What is Mello-Roos in southern California ?
Mello-Roos is a form of financing used by some California local governments to fund public facilities and services within newly developed areas. It is named after the two California state legislators who sponsored the legislation that created this financing mechanism in 1982: Senator Henry Mello and Assemblyman Mike Roos..
The Mello-Roos Community Facilities Act of 1982 allows local governments to create Community Facilities Districts (CFDs) in which a special tax is levied on property owners to finance the construction of public facilities and services. These facilities can include things like schools, libraries, parks, police and fire stations, and other infrastructure needed for new developments.
Mello-Roos taxes are typically levied as a fixed annual amount per parcel of land within the CFD. The tax is usually based on the estimated cost of constructing the public facilities and services, plus ongoing maintenance and operating expenses. The tax is then collected along with the property tax bill.
It is important to note that Mello-Roos taxes are separate from regular property taxes and are only applied to properties within the CFD. They are also not deductible on federal income tax returns, unlike regular property taxes.
The use of Mello-Roos financing is not mandatory for local governments, but it can be an attractive option for financing public facilities and services in newly developed areas. Developers often work with local governments to establish CFDs to fund the construction of public infrastructure needed for their developments. This financing mechanism helps to shift some of the costs of providing public facilities and services away from the local government and onto the property owners who benefit from them.
Overall, Mello-Roos has been an important tool for financing public facilities and services in California, particularly in rapidly growing areas. It has enabled the construction of new schools, parks, and other infrastructure that might not have been possible without this type of financing.
The cost of Mello-Roos in Southern California can vary depending on the location and the specific public facilities and services being financed. The tax amount can range from a few hundred dollars to several thousand dollars per year, per parcel of land.
The duration of Mello-Roos assessments can also vary depending on the terms of the CFD created by the local government. The tax typically lasts for a period of 20 to 40 years, but it can be shorter or longer depending on the specific terms of the financing.
In some cases, Mello-Roos assessments can be paid off early by property owners through a lump-sum payment, which is known as a “prepayment.” This can be advantageous for property owners who wish to avoid paying the tax over a long period of time and may also make their property more attractive to potential buyers.
It’s important for property buyers to be aware of any Mello-Roos assessments that may apply to a property they are interested in, as these taxes can significantly increase the cost of ownership over the long-term. Potential buyers can obtain information about Mello-Roos taxes and assessments from the local government or through a real estate agent.