Mello-Roos

Will Mello Roos taxes assessed to existing Portola Hills homeowner’s be used to fund any public improvements, including roadway or traffic-related improvements, in the Portola Center?

No, Mello Roos taxes assessed to existing Portola Hills homeowners are controlled by the County of Orange and cannot be used to pay for any new public improvements, including roadway or traffic-related improvements in the Portola Center project. Public improvements, including roadway/traffic, proposed as a component of the project would be paid for by the developer. Any roadway or traffic-related improvements which are not a component of the project may be funded in whole or in part by the developer, or by the City as a potential component of future Capital Improvement Projects (CIP) plans. 

What is Mello-Roos? 

The term Mello-Roos is often used to refer to either the Mello-Roos Community Facilities Act of 1982 or to special taxes levied on homes within a pre-defined geographic region. 
 
What is the Mello-Roos Community Facilities Act of 1982 (“Act”)? 
 
Prop. 13 limited the ability of local public agencies to increase property taxes based on assessed value. The Act was created to provide an alternate method of financing needed improvements and services. The Act allows any county, city, special district, school district or joint powers authority to establish a Mello-Roos Community Facilities District (“CFD”) which allows for financing of public improvements and services by selling tax-exempt bonds. 
 
Why would a Mello-Roos Community Facilities District (“CFD”) be created? 

 A CFD is created to finance public improvements and services when no other source of money is available. CFDs are normally formed in undeveloped areas and are used to build or install infrastructure so that new homes or commercial space can be built. 

How is a Mello-Roos Community Facilities District (“CFD”) formed? 

A CFD is created by a sponsoring local government agency. A CFD cannot be formed without a two-thirds majority vote of residents living within the proposed boundaries. If there are fewer than 12 residents, the vote is conducted of current landowners. In many cases, that may be a single owner or developer. Once approved, a Special Tax Lien is placed against each property in the CFD. Property owners then pay a special tax each year. 

When will my Mello-Roos expire? What are the chances of the bond being renewed/refinanced? 

Generally, if bonds are issued by a CFD, special taxes will be charged annually until the bonds are paid off in full. Often, after bonds are paid off, a CFD will continue to charge a reduced fee to maintain the improvements. Also, additional bonds may be issued for the purposes of: 1) refunding all or a portion of outstanding bonds; and 2) additional project costs. Any questions regarding the expiration date or potential for refinancing of existing CFDs should be directed to the local sponsoring agency. In the case of properties in Lake Forest, sponsoring agencies include the County of Orange and local school and water districts. The City is not the local sponsoring agency for existing Mello-Roos taxes. 
 
What is currently being paid for with the funds?
This question should be directed to the appropriate sponsoring local agency. 
 
How is a Mello-Roos Community Facilities District (“CFD”) used? 

New development requires infrastructure (i.e., streets, storm drains). CFDs provide financing for the infrastructure needed for new development. Bonds are issued to generate cash to pay for installation and are paid back over time by the property owners within the area that the infrastructure serves. 
 
Is there any kind of transparency with the Mello-Roos? How does the public know where their funds are going? Reporting? 

All issuers selling CFD bonds after January 1, 1993 are covered by State Law and are required to report certain information about the bond issues through the completion of the Yearly Fiscal Status Report and/or the Draw on the Reserve Fund or Default Report. In addition, the County of Orange commissions a Community Facilities District Administration Report each fiscal year. For additional information on available reports, please contact the appropriate sponsoring local agency. 
 
Has the City of Lake Forest ever authorized the levy of Mello-Roos taxes on residential homes?

No, the City is not currently a local sponsoring agency for any Mello-Roos taxes. The development agreements signed by the landowners responsible for development of the New Neighborhoods allow for the formation of CFDs at the request of the landowner. To date, no new CFDs have been formed. 
 
What fees do the developers of the New Neighborhoods have to pay to the City and what can they be used for? 

Each developer is required to pay various fees as part of the Development Agreements associated with the Opportunities Study Area ("OSA") New Neighborhoods.

•Community Facilities Fees pay for the development of new infrastructure such as the Lake Forest Sports Park and Recreation Center and the future Civic Center.
•Park Maintenance Fees pay to maintain certain public parks.
•The Lake Forest Transportation Mitigation (LFTM) fees fund intersection improvements throughout the City to ensure that the City's roadway infrastructure accommodates projected traffic volumes.
•The Foothill Circulation Phasing Plan (FCPP) Fees fund other road improvements such as the completion of Alton Parkway.
•Affordable housing and neighborhood park requirements can be satisfied on site or, in some instances, through fees.

These funds cannot be used for general government purposes. The money collected is restricted and may only be used for the purposes identified specifically in the Development Agreements and other program documents. 
  
Once the Baker Ranch development project is completed, how much will the developers have paid in fees to the City? 

Upon completion of the Baker Ranch development, projections indicate the City will have collected approximately $72 million in Community Facilities Fees, $2 million in park maintenance fees, $6.7 million in LFTM fees, and $3.6 million in FCPP fees. 
 
How much have the developers of the Baker Ranch project paid in fees to the Saddleback Valley Unified School District to support the additional elementary school students who will be attending Foothill Ranch Elementary School? 

The Shea-Baker Ranch Development Agreement includes a School Mitigation Agreement between the District and the developer, requiring the developer to pay an impact fee to the school district totaling $8,540 per housing unit prior to pulling any building permits. The City does not collect or administer the use of these funds. 
 
Will the new homes in the former auto center (Bake and Portola) be required to pay a share of the Mello-Roos fees associated with the Foothill Ranch Community Facilities District (CFD No. 87-4)?

Yes. The new homeowners in the former auto center are required to pay a share of the payments for CFD 87-4. 
 
Are the homes in the Baker Ranch development contributing their fair share towards the maintenance of the City's infrastructure? 

Yes. While not a part of CFD 87-4, the Baker Ranch property was included in CFD 87-6 and made payments for its share of costs for the road infrastructure in the local area including arterials in Foothill Ranch. In addition, Baker Ranch was required by the County to pay its share for the Sheriff's Substation, Fire Station, and the Foothill Ranch Library in addition to other miscellaneous facilities. The owners of Baker Ranch decided to pay their obligation in cash instead of utilizing CFD financing. Therefore, the new homeowners in Baker Ranch do not pay Mello-Roos taxes. 
 
Are any funds generated by new developers being used to pay off the existing bonds for CFD No. 87-4? 

No, funds from one CFD cannot be used to pay off a different bond obligation. The money collected from the developers is placed into restricted funds and may only be used for the purposes identified specifically in the Development Agreements and other program documents. 
 
Who can I contact for more information? 

If you have additional questions relating to your Mello-Roos tax, please contact the Treasurer Tax Collector at (714) 834-3411. Read more about Mello-Roos.