In 2013, an investigative report discovered at least two homeowners in San Diego were over-charged thousands in property taxes known as Mello-Roos taxes. The two homeowners lived in an upscale development called Del Sur. However, the investigation revealed it was happening in districts with the special tax. For example, one homeowner in the Black Mountain Ranch District paid $8,687 per year in Mello-Roos tax. His neighbor, with the same sized home, paid $6,601 each per. This was over a $2,000 difference.
Property Tax is Paid by Property Owners to the County Government
A property tax is a tax placed on real estate owners by the local, county, or state government where the property is located.
In many jurisdictions, the amount of the property tax varies for each house or building depending on the appraised value. The amount of property tax can change according to the fluctuation in the real estate market or value of the property.
The property tax is typically an accumulation of taxes. For instance, a district may pay for sewer, water, public schools, or zoos. The property tax can also include a special tax like Mello-Roos, in addition to the other taxes.
Understanding the Mello-Roos Tax
The Mello-Roos tax, named after legislators, required homeowners in new developments to pay an extra property tax for schools, new roads, and infrastructure. It went into effect in 1982. The tax could range from approximately $35 to several thousands of dollars per year. The amount of tax paid depended on the square footage of the house.
The Mello-Roos District choose to impose a special tax on individuals and businesses who owned property within the Community Facilities District. The district chose to ask for public financing via the sale of bonds. The tax residents pay each year is the interest and principal owed on the bonds.
The special tax will end either when the interest and principal is paid, or in 40 years, whichever comes first. It’s important to note, districts can choose to renew the special tax. The tax is considered a tax lien against a property. A tax lien is a specific legal claim against a property just like a mortgage lien. If the lien isn’t paid, the property can be foreclosed and sold at auction.
Mello-Roos and Prop 13
In 1978, Californians passed Proposition 13. Prop 13 limits local public agencies ability to increase property based on the assessed property’s value. Many opponents of Mello-Roos tax claim the special tax side sidesteps Prop 13 because it’s not based on value of property, but instead uses characteristics of the property like lot size and square foot. Also, the defined formula includes a maximum amount which many residents are paying. That maximum amount can increase each year.
The Mello-Roos Tax Controversy Continues
A resolution to the Mello-Roos tax controversy doesn’t seem to be in sight. In July of 2014, Beaumont City Council attempted to squash its Mello-Roos controversy. Beaumont residents demanded Mello-Roos workshops. Its report provided a list of roads paid for with the special tax. However, it didn’t disclose how the city arrived at its Mello-Roos tax assessments for each property.
Property assessment is an estimate of the value of a property. The assessment is typically conducted to calculate property taxes or resale value. The assessment is generally performed by a County Assessor. Calculations vary according to state law and neighborhood zoning laws.
Disputes over property taxes isn’t a rarity. Homeowners dispute property taxes all the time. Some common property tax disputes include:
- Amount of taxes owed
- Who is supposed to pay for the tax if the property was sold
- Disagreements over the value of property
Property tax disputes are usually addressed via property tax proceedings. This legal process allows a court to determine which party is liable for paying the property tax and the true amount owed.
Authored by Taelonnda Sewell, LegalMatch Legal Writer