What is Mello Roos?
Mello Roos 101, A Reader's Digest version of Mello Roos.
Proposition 13 severely limited governments ability to use property taxes to finance public facilities. As an alternative method of financing, the Mello-Roos Community Facilities Act was created in 1982. Mello Roos enables public agencies such as counties, cities, and school districts, to form "Community Facilities Districts" (CFD's). CFD's issue bonds and create special "taxes" to finance public improvements and services as needed. These "taxes" (Mello Roos) is the debt service on these bonds that are passed on to the buyer.
In most newer cities or unincorporated areas, you pay an annual "tax" that goes toward payment of the CFD bonds. The amount of that "tax" is based on the size of your home. In subsequent years, these "taxes" will not increase substantially because a cap on annual increases in the maximum "tax" has been incorporated into the bond plan. Your CFD "taxes" are payable as part of your regular tax bill. Is this amount tax deductible? Check with your tax advisor.
Builders, developers, commercial and industrial land owners, pay Mello-Roos taxes by the acre. Mello Roos is also paid by apartment owners commercial and industrial facilities.
Can Mello Roos go up higher than the stated maximum cap? If the total amount isn't already at the maximum amount for a given property, it could jump to that maximum, which could be in excess of the stated maximum cap percentage per year. This maximum amount is stated in the "White Report" on a new property and disclosed if you get a report similar to Property ID and/or the Mello Roos disclosures issued by David Taussig and Associates on resale properties.
Could additional CFD's be added? Yes, if the voters voted them in, which is highly unlikely. The way the CFD's were created in the first place, was when there are fewer than 11 registered voters in an area where CFD's are being considered, there doesn't need to be a public vote. The land owners make the decision whether to establish the CFD's and pass off the debt service (Mello Roos) of these bonds to the property owners or pay for the schools and infrastructure and charge more for the properties.
Remember - Mello Roos goes up every year, regardless of whether or not the property value goes up or down. The increase is minimal however, typically from 2% to 3.5% of the current Mello Roos amount. As an example, if you're currently paying $500.00 and it goes up 2%, that's only $10.00 for the year.
Because of the age of many of these bonds in Aliso Viejo and surrounding areas, many have matured and have neen eliminated.
If you have a question about your home or a particular home, please contact me.