Mello-Roos taxes are common in many areas of California, so if you are buying a home that is newer you should know what they are. Many people do not understand the purpose behind them, or why they have to pay them; in fact, it is a question many buyers have asked me over the years. Here is what you need to know about mello-roos, in a nutshell.

Definition: Mello-Roos are fees paid by a homeowner that are assessed by the builder. They enable the formation of Community Facilities Districts (CFDs), which provide community funding for public improvements and maintenance. The CFDs decide where the collected money will go.

History: Mello-Roos (named after a Senator and Assemblyman who coauthored the Community Facility Act in 1982, which is now simply referred to as “Mello-Roos”) are assessed by the local CFD. If a new community or a school is planned in your CFD tax exempt municipal bonds are issued to finance the construction.

Benefits: Mello-Roos taxes are used to fund and maintain projects within your community, such as road improvements, traffic lighting, storm sewers, libraries, emergency services and schools. By passing the taxes on to the homeowners the builders can keep the cost of housing lower, and owners benefit from having well-maintained communities.

Payment termination: These bonds are paid off over a period of time, usually 25 years. Once they are paid off the taxes stop. If the home is sold before they are paid off the taxes transfer to the new buyer.

Tax Increase or Decrease: Mello-Roos can only increase at a maximum rate of 2% per year over a 25 year period. It is possible that the tax may also decrease over that time. If state or other funds become available the bond indebtedness can be reduced, which could lower residence tax payments. Although I do not see indebtedness being reduced in California any time soon, keep in mind that it could happen.

How to Pay: There are several ways to opt to pay your Mello-Roos tax bill. It can be added to annual property tax or paid upfront upon the purchase of a new home. The latter option may not make sense unless the owner knows he or she will be living in the home for a long time.

In conclusion, although people may complain about Mello-Roos taxes the benefit to you as a homeowner are plentiful. Think of them as insurance that your community will look it’s best and be a better place to live.

Good news for California homeowners: there is a good chance your property tax bill will decrease this year.

Proposition 13, which puts a cap on the maximum amount property tax bills can be raised, is to thank; it prohibits property taxes from rising more than 2% annually. This number is based on the Consumer Price Index, which documents increases in the overall cost of living (thus the increase is not based on home value exclusively).

Notices regarding changes in value are usually sent out mid-July, so look for those to see if there is a new, lower valuation on your property. If you still feel your property value is lower you can apply with the county Assessor’s office for a request for review of valuation.

The total assessed home value in San Diego has declined by approximately 1.56%. Make sure to check your home value and see if you will get a slight break this year on property taxes.