Mello-Roos

Community Facilities Districts (CFDs), more commonly known as Mello-Roos, are special districts established by local governments in California as a means of obtaining additional public funding. Counties, cities, special districts, joint powers authority, and schools districts in California use these financing districts to pay for public works and some public services.

The Community Facilities Act was a law enacted by the California State Legislature in 1982. The name Mello-Roos is derived from its co-authors, Senator Henry J. Mello (D-Watsonville) and Assemblyman Mike Roos (D-Los Angeles).

When Proposition 13 passed in California in 1978, it limited the property tax rate and the ability of local governments to increase the assessed value of real property by not more than an annual inflation factor. As a result, the budget for public services and for the construction of public facilities could not continue unabated. New ways to fund local public improvements and services were considered and adopted by the California State Legislature. A Mello-Roos tax is a species of parcel tax that circumvents Proposition 13 (which limits property taxes based on the assessed value of real property) because it is not levied on the assessed value of real property.

A Mello-Roos District is a geographic area where a special property tax on real estate (a parcel tax), in addition to the regular property tax subject to Proposition 13, is imposed on taxable real property within a Community Facilities District. These districts seek public financing through the sale of bonds for the purpose of financing public improvements and some public services. These public services may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks and police protection to newly developing areas. The tax paid is used to make the payments of principal and interest on the bonds.

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