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All homes have property taxes and many have an accompanying special assessments.
Mello Roos taxes are additional encumbrances added to basic property taxes.
Not all homes in Orange County have this additional Mello Roos tax. When home shopping,
your Realtor should let you know which homes you will be viewing do or don't have Mello
Roos taxes. Usually only the newer areas where new schools, fire stations, libraries
and such had to be built will have this addition property tax.
There is no "standard calculation" for Mello Roos. One community may have very low
Mello Roos, while the community across the street may have much higher Mello Roos, while
another community bordering it has no Mello Roos at all.
A Mello Roos tax (bond) is a
method of financing or underwriting the cost of public improvements or infrastructure such
as utilities, roads, recreational facilities, schools, libraries, fire stations, etc. that
are needed to support new development.
This method of financing came about in 1982 and was a direct result of
the passage of Proposition 13 in 1978 in California, which limited the amount of revenue
that could be raised to support new developments through traditional means. Only those new
developments that choose to create a Community Facilities District impose this added tax
burden on homeowners.
Bonds usually run for 20 to 40 years and are repaid by homeowners. This
means for example that your "overall tax burden" when you purchase a home with
Mello Roos financing can be 60%, 80%, or 100% higher than your basic property tax
obligation would be if you purchased the same home without Mello Roos financing.
When purchasing a home with Mello Roos financing always investigate the basis for the
tax, it’s duration and any potential for increase. Also, be aware that this added
burden will affect your qualifying ratios.
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