When Proposition 13 passed in 1978, it severely limited the ability of local governments to use property taxes to construct public facilities and services. Consequently, Californians were forced to find new ways to fund public improvements in their communities such as roads, schools, etc. The Mello-Roos Community Facilities Act of 1982 was enacted by the California legislature, the Act enabled “Community Facilities Districts” (CFD’s) to be established by local government agencies as a means of obtaining this crucial community funding.
The amount of Mellow-Roos Taxes varies from one CFD to another. Typically, an adopted formula that relates to the size of the home (square footage or lot size) is used to determine the amount of an individual assessment. In general, the special taxes and assessments do not exceed 1% to 1.5% of the market value of new homes. Additionally, the total amount of all annual taxes (including property tax) usually does not exceed 2% to 2.5% of the home’s base value. So if you are able to lower your taxable base value you will save a substantial amount of money if you have Mellow-Roos Taxes on your home because of the higher percentage in property taxes you pay.
The average homeowner in most urban areas in California in today’s market has lost about $200,000 in value and at the normal tax rate of 1.25% in property taxes they will save $2,500 per year for every year they own their home! However, that same homeowner at a 2% property tax rate because of Mellow-Roos taxes will save $4,000 per year in property taxes! Learning to PERMANENTLY lower your taxable base value in California is the key to saving thousands over the course of your home ownership which is disclosed in the California Little Black Book. Most often Mellow-Roos Taxes are applied to newly built communities such as large scale Planned Unit Developments (PUD) where there have been many new homes built at once and the taxes are needed to establish the city services. I’ve seen Planned Unit Developments that had upwards of 5,000 homes built! So, the county and city governments need to scramble for funds to build the roads, sewage systems, schools, recreation centers, parks and so much more. Before purchasing a property with Mellow-Roos property taxes you will be informed in the initial negotiation stages of buying the home and during escrow that these property taxes apply. You will never be blind sighted by Mellow-Roos, it is required that you are informed before and during escrow.
