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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: George8 who wrote (48988)	2/23/2006 1:21:09 PM
From: Elroy Jetson	Respond to of 306849

Mello-Roos financing is generally a one shot deal. It is voted in by the property owners, who at the time of the vote, are usually real estate developers and people hoping to sell their land to real estate developers. There is no real upper limit on the amount of indebtedness which can be raised, the only limitation is the type of property improvements which can be made. The costs of freeway exchanges, trunk-line sewer, water lines utilities, main access road, schools, fire stations are often all rolled into a Mello-Roos bond issue which attracts a low interest rate as it is a tax-free municipal bond. Without these improvements, the housing could not have been built. A $400k home in new areas will often have something like and additional $180k of Mello-Roos bond repayment attached to the lot. Alternately the builder could charge $580k for the home and the home owner could finance the extra $180k themselves at a higher rate. In earlier times, the costs of this infrastructure would have been borne by the state, county and city. However, the limitations of Prop 13 mean that these costs could never be recouped. Mello-Roos was a response to the irresponsibility of Prop 13. Mello-Roos payments can increase where the original Mello-Roos authorization was for more facilities than have been built and paid for yet. But this is unusual, because the entire bond issue is normally sold up front to cover all costs. The excess money is invested in Treasuries and use to help repay the bond issue. Cities with very little Sales Tax revenue must rely upon Prop 13 taxes and frequently go bankrupt, as Malibu did when they became a city. A city of multi-millionaires and billionaires without a tax-base. Prop 13 property taxes alone do not bring in enough revenue to provide for normal city services like roads and schools. In situations like Malibu, resident have needed to face fact an create Special Tax districts and Special Assessments to supplement the meager property tax revenue. When you purchase a home in a Mello-Roos area, by law, you are required to receive a notice which details your total obligation as well as the monthly payment. .