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Ladera Ranch Mello Roos Explained

There is a lot of misunderstanding about Mello-Roos in Ladera Ranch. Simply stated, Mello-Roos is a special property tax assessment that is levied on Ladera Ranch (and other cities) real estate within a designated district. These Ladera Ranch Mello-Roos districts are created to raise money by the sale of bonds, for the purpose of financing infrastructure improvements for that community. This infrastructure improvements may include drainage systems, sewer treatment, water lines, new streets, new parks, upgraded electrical lines, etc.

The motivation for the creation of the Mello-Roos tax started back in 1978 with the passage of Proposition 13. Prop 13 limited local governments ability to pay for capital facilities and services by increasing property taxes. In 1982, Senator Henry Mello and Assemblyman Mike Roos enacted the Community Facilities District (now called Mello-Roos) to enable local governments with an another means to raise needed funds, and the first Mello-Roos district was created in 1986. Below are some of the more common questions that are asked about Ladera Ranch Mello-Roos:

A.- What is the Total Tax Rate in Ladera Ranch including Mello Roos ?

When homes were first built, the Ladera Ranch Mello-Roos fee plus Prop 13 base tax totaled about 2.0%. Prop 13 base property tax is approximately 1.1% of the purchase price and the Mello-Roos portion of the tax was approximately an additional 0.9%. One important distinction is that the Prop 13 Tax is based upon the sales price, so as your home appreciates and is sold, the new Buyer has to pay a higher property Tax. But, the Mello-Roos tax is not based upon the sale price and mostly stays constant even after years of appreciation. Due to the strong appreciation that Ladera Ranch has experienced since the homes were first built, the Prop 13 tax adjusts upwards at bout 1.1% of the purchase price, while the Mello-Roos essentially stays fixed at approximately $2,000/year. So today, the total property tax is around 1.5% for a $800,000 home.

B.- How does one estimate the Mello-Roos when buying a Ladera Ranch home?

During the escrow period, the Seller is required to acquire a report which will state in writing the exact amount of the Mello-Roos tax. Before you make an offer you can also estimate the Mello-Roos for it does vary somewhat from community to community and even lot to lot.. You take the quoted Tax Assessor yearly Tax amount, and subtract the 1.1% of the Prop 13 portion of the tax from this amount. The remainder is a reasonable estimate of your yearly Mello-Roos payment for that home.

C.- Can I deduct my Ladera Ranch Mello-Roos taxes from my Income Tax?

It is the opinion of some tax accountants that the Mello-Roos tax is not tax deductible. On the other hand, I know of home owners in Ladera Ranch who have deducted their Mello-Roos tax from their income taxes. It is best advised that you consult with your tax advisor and make your own decision on this topic.

D.- How and when do I pay the Ladera Ranch Mello-Roos Tax ?

The Mello-Roos tax is included in your normal Prop 13 tax bill and this is billed to you twice per year on February 1st and November 1st.

E.- How long do the Ladera Ranch Mello-Roos tax last ?

The Mello-Roos assessment is written for about 15 to 25 years dependent on the community facilities district. Many of the districts have the right to renew the Mello-Roos tax if needed, so it is prudent not to assume that this tax will disappear during your ownership

F.- How do I compare the value of a Home with Mello-Roos against a Home without?

As an example, let’s say you are thinking about buying either a home in Ladera Ranch with yearly Mello-Roos payment of about $1,800, or possibly buying a home in Laguna Niguel with no Mello-Roos. To compare the values of these two homes, take the $1,800 yearly Mello-Roos payment, divide by 12 for the monthly payment of $150. A $150 per month payment is approximately equal to a $25,000 mortgage in today’s interest rates. Therefore the home in Ladera Ranch is actually costing you about $25,000 more as compared to the home you’re considering in Laguna Niguel. If the Ladera Ranch home is still more desirable to you at a comparative price $25,000 higher than the home in Laguna Niguel, then buy it, if not, buy the home in Laguna Niguel.

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