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Mello-Roos refers to “special” tax districts (SAD) that won passage as the Mello Roos Community Facilities Act in 1982. This legislation was authorized as a way to assist cities, counties and school districts to provide new infrastructure.Senator Henry J. Mello and former Assemblyman Michael Roos composed this legislation after governmental funds were cut by a groundswell of support (70%) for passage of Proposition 13 in 1978.
Prior to Proposition 13, state and local governments used income collected through property taxes to build new roads, schools and other necessary community facilities.
“Prop 13” froze the current property tax assessments at the level that (current homewoners) purchased their home or business.
Homes and businesses would not be reassessed until they were transfered or sold.
As home prices skyrocketed in the late 1970’s many homeowners had witnessed their property tax payments double or triple every few years. Most voters and taxpayers viewed the tax increases as excessive and beyond the funds needed to grow the necessary infrastructure the schools and roads required by a burgeoning population.
The corruption, waste of funds and pandering to government employees unions kept draining every level of local, county and state government reserve funds.
Pet projects in lawmaker’s home districts were further a drain on revenues.
Business lobbyists desired to shift their tax burdens onto the newly, (home-equity) :"rich” by cutting their own taxes.
After passage of “ Prop.13” (rather than cut unnecessary spending, waste and fraud ) these local governments circumvented the law by forcing homebuilders of new communities to pay for roads, sewer lines and other public facilities.
Consequently, these higher costs were passed onto the cost of new homes.
Most of price increases were borne by inner city residents relocating to the suburbs. Those homeowner’s had to wait for the public facilities to be built.
In 1982, Mello and Roos devised a plan to form a public agency that sells bonds to fund the construction of new public facilities.
The bonds allows for re-payment over a specific amount of time through special taxes levied on property owners in that (new) particular district. Mello-Roos taxes are paid to the County Tax Collector as part of the normal property tax system.
Many taxpayers have been under the impression that once the bonds had been paid off ( usually within 30 years) and the roads, schools and lighting has been completed, that the special assessments would have expired.
Careful examination of the bond rules reveal(in the “fine print”) that these taxes are to be collected in perpetuity.
Whenever city resident have attempted to pass a local initiative forcing the repeal of the ongoing taxes city residents are subjected to doomsday predictions of cuts in fire and police services.
Homeowners should note that although the state tax code allows for the deductibility of Mello-Roos assessments, the
Federal tax code (IRS) DOES NOT !!!
Not all new home communities are affected by Mello-Roos special taxes. For example, often a new tract of homes is built within an existing community. Because public facilities are already in place, they are not levied with Mello-Roos taxes.
Newer communities have varying rates of assessments according to their location, size and need for public services.
To verify the amount of special assessment taxed a homeowner should consult with county tax assessor’s office.
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