services, the operation and maintenance of parks, parkways and open space, museums, cultural facilities, flood and storm protection, and services for the removal of any threatening hazardous substance. Facilities may include: parks, recreation facilities, parkway facilities, open-space facilities, elementary and secondary schools, libraries, child care facilities, natural gas pipeline facilities, telephone lines, facilities to transmit and distribute electrical energy, cable television lines, and others. 

When do I pay these taxes?

Your Mello-Roos assessment is 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.  The term length of this assessment varies from about 27 years to over 35 years.

How are Mello-Roos taxes affected when the property is sold?

The Mello-Roos tax is a flat fee - not based on the value of the property; therefore, any increased value of the property does not affect the amount of the tax when property is sold.  Any delinquent payments must be paid before the sale of the real property since the unpaid amounts are a lien against the property.

There is conflicting information on whether Mello-Roos taxes are deductible from federal and state income taxes. In general, only "ad valorem" property taxes (based on the value of the property - that would be the 1% general tax levy on all properties) are deductible. Mello-Roos taxes are not ad valorem property taxes, but rather are generally flat parcel taxes.

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Based on information from California Regional Multiple Listing Service, Inc. as of . This information is for your personal, non-commercial use and may not be used for any purpose other than to identify prospective properties you may be interested in purchasing. Display of MLS data is usually deemed reliable but is NOT guaranteed accurate by the MLS. Buyers are responsible for verifying the accuracy of all information and should investigate the data themselves or retain appropriate professionals. Information from sources other than the Listing Agent may have been included in the MLS data. Unless otherwise specified in writing, Broker/Agent has not and will not verify any information obtained from other sources. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent.