Buyers September 18, 2023

What is Mello Roos

In California, “Mello-Roos” is a term that refers to a special property tax assessment district used to finance infrastructure and public services in newly developed areas. Mello-Roos districts are established by local governments, such as cities or counties, and they are named after the two California legislators, Henry Mello and Mike Roos, who co-authored the Mello-Roos Community Facilities Act of 1982, which authorized their creation.

Here are some key points to understand about Mello-Roos districts in California:

1. Purpose:
– Mello-Roos districts are created to fund the construction, improvement, or maintenance of public facilities and services, including schools, streets, parks, libraries, fire stations, and more, in rapidly growing or newly developed areas. They provide a way for local governments to finance the infrastructure needed to support new housing developments and communities.

2. Funding Mechanism:
– The primary funding mechanism for Mello-Roos districts is through special property tax assessments levied on properties within the district. These assessments are in addition to the regular property taxes paid by property owners. The additional tax revenue is used to repay bonds or other financing mechanisms issued by the district to fund the infrastructure projects.

3. Assessment Duration:
– Mello-Roos assessments typically have a fixed duration, which can span several years or even decades. The assessments continue until the bonds used to finance the infrastructure are paid off. The exact duration and amount of the assessments vary depending on the specific Mello-Roos district.

4. Transparency:
– Property owners within a Mello-Roos district are informed about the assessments through disclosure documents provided during the real estate transaction process. These documents include information about the assessed amounts, the duration of the assessments, and the services or facilities to be funded.

5. Impact on Property Values:
– Mello-Roos assessments can affect property values and the cost of homeownership in the affected areas. Buyers and sellers should consider the presence of Mello-Roos assessments when pricing or purchasing properties.

6. Local Control:
– The establishment of Mello-Roos districts is subject to local government control and voter approval. Residents within the proposed district typically vote on whether to create and fund the district through assessments.

It’s essential for property buyers and sellers in California to be aware of Mello-Roos assessments when evaluating properties, as these assessments can significantly impact ongoing property ownership costs. If you are considering purchasing a property in an area with a Mello-Roos district, it’s advisable to review the assessment details, payment schedule, and the specific improvements or services funded by the district. Additionally, consult with a real estate agent or attorney for guidance on how Mello-Roos assessments may affect your property purchase or ownership.