Can we talk Mello-Roos ... AGAIN?

L

Laing_Lies_IHB

New member
<p>I'm sure I'm not the only one who doesn't understand too much about Mello-Roos ... so can someone please explain? </p>

<p>Where do I go to find out how many years the Mello-Roos in a community is for?</p>

<p>I've read that it can increase .... anyone with personal experience (perhaps in their community)? Does it increase often? </p>

<p>Also, what happens to the Mello-Roos amount as home prices drop?</p>

<p>And ... <strong><u>Awgee</u></strong> ... I know I'm trying, but are any portions deductible? </p>
 
Firstof, I'd like to say that Mello-Roos remind me of Bill Cosby. M-E-L-L-O . . . ROOS! Am I the only one?





I think they can increase because they are a set amount that the whole community owes. So, if one guy loses his house (which will never happen in Irvine because the prices will go up forever, as we all know) then he's probably not going to be putting in his share for this month, so everyone else has to pick up the slack. I think that non-payment gets put forth in the form of a lean against his property though, but still it's no fun to have to pay more coin because the neighbor isn't throwin' what he's ownin'.





Nothing should happen as the prices drop.
 
<p>What about HOA's ... they don't decrease, do they?</p>

<p>If not... and Mello-Roos do not decrease either...</p>

<p>then you'll have all these towers with HOA's and Mello-Roos combined of probably greater than $1,500/month.</p>

<p>If prices come down to what some predict, that'll be probably half of what their mortgage would be.</p>
 
HOA's probably increase somewhat in-line with inflation. What will burn will be special assessments ::cough:: lakepines ::cough::





The more I think about it, the more I like turning the Towers into the low income "Projects of Irvine" (as they languish, empty). I'd be happy to move in (and sell crack!)
 
OK... HOA fees and Mello-Roos taxes - like apples and oranges.





HOA fees are fees that are charged, usually monthly, by your HOA. The HOA is a nonprofit association that manages the community. If you're in an attached condo, they also own the structure. They typically own the parks, maintain the landscape, run programs (e.g. holiday parties), and enforce the CC&Rs.





Mello-Roos, or Community Facilities Districts, are districts of lots of homes where the voters have elected* to tax their parcels in order to pay P&I on bonds, the revenue of which will pay for a project to benefit the district. For example, near Beckman High, the residents are subject to a parcel tax that pays the bonds that were issued to raise the money to buy the land for and construct the school.





HOA fees can go up or down, depending on your HOA, their budget, and their reserves.





CFDs should stay stable over time and then stop after the bonds are paid off. The reason CFDs are called Mello-Roos, is because the two legislators that sponsored the legislation that allowed for the formation of CFDs and the issuance of CFD bonds were Mello and Roos. Typically, the financial model will allow for a few deadbeats so that the parcel taxes won't go up and/or the bonds won't default. Also, upon nonpayment of taxes, not only can the CFD record a tax lien, they can foreclose on the house to pay the tax bill. I had a friend who ran a business placing the liens and foreclosing on them in the IE during the last downturn.





*In new developments, the voters in the election are those who own the land, typically only the developer. Thus, for Orchard Hills, likely the only voter for those bonds, was TIC. Proposition 13 does not allow for the imposition of new parcel taxes without a 55% (for schools) or 2/3 (for other projects) vote. Given the anti-tax sentiment, the best way to assure that the project gets the streets, schools, etc. that the developer wants, is to form the district and hold the vote prior to selling the lots and homes.
 
My experience with HOAs is that they do increase, and the increases can jump pretty quickly if the board doesn't budget properly. It's important to get knowledgeable people on the board. The worst are the board members that decide the community needs something like a slurry seal of the asphalt, but forgot to provide for it in the budget, so they hit you with a special assessment in addition to your regular HOAs.
 
Whether or not the HOAs increase or decrease depends on the situation and the competence of your board. In our development, the board seems to be doing an ok job and our HOA stayed pretty stable over the years. It went down for a couple of years but recently went back up to where it started 5 years ago.
 
When I wrote the post <strong><a title="Permanent Link to Land Value 101" rel="bookmark" linkindex="6" set="yes" href="http://www.irvinehousingblog.com/2007/07/16/land-value-101/">Land Value 101</a></strong> I did not discuss CFDs and <a href="http://en.wikipedia.org/wiki/Mello-Roos">Mello Roos</a> to keep the post simple. There are a number of costs of development I did not mention because they are reimbursed to the developer through Community Facilities Districts.





Community Facilities Districts are taxing entities set up to provide a mechanism where private developers can get reimbursed for their cash outlays in developing land. A CFD sells bonds to the general public and this money goes to the developer. Taxpayers in the CFD pay the debt service on these bonds through their tax bills. As these bonds are paid off, Mello Roos fees can decline, and in fact, in many older communities, the bonds are completely paid off. If the voters in a particular CFD want of need to finance an improvement, the CFD can issue new bonds and increase the Mello Roos payments.





The Mello Roos fees vary widely by location. In general, older communities have low Mello Roos fees and newer communities have high Mello Roos fees.
 
<p>Aren't Mello Roos an ugly extension of the Damage prop 13 is doing?</p>

<p>I thought because Prop 13 freezes in Taxes at the buying rate it can never go up, but I am sure people will be lining up for a decrease, These bonds are needed to build the infrastructure of new communites.</p>

<p>This is another reason I am hesitent to move into one of these newer communities. I can't see over 1k for the next 30 years in HOA and Mello Roos and that is if the HOA doesn't go up.</p>

<p>If prop 13 was repealed the price of homes in CA would come crashing down faster then this whole mortgage meltdown.</p>

<p>All those equity rich people would have heart attack when they got taxed on said equity.</p>
 
<p>In plain English, Mello-Roos are a fixed cash amount that are not tied to the resale value of your house. </p>

<p>If the previous owner bought the Irvine house at $1,000,000 dollars and has $4600 of mello roos and another $10,400 of property tax, the combined "tax" bill will come for $15,000. IF you then buy that house for $800,000, you property tax will be $8320 however your Mello-Roos will still be $4600 for a total of $12,920.</p>
 
<p>If Mello-Roos is an infrastructure cost, why can't such costs be tax deductable? Why was the law written in such a way that this cannot be deducted? Also, why does it seem like with every new community, the Mello-Roos rate increasing? </p>
 
The only "concession" I've seen with MR, is that the payment might vary depending on the size of the home. For example, in VOC, homes over 2400 sq feet pay a higher MR rate than homes under 2400 sq ft., but there are only two fixed amounts. I don't recall the exact numbers, but it was something like homes under 2400 sq feet pay ~3600/yr MR and homes over 2400 sq ft pay ~$4800 per year (these amounts were likely more; I'm just using them to illustrate my point).
 
Blue (and anyone else) - We've been over MR before. You might try the search function for additional info, including a link regarding the deductibility of same.
 
<p>Yup... i'm relatively a newbie </p>

<p>I love the crying face ... not as much as the monkey in the chatroom...but still love it.</p>
 
For VoC in Zone 2 (Columbus Grove Tustin), there are 13 tiered rates just for mello roos, in this case they call them Special Tax "A" and "B". This is in addition to the 1.1% property tax.


A B


Single Family Detached > 4300 sq ft = $7448 + $2250


Single Family Detached 3951-4300sf = $6988 + $2115


Single Family Detached 3601-3950sf = $6629 + $2010


Single Family Detached 3251-3600sf = $6118 + $1860


Single Family Detached 2901-3250sf = $5094 + $1560


Single Family Detached 2551-2900sf = $4838 + $1485


Single Family Detached <= 2550sf = $4582 + $1410


Single Family Attached > 1800sf = $3268 + $1020


Single Family Attached 1600-1800sf = $2961 + $930


Single Family Attached <= 1600sf = $2449 + $780
 
LL,





Yes, 1.1% + A + B = way too much





Not only that, but A + B increases 2% every July. Per Tustin CFD No. 06-1:





Commenincing on July 1, 2007 and on each July 1st thereafter, the Maximum special tax A shall be increased by an amount equal to 2% of the amount in effect for the previous fiscal year. Commencing on July 1, 2007 and on each July 1st thereafter, the Maximum Special Tax B shall be increased based on the percentage changed in the Consumer Price Index, with a a maximum annual increase of 2% per fiscal year.
 
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