What is Mello-Roos?
is a special tax billed to everyone within designated areas known as community
facilities districts. The taxes pay for services such as utilities, roads,
public safety, schools and recreation. Senator Henry J. Mello and Assemblyman
Mike Roos drafted the law in 1982 in the wake of Proposition 13, which limited
governments' ability to raise property taxes. Rather than force builders to pay
upfront for needs their developments trigger, Mello-Roos allows government
agencies to bond for those projects and pay off the debt through extra taxes
collected from residents over decades. Any California county, city, special district or
school district can form a Mello-Roos district with approval from two-thirds of
residents. However, most Mello-Roos districts are created before communities
are built, when the landowners – often a single developer – can give the OK.
Before Proposition 13, state and
local governments used income collected through property taxes to build new
roads, schools and other necessary community facilities. In order to continue
building residential areas, these same governments were forced to require
builders of new communities to pay for these public facilities. Consequently,
these funds were added to the cost of homes. These price increases hurt new
home buyers as fewer people were able to afford higher-priced homes. Those who
could had to wait for the public facilities to be built.
Under Mello-Roos Community
Facilities Act, landowners put up their land as collateral so that public
agencies, like a school district, could raise money to pay for vital basic
public facilities. The public agency forms a Mello-Roos Community District that
sells bonds to fund the construction of these new public facilities. A bond allows
for payment over a specific amount of time through special taxes levied on
property owners in that particular district. Mello-Roos taxes are collected by
the County Tax Collector as part of the normal
property tax system.
Not all new home communities are
affected by Mello-Roos special taxes. For example, sometimes a new neighborhood
is built within existing communities. Because public facilities are already in place,
they are not subject to Mello-Roos taxes.