What Is Mello-Roos & How to Tell If a House Is in a CFD

Article Summary:

Mello-Roos taxes are special taxes imposed by California law on Community Facilities Districts (CFDs). In a district that’s been designated a CFD, aka a Mello-Roos district, local government can sell bonds to help fund public services and amenities. The taxes collected under Mello-Roos law are meant to pay back those bonds and fall on the shoulders of property owners.

In real estate, there are some terms that sound official, such as “escrow.” Mello-Roos is a bit different, primarily because it sounds more like a dessert or snack than it does a law. However, it’s a California law that everyone who lives in the Golden State should know.

Mello-Roos taxes can be a burden to the property owners who must pay them, particularly if they fail to take them into account when buying property. But Mello-Roos taxes can also greatly benefit people in the community who use the bond-funded services and amenities these taxes make possible. Before you assume you know what to expect in real estate, let’s talk about what this tax bill is and what you should expect.

What are Mello-Roos taxes?

Mello-Roos is a term for a special tax district that allows communities to sell bonds and levy taxes as a way to improve services and amenities in the area. Mello-Roos law does not require all districts to raise money this way. Instead, it empowers specific districts known as Community Facilities Districts, or CFDs, to do so.

Mello-Roos is named after the two politicians who created this method of fundraising: California State Senator Henry Mello and State Assemblyman Mike Roos. If you live in a CFD district, then you will get an additional tax bill on the property that you own.

When people buy Mello-Roos bonds, local officials (of a school district, city, or county) will use that money to bolster amenities or services in the area. However, they are going to need to pay back those bonds. They’ll do so through an increase in local property taxes.

How does a Community Facilities District start?

CFDs are not arbitrarily assigned by the state. Representatives from your local government have to put it to a vote, and it has to pass by a two-thirds supermajority.

Since living in a Mello-Roos district can be very pricey for property owners, getting this supermajority can be difficult. People generally do not want to see their property taxes increase, particularly in difficult times. A fairly dire situation may be required to win the public support required to levy this special tax.

How can you tell if you live in a Community Facilities District?

Real estate agents will usually tell you if you want to buy a home in a CFD. Your real estate agent will be able to tell you if your district sold Mello-Roos bonds or if your home will be subject to this type of property tax.

With that said, you can also find out if you’re living in one of the many Mello-Roos districts out there by looking at your property tax bill. If you have Mello-Roos taxes, your bill may indicate this. If it doesn’t, you will need to search your county tax assessor’s website using your secured property tax parcel number, which you can find on your tax bill. The exact procedures for finding the information you need may vary from one district to another.

Pro tip — Mello-Roos taxes can put a major financial burden on you, to the point that they add the equivalent of $60,000 extra owed on top of your mortgage. It’s best to warn real estate agents if you don’t want to be in one of these areas. Of course, there’s no guarantee that two-thirds of local voters won’t turn your area into a CFD after you move in.

Are Mello-Roos taxes found in every state?

Nope! The law that enacted this type of taxation is a state law in California. As a result, it is only going to be an issue for residents, landlords, and property owners in California.

Usage note: Since “Mello-Roos” is derived from the names of two California legislators (more on this later), it should always be hyphenated, whether used adjectivally (“I gotta pay my Mello-Roos taxes”) or as a standalone noun meaning “Mello-Roos district” (“I own property in a Mello-Roos and the taxes are killing me”). You’ll often see it used without the hyphen, however, so be ready.

Moreover, it’s not even a statewide part of taxation, so there are plenty of communities that don’t even have a Mello-Roos taxation plan in place. This is a law that only applies to counties, cities, and municipalities (as well as school districts) under the CFD label.

Professional tip — While these taxes are not required by state law, you do have to pay them if you live in a Community Facilities District. If you fail to pay them, you could end up with a tax lien on your house.

Financing your home or investment property purchase

Choosing whether or not to buy property in a Mello-Roos district is a big decision, no doubt about that. Once you’ve made it and chosen a property, however, your work is far from over. Finding the right financing can be an even bigger challenge. SuperMoney’s search filters and comparison tools, along with real-customer reviews free from commercial bias, can help you meet that challenge.

Why do Mello-Roos taxes exist?

