What is a Mello-Roos Community Facilities District?
Proposition 13 was enacted by Californians, which limited the ability of many
public agencies to finance new projects.
In 1982, Senator Henry Mello and Assemblyman Mike Roos affected the
passage of the “Mello-Roos Community Facilities Act of 1982” (the act)
authorizing local governments and developers to create Community Facilities
Districts (CFDs) for the purpose of selling tax-exempt bonds to fund public
The Act allows
any county, city, special district, school district or joint powers authority
to establish a CFD, which allows for the financing of public services and
facilities. In order to establish a CFD,
it must be approved by a two-thirds margin of qualified voters in the district
at the time of formation. If there are
fewer than twelve registered voters within the district, the vote may be passed
by landowners in the district. At the
close of the legal proceedings, an established CFD has all the legal privileges
of a legally sanctioned government body.
How are CFD’s used?
requires infrastructure (streets, sewers, storm drains) and public services (Law
enforcement, Fire and Paramedic Services).
Local governments are forced to require developers to put in the
necessary regional infrastructure for new home developments. Developers have
one of two options. The developer can add the cost of this infrastructure to
the price of each new home. The
homeowner pays more for the home, therefore increasing the amount of the
mortgage. Or, many developers opt for
establishing a CFD and thus have the power to create the district for future
property owners. The CFD has the power
to issue tax-exempt bonds to pay for infrastructure or services. The cost is
then passed on to the homeowner in the form of annual special taxes. Without the CFD, the homeowner would probably
pay more for their home resulting in a higher mortgage payment and would also
be paying higher property taxes on the increased cost of the home.
Mello Roos Community Facilities Act of 1982