Mello-Roos taxes apply to specific areas within California that have issued bonds to fund improvements to local infrastructure. The tax is an additional property tax, with the money covering the costs of repaying the bonds. The precise amount of Mello-Roos tax will depend on both the property and the area.
Mello-Roos taxes result from the Community Facilities District Act, a 1982 California state law. It is commonly known as the Mello-Roos act as it was co-authored by state senator Henry Mello and state assemblyman Mike Roos. The law followed a 1978 proposition vote in which the public agreed to a ban on local governments raising property taxes beyond the rate of inflation.
The act allows local officials to designate a specific area as a so-called Mello-Roos district; this designation must be approved by a two-thirds majority in a public vote. The officials can then issue bonds to raise money that must specifically be spent on local infrastructure. Property-owning residents in the area then pay an additional property tax, with this revenue funding the bond repayments.
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The amount charged as a Mello-Roos tax varies from case to case depending on the value of the property and the area concerned; it can range from $25 a month to more than $300 a month. The tax only applies for a set number of years. This again varies from area to area, though the average duration is around 15 years. The maximum allowable period is 40 years.
Mello-Roos taxes are almost always collected alongside other property taxes, being listed as a standalone entry on the annual property tax bill. It is possible for a district to bill and collect a Mello-Roos tax separately but this is rare.
California law means that a property seller must disclose to potential buyers whether the property is subject to a Mello-Roos tax.