HUNTINGTON BEACH : City Gets Its First Mello-Roos District

In a move that may set a precedent for funding part of future housing developments, the City Council this week agreed to establish the city’s first Mello-Roos special tax district.

The city plans to impose an additional property tax on future residents of 113 homes being built near Ellis Avenue and Golden West Street to install utilities, widen Ellis and make other improvements.

The special tax district will take effect if a majority of the area’s seven landowners approve the idea.

Future homeowners in the tract between Ellis, Golden West, Edwards Street and Garfield Avenue will pay a first-year total property tax of 1.41%--an average of $2,366--to repay a $2.5-million bond. The Mello-Roos portion of the tax will remain constant throughout the 30-year bond period, regardless of the property value of the homes, Deputy City Administrator Robert Franz said.

As originally proposed, the extra tax would have escalated 2% each year to pay for additional police and fire services. Council members rejected that clause, however, arguing that it would tax homeowners twice for police and fire service.

The special tax does not apply to other city residents, and state law requires that potential home buyers be notified of the extra tax before moving to the area.

Under the state’s Mello-Roos Community Facilities Act of 1982, a city may levy a special property tax in a specified area to pay for such improvements as storm drains and roads, as well as additional police and fire service.

Although the taxing procedure has become a popular financing method in developing areas of South County, Mello-Roos districts are unusual in older North County areas.

But with 750 acres to be developed in the Holly Seacliff area and about 400 acres east of the Bolsa Chica wetlands planned for housing tracts, city officials suggested that imposing a special tax may be the best way to finance new utilities and street improvements.