A common question I am asked regarding San Bernardino County homes that have Mello Roos taxes is, “What is Mello Roos tax?”.
In the past, when I was asked this question I typically instructed people to call the county accessors main office or visit the county web page.
What Exactly Is Mello-Roos?
Many prospective home buyers in California are becoming increasingly aware of the term Mello-Roos when looking to purchase new and used homes. For those that are unfamiliar, Mello-Roos is simply a special tax assessed to homeowners in a community as repayment for bonds used to fund the infrastructure within their community. To home buyers, Mello-Roos often carries a negative connotation, one where the monthly payment for a home will be significantly more than one in a non Mello-Roos community. But is this a fair assessment? I will attempt to answer this question in order to educate any potential home buyers about Mello-Roos.
Advantages of a Mello-Roos District to Home Buyers
- New schools, parks, recreation centers, etc can be built and funded using the revenue generated from the Mello-Roos income.
- More housing inventory will be created when undeveloped locations are built up.
- Generally speaking, low crime rates and highly desirable new schools are common in Mello-Roos communities.
Disadvantages of a Mello-Roos District to Home Buyers
- Cost of housing may be increased because of the tax, possibly limiting the amount of prospective buyers when it comes time for resale.
- Maintenance of the improvements could be more costly than anticipated.
A Brief History of Mello-Roos
The term Mello-Roos was derived from the names of its co-authors, Senator Henry Mello and Mike Roos. It is also generally termed as the Community Facilities District Act (CFD). The CFD started when people in California voted for Proposition 13 in 1978 to limit property taxation. Therefore, new initiatives were considered to finance public constructions and improvements. In 1982, the California State Legislature made Mello-Roos legitimate.
After passing a community vote with two thirds in favor of becoming a Mello-Roos district, bonds are issued to help fund the community infrastructure. Normal services and infrastructure would include police services, schools, roads, ambulance and fire protection services, utility connection, sewer lines, and streetlights. Once Mello-Roos is established, residents must repay the bonds in order to fund ongoing projects. A special tax is assessed to the homeowners as the repayment method and levied yearly. An ongoing lien is used to make sure that the taxes are safe and secured.
The bottom line to the buyer of a home in a Mello-Roos community is that they will have to pay this tax in order to repay the municipal bond. This would be in contrast to a non Mello-Roos community where the infrastructure and services would be paid for by the surrounding residents or the actual builder.
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