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What is Mello-Roos?

July 19, 2009

New Buyers are seeing the phrase Mello-Roos and always asking me what it is – “what is this additional fee/tax to be paid and why?”  Here is the definition and reason behind this tax/bond.

California’s Mello-Roos Community Facilities Act of 1982 allows any county,city, special district, school district or joint powers authority to establish a Mello-Roos Community Facilities District for financing public improvement and services, including streets, sewers and other basic infrastructure; police and fire protection; ambulance services; schools; parks and libraries, museums and other cultural facilities.

A district is created for financing public improvements and services when no other source of money is available.  Districts usually form in undeveloped areas to build roads and water and sewer systems so homes or commercial space can be built.  Districts also may be used in older areas for financing new schools or other community additions.

A district must be approved by a two-thirds vote of residents in the proposed boundaries.  If there are fewer than 12 residents, the landowners vote – Landowners may be a single owner or developer.

Once approved, property owners pay a special tax each year.  If bonds were issued by the district, the tax is charged annually until the bonds are paid off.

In laymans language – this is a 20 year bond on a property that starts when the home is first sold.  The amount of the tax never changes when it is sold to another buyer.  The tax is paid in your property taxes.

Mello-Roos can be scattered widely throughout many cities.  New developments that are built will have Mello-Roos, to help build the streets, parks and schools, where neighborhoods nearby will not have this tax.  I have seen small pockets of neighborhoods in many cities, such as Anaheim Hills, Placentia, Yorba Linda and Irvine, that have this bond, where the neighboring tract won’t have it.  Mello-Roos is widely seen in cities such as Rancho Santa Margarita and Aliso Viejo.


2 Comments leave one →
  1. August 18, 2009 4:51 am

    thanks !! very helpful post!


    • September 18, 2009 11:55 am

      Thanks, I appreciate the comment!


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