What are ”Mello-Roos” taxes?

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Date: August 24, 2017

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We hear this all the time. ‘What is Mello-Roos and why do I have to pay it?’ If you have been looking to buy a home in Orange County you may have seen this term pop up. Here is what you need to know.

In 1978, California passed Prop 13 which limited property taxes. In order to pay for public works and some public services (which might include schools, roads, libraries, police and fire protection services, or ambulance services), the legislature passed the Mello-Roos bill in 1982. The bill allows Counties, Cities, special districts, joint powers authority, and schools districts in California to create special Mello-Roos districts with 2/3rd voter approval. These bonds are then paid back with a tax levy that is part of the annual property tax bill.

A few frequently asked questions regarding Mello-Roos homes in Orange County:

Benefits of owning a home in a Mello-Roos District?
Communities with Mello-Roos are great family friendly cities because they are supported and maintained by these taxes. They often have greater housing inventory, low crime rates, top-notch amenities like clubhouses and parks and of course highly desirable new schools.

Which communities have Mello-Roos?
Mello-Roos is commonly found in newer South Orange County communities, including: Irvine, Mission Viejo, Laguna Hills, Ladera Ranch, Lake Forest, Rancho Mission Viejo, Aliso Viejo and Coto De Caza.

How is the Annual Charge Determined?
By law (Prop. 13), the Special Tax cannot be directly based on the value of the property. Special Taxes instead are based on mathematical formulas that take into account property characteristics such as use of the property, square footage of the structure and lot size. The formula is defined at the time of formation, and will include a maximum special tax amount and a percentage maximum annual increase.

How do I pay my Mello-Roos taxes?
In almost all cases, Mello-Roos special taxes are levied as part of the annual property tax bill. You should be able to find your Mello-Roos special tax as a line item on that bill. In rare cases, a Mello-Roos district will send out its own bill. To find out more about this bill, you will need to contact the agency directly.

How long do I have to pay Mello-Roos for?
If bonds were issued, special taxes will be charged annually until the bonds are paid off in full. Often, after bonds are paid off, a CFD will continue to charge a reduced fee to maintain the improvements. However, the district may cancel the special tax. For example, in 2016, The Capistrano Unified School District Board of Trustees voted unanimously to end a decades-old Mello-Roos tax that could have legally continued taxing residents of Mission Viejo and Aliso Viejo indefinitely. On any given home there may be 30 years or 3 months left, it all depends on the property you consider buying.

For more information visit: www.CaliforniaTaxData.com and www.ttc.ocgov.com

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About Jaleesa Peluso, Orange County Realtor & Certified International Property Specialist
Between the Orange County Canyons to the Coast, Jaleesa and her team successfully connect buyers and sellers & landlords and tenants. Thinking of leasing, buying or selling your home? Call us now at (949)395-0960!