Explore Property Tax Information For California

It's a form of municipal debt financing that can be used by cities, counties, and special districts (such as school districts).

This gives local governments a way to fund public facilities and certain services, particularly for developing areas.

Mello-Roos Community Facilities Districts (referred to as "CFDs") raise money through special taxes that must be approved by 2/3rds of the voters within the district.

A CFD (in California) is formed to finance major improvements and services within the district which might include schools, roads, libraries, police and fire protection services, or ambulance services. The taxes are secured by a continuing lien and are levied annually against property within the district.

How is the Community Facilities District formed?

1. Need.  Either a) A developer wants to build a housing or business development and needs public funding to put in roads, utilities, and other facilities, or b) An existing community needs new services to be provided or facilities to be built.

2. Petition. A written request must be made by two members of the authorizing legislature, or a petition must be signed by 50% of voters or by landowners who own 50% of property. The legislature then adopts a resolution of intention to form a special district.

3. Hearing. A hearing is held by the legislature to accept written protests by landowners and voters in the area. If 50% of the registered voters or owners of 50% of the area's land submit written protests, the proceedings are either stopped altogether, or modified to conform to the demands of the protests.

4. Vote. After 90 days have passed, but before 180 days, the proposed levy is submitted to the area's registered voters. A 2/3 majority vote is required to pass the special tax. If there is not a 2/3 majority, the legislature may not pursue the formation of a Community Facilities District for at least one year.

5. Bonds Issued. Once the lien on the properties in the district has been recorded, the district may begin to sell municipal bonds. This raises the money necessary to pay for the proposed facilities. If the district was formed to provide only services, bonds will not be issued.

6. Calculation. Each year the district calculates the special tax for each parcel, basing the calculations on the Rate and Method of Apportionment (RMA). The district submits the tax charges to the County, who adds them to your annual Property Tax Bill.

What is the money used for?

To finance the installation of infrastructure, such as streets, sidewalks, curbs and gutters, or to construct a school building or fire station.

Does this taxation involve Real Property in California?

Yes. There are several critical aspects to Mello-Roos and 1915 Act Assessment Districts that property buyers and sellers need to be aware of.    

Isn’t it enough to tell a buyer that property is in or not in Mello-Roos District? 

No.  Sellers of property must provide Notices of Special Tax describing each of the Mello-Roos districts the property is in; these notices are part of the legal disclosure requirement.

California Civil Code Section 1102.6 (passed in 1990) requires that sellers make a good faith effort to give property buyers a "Notice of Special Tax" if the property is in a Mello-Roos district. The notice must include the current year's maximum special tax for the parcel, the rate at which that maximum tax may increase per year, and the final date in which special taxes may be collected for bonded indebtedness.

Property sold "as is" is not exempt from providing this disclosure, as stated in Section 1102.1 of the California Civil Code.

Is there a special tax lien by the Mello-Roos district?

Yes.  When Mello-Roos districts are formed, a Special Tax Lien is recorded against each property in the district. This allows the Mello-Roos district to use the value of the property as security for bonds that will be issued to finance the improvements and services.  As a property-tax related lien, it has priority over all other liens on your property (such as your mortgage). So, if property taxes are not paid, and the house is foreclosed on, the first parties to get paid would be the Mello-Roos district and the County. Your mortgage holder would collect money next to pay off the balance due on the mortgage.