Mello-Roos taxes started in 1982 with the Mello-Roos Act. This was a direct response to Proposition 13, which limited the power of local governments to increase property taxes on homes not being sold based on their increasing value. The proposition allowed homeowners who could not have afforded a tax burden rising in sync with rapidly rising property values, and who might have lost their homes as a result, to retain long-term ownership. The proposition also established the requirement that special-purpose local taxes must receive two-thirds voter approval.

An additional effect of the proposition, however, was to make it difficult for local governments to fund the amenities and infrastructure they wanted to fund. The Mello-Roos Act compensates for this by allowing local governments to put together districts that can fundraise for well-supported amenities and maintenance using bonds. Property owners who vote in favor of Mello-Roos bonds believe the benefit to be had from the public facilities or services created or upgraded justifies the cost.

Historic close-up

California voters passed Proposition 13 in 1978, and property owners’ support for the bill has remained strong ever since. One can guess why from this summary by California’s Legislative Analyst’s Office:

Prior to Proposition 13, property taxes were based on the market value of property — that is, the price for which it could be sold. Under Proposition 13, property taxes instead are based on a property’s purchase price. In the year a property is purchased, it is taxed at its purchase price. Each year thereafter, the property’s taxable value increases by 2 percent or the rate of inflation, whichever is lower. This process continues until the property is sold and again is taxed at its purchase price.” — Common Claims About Proposition 13

Not long after the proposition passed, it became clear to local officials that they could not fund many of the projects they had in mind under its restrictions. So, in 1982, Democratic state legislators Mello and Roos, whom you’ve already met, persuaded fellow lawmakers to pass the “Mello-Roos Community Facilities Act of 1982” (the Act’s full title), empowering local officials to sell tax-exempt bonds to fund projects they could not fund with existing revenue.


In 1996, California voters passed Proposition 218, which places some constraints on local officials’ use of special taxes. Curious readers can read more about it here.

How are Mello-Roos taxes determined?

This actually depends on the local governments’ ways of assessing taxes. In the words of the California Land Title Association,

Most special taxes levied on properties within these [CFD] districts have been structured on the basis of density of development, square footage of construction, or flat acreage charges. The Act, however, allows for considerable flexibility in the method of apportionment of taxes, and the local agencies may have established an entirely different method of levying the special tax against property in the district in question.” —Understanding Mello-Roos

Whatever method your district uses, it will likely involve calculations based on a formula. You have the right to ask about the formula by contacting your local County Assessor’s Office. Office staff will be able to tell you about the tax formula, whether you can do anything to decrease it, and how you can go about correcting any errors you might spot when reviewing how the calculation has been applied to your property.

How rapidly can Mello-Roos taxes increase?

Anyplace where a Mello-Roos tax is imposed will set a limit on how much the tax can increase each year, and the law appears to set a 2% upper limit on these yearly increases. Both California Title Company and LegalZoom read the law to mean just this.

Local officials in one California city make matters a letter less clear, however.

What about Rocklin?

Oddly, the city of Rocklin indicates that a yearly increase of up to 4% is possible in some of its CFDs. Are there exceptions and complexities to this that California Title and LegalZoom fail to mention? That does seem to be one possible explanation.

Proceed with caution

The apparently higher yearly increases in some CFDs in Rocklin urge caution. You should carefully research the CFD-creating measures in effect wherever you are planning to buy property. Talking to a legal professional in the area, or speaking with the appropriate staff in local government offices, should help you nail down exactly what you can expect if you buy property in a Mello-Roos district there.

What does my Mello-Roos tax help fund?

Mello-Roos was established as a way to help bankroll a wide range of different amenities that people want but believe that nongovernmental entities cannot be relied upon to supply. Mello-Roos community facilities can include things like a local park, a community center, a library upgrade, or even public works repairs.

If you have ailing school districts or are in need of police protection, your local government may use these property taxes to help fund these things. For most communities, the reason for a Mello-Roos tax stems from a school district that needs to fund books, teacher salaries, and more. To incentivize new housing construction, Mello-Roos taxes are also often used to build infrastructure around large private developments.

How long do Mello-Roos taxes last?

Taxpayers will be happy to know that Mello-Roos taxes are not meant to be forever. Property owners in the district benefiting from the fundraising will have a Mello-Roos tax placed on their properties for a set period of time until the bond (principal plus interest) has been repaid.

In most cases, this taxation period will last for 20 to 25 years. But this does vary. Los Angeles County CFDs, for instance, normally take 30 years to pay off these bonds. And it is possible for certain bonds to require a repayment time frame of as much as 40 years.


