P O Box 1879,  Garden Grove, CA 92840-1879

Mello-Roos

A commodity, such as a house, is worth what some one is willing pay for it.  If one is able to produce a house for one figure and sell it for a higher figure, the difference is profit.  When a developer builds a house, he must pay series of fees to offset the impact the house will put on the local community’s infrastructure.  For example, there is a fee to hook-up to the sewer system and the cost of the new street and a fee to the local school district for classroom space.  Normally, these fees are paid by the developer and become part of the cost to produce the house. The consumer pays for them indirectly as part of the sales price, which is amortized within the mortgage.

Mello-Roos is a clever scheme whereby developer’s infrastructure fees are disguised as a special property tax and paid by the buyer in addition to the price of the house.  But, unlike an actual property tax, most of it is not deductible.  In a Mello-Roos District the infrastructure cost, are charged to the homeowner on his property tax bill.  For the developer, a $700,000 house built in a Mello-Roos district is more profitable than the same $700,000 house built in a non-Mello-Roos District because the new homeowner will pay $700,000 for the house and the developer’s infrastructure cost.

What is the point?  Our City Council deserve a round of applause.  Recently, a developer-sponsored proposal to establish a Mello-Roos district in Garden Grove was unanimously defeated by the Council.  Thank you City Council.

For more information on Mello-Roos click on http://en.wikipedia.org/wiki/Mello-Roos



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