The Second Property Tax

The Second Bill Was There From the Start

California has a law from 1982, the Mello-Roos Act, and it lets a new community pay for its own public works before the neighborhood grows big enough to pay for them out of regular taxes. When a developer builds in a place with no roads, no sewer lines, no fire station, the math does not work any other way. So the property owners in the new district, or the landowner where nobody has moved in yet, vote to create a Community Facilities District, a CFD. The district sells bonds. The bonds pay for the streets, the water lines, the parks, the school sites, and the fire station. Then every parcel in the district pays a special tax that repays the bonds.

It takes a two-thirds vote to create one of these districts, which is a high bar, and in brand-new areas the landowner's approval stands in for the votes because there is nobody living there yet. The people who bought into the first phase effectively decided for the people who buy in phase six. That is how it works, and it is worth knowing before you call it unfair.

None of this shows up in the builder's flyer. The flyer shows the house at $849,000 and a payment with taxes and insurance already folded in. What it does not show is that part of that escrow number is a special tax that traces back to bonds sold years before, and that the number is fixed to the parcel, not the price.

What It Costs Around Here

Every CFD sets its own number, so there is no single price tag, but the ranges in this region are consistent. In Placer County, which covers Roseville, Rocklin, and Lincoln, special taxes on newer homes commonly run about $1,200 to $4,800 a year. In the newer Roseville master plans, Westpark, Fiddyment Farm, and Sierra Vista, the typical range is $2,000 to $4,500 a year. Down in Folsom Ranch in Folsom, the range runs roughly $1,500 to $4,500. The heaviest districts, the ones that financed the most up front, can push a special tax past $10,000 a year, and when that happens the total property tax bill lands at 1.8 to 2.8 percent of the home's value instead of the roughly 1 percent most people expect.

Most of the new homes carrying these taxes in this region price between the mid six figures and just over a million. At that level the special tax is the difference between a payment that works and a payment that does not, especially with two cars, two kids, and a summer camp bill already in the budget.

It Comes With the Parcel, Not the Person

The special tax is attached to the land, not to you. Buy the house and you take over the bill. Sell it and the next owner does too. It does not go away when the mortgage does, and it has nothing to do with what you paid for the house. Two neighbors in the same village can pay the same special tax on wildly different purchase prices, because the tax follows the parcel.

Most districts raise the special tax a little each year, often up to 2 percent, because that is how the bond payments are structured. And it is a tax. Skip it, and the county treats it the way it treats unpaid property taxes, which is to say seriously, with interest, penalties, and eventually the county's own claim on the house.

The Part That Hides in the Escrow

Here is how the bill disappears in plain sight. The special tax is usually collected through the mortgage escrow, so it folds into the taxes and insurance line of your monthly payment. The payment is the payment, and the reason it runs higher than the builder's flyer suggested is buried one level down in a number almost nobody splits apart.

One more thing to know: the tax does not shrink as you pay down the loan. It stays roughly flat, year after year, and then one day it stops, when the bonds are paid off. In this region the bonds usually run 20 to 40 years from when they were sold. Buy a house late in that window and the tax can roll off while you own it, which is a nice card to hold when you sell.

And a detail worth keeping: the part of the tax that paid for bonds has an end date. The part that pays for ongoing services, like a community's parks crew or street lights, can be written to last as long as the district exists. Ask which kind your district is.

Where the Second Bill Lives in This Region

A quick map of the places I see these taxes most, so you know what to look for when you open a listing.

The Disclosure Is Supposed to Come to You

Here is the fair part: California law requires the seller, and the builder on a new home, to hand you a written notice when a property sits in a CFD. The notice names the district, the current special tax, the maximum it can reach, and when the bonds mature. On a resale it comes with the escrow paperwork. On new construction it is usually one page deep in the stack they give you at the design center, which makes it the easiest thing in the world to miss.

Ask for that page before you write the offer, not after. You can also check it yourself in about two minutes: pull the current tax bill for the parcel from the county tax collector's website and look for the special tax line. I have done this in Placer, Sacramento, and El Dorado Counties more times than I can count, and it has never once surprised someone who asked for it first.

Five Questions to Ask Before You Offer

Take this list to the builder's office and to your lender. The answers take less than an afternoon, and they keep the closing table from holding any surprises.