Is Mello-Roos tax included in property tax?

Yes, your property tax bill may also mention your Mello-Roos taxes, if you have them. You will typically have to pay these along with your regular property taxes. Some districts, however, may give you the option to receive your Mello-Roos and general property tax bills separately.

How much is Mello-Roos a month?

This depends on the specific tax year, but in general, you can expect Mello-Roos taxes to run between $350 and $600 per month. If you have a very large house that has high property tax bills, then you might see even higher payments.

Do you pay Mello-Roos every year?

Generally speaking, the answer is yes. Mello-Roos taxes have to be paid every month, or every year, depending on your local government. If the Mello-Roos bonds have been paid off, you no longer have to pay that special tax every year.

Is it good to buy a house with Mello-Roos?

This depends on your financial situation and what you want out of your home. If you live in a Mello-Roos district, you might be on the hook for thousands of dollars’ worth of taxes that could go to other things. However, there is a trade-off.

Mello-Roos districts typically have houses that are priced lower to compensate for the increased property taxes. They also tend to have better school district amenities and may show the influence of Mello-Roos funding in the quality of other public resources, such as libraries. So, it’s up to you to make that judgment call.

Key takeaways

  • Mello-Roos refers to a law that allows local governments to sell bonds to fundraise for infrastructure, public facilities and services, and other amenities.
  • The law also allows city, county, and municipal officials to levy taxes on local residents to pay off those bonds.
  • If you live in a Mello-Roos Community Facilities District, you may have higher-than-average property taxes to help pay for bonds.
  • How much you will owe for this special tax is determined by a formula used by your area’s County Assessor’s Office.
  • These taxes typically will last for 20 years but can last for as long as 40 years.
  • This particular tax law is only applicable in the state of California.

Your tax-law learning has barely begun

No matter where you live or what you do for a living, understanding tax laws is a good way to ensure that you don’t get in trouble with your local tax collector or the IRS. The question, of course, is how do you go about acquiring that understanding? SuperMoney has an extensive library of articles filled with tax knowledge to help you with this.

Of course, we often don’t realize that we’re having a hard time until we get that tax bill in April. If you’re having trouble with the IRS, SuperMoney can help with that, too. Check out our article about the best tax relief programs out there.

View Article Sources
  1. California Government Code…The Mello-Roos Community Facilities Act of 1982 — California Legislative Information
    This is the full law as currently amended. A more specific reference to a section of interest is provided in the article.
  2. California Property Tax Managers’ Reference Manual — California State Association of County Auditors
  3. Common Claims About Proposition 13 — Legislative Analyst’s Office
  4. Henry Mello…Democrat was known as classic retail politician — SFGate
  5. Guidelines for Mello-Roos Financing — California Debt Advisory Commission
    These early guidelines advised local officials to limit increases in Mello-Roos taxes to 2% annually for practical reasons.
  6. Mello-Roos Community Facilities Act — Rancho Santa Margarita City
  7. Mello-Roos Frequently Asked Questions — Rocklin, California
  8. Michael Roos — The Center for Media & Democracy
  9. Mello-Roos Information — County of San Diego
  10. Mello Roos Information —Orange County Treasure-Tax Collector
  11. Mello-Roos Q & A’s — Pacific Coast Title Company
  12. Property Tax FAQs — Los Angeles County Auditor-Controller
  13. Recommended Changes to the Mello-Roos Act of 1982: Report to the Legislature and Governor — California Debt Advisory Commission
    This is where the commission recommended making the 2% limit part of the law.
  14. The Truth About Mello Roos — California Title Company
  15. Understanding Mello-Roos — California Land Title Association
  16. What is Mello-Roos? — Tulare County
  17. What Is Mello-Roos? The Ultimate Guide to Understanding This California Tax Law — LegalZoom
  18. Who Will Build the Roads? Anyone Who Stands to Benefit from Them — Mises Institute
    Some economists believe that nongovernmental entities can be relied upon to produce a lot more than supporters of laws like the Mello-Roos Act do. This is an example of their thinking.
  19. Buying a House with a Tax Lien? Here’s What You Need to Know — SuperMoney
  20. How to Buy a House — SuperMoney
  21. How to Finance Investment Property — SuperMoney
  22. The Best Tax Relief Companies — SuperMoney
  23. What is Property Tax Relief? Five Ways to Get it — SuperMoney