Community Facilities
District
When purchasing your new home, your future
monthly payments will be made up of principal, interest, real property
taxes and insurance, but what is the tax for the Community Facilities
District, otherwise known as a Mello-Roos District? The CLTA has
answered some of the questions most commonly asked about the Mello-Roos
Community Facilities Act.
Q. What is a Mello-Roos District?
A. A Mello-Roos District is an
area where a special tax is imposed on those real property owners within
a Community Facilities District. This district has chosen to seek
public financing through the sale of bonds 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 the
bonds.
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Q. Are the assessments included
within the Proposition 13 tax limits?
A. No. The passage of Proposition
13 in 1978 severely restricted local government in its ability to
finance public capital facilities and services by increasing real
property taxes. The "Mello-Roos Community Facilities Act of 1982"
provided local government with an additional financing tool. The
Proposition 13 tax limits are on the value of the real property, while
Mello-Roos taxes are equally and uniformly applied to all properties.
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Q. What are
my Mello-Roos taxes paying for?
A. Your taxes may be paying for
both services and facilities. The services may be financed only to the
extent of new growth, and services include: Police protection, fire
protection, ambulance and paramedic services, recreation program
services, 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 which may be financed under the Act include:
Property with an estimated useful life of five years or longer, parks,
recreation facilities, parkway facilities, open-space facilities,
elementary and secondary school sites and structures, libraries, child
care facilities, natural gas pipeline facilities, telephone lines,
facilities to transmit and distribute electrical energy, cable
television lines, and others.
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Q. When do I pay these taxes?
A. By purchasing an interest in a
subdivision within a Community Facilities District you can expect to be
assessed for a Mello-Roos tax which will typically be collected with
your general property tax bill. These special tax payments are subject
to the same penalties that apply to regular property taxes.
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Q. How long does the tax stay in
effect?
A. 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, but in
no case shall exceed 40 years.
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Q. What happens if a general tax
payment is not made on time?
A. Because the Mello-Roos tax is
typically collected with your general property tax bill, the Facilities
District that obtained the lien may withdraw the assessment from the tax
roll and commence judicial foreclosure.
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Q. What is
the basis for the tax?
A.
Most special taxes levied on properties within these districts have
been structured on the basis of density of development, square footage
of construction, or flat acreage charges. The act, however, allows for
considerable flexibility in the method of apportionment of taxes, and
the local agencies may have established an entirely different method of
levying the special tax against property in the district in question.
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Q. How much will the Mello-Roos
payment be?
A. The amount of tax may vary
from year-to-year, but may not exceed the maximum amount specified when
the district was created. In the case of the purchase of a new house
within a subdivision, the maximum amount of the 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 in
sufficient detail to allow each landowner or resident within the
proposed district to estimate the maximum amount that he or she will
have to pay.
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Q. How is the special tax
reflected on the real property records?
A. The special tax is a lien on
your property, essentially like a regular tax lien. The lien is recorded
as a "Notice of Special Tax Lien" which is a continuing lien to secure
each levy of the special tax.
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Q. How are Mello-Roos taxes
affected when the property is sold?
A. The Mello-Roos tax is assessed
against the land, but is not based upon the value of the property,
therefore, the possible increased value of the property does not affect
the amount of the tax when property is sold. The amount of the tax may
not exceed the original maximum amount stated in the Resolution of
Formation. Any delinquent payments must be satisfied before the sale of
the real property since the unpaid amounts are a lien against the
property.
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