What is Mello-Roos?

Mello-Roos is a special tax billed to everyone within designated areas known as community facilities districts. The taxes pay for services such as utilities, roads, public safety, schools and recreation. Senator Henry J. Mello and Assemblyman Mike Roos drafted the law in 1982 in the wake of Proposition 13, which limited governments' ability to raise property taxes. Rather than force builders to pay upfront for needs their developments trigger, Mello-Roos allows government agencies to bond for those projects and pay off the debt through extra taxes collected from residents over decades. Any California county, city, special district or school district can form a Mello-Roos district with approval from two-thirds of residents. However, most Mello-Roos districts are created before communities are built, when the landowners – often a single developer – can give the OK.

Before Proposition 13, state and local governments used income collected through property taxes to build new roads, schools and other necessary community facilities. In order to continue building residential areas, these same governments were forced to require builders of new communities to pay for these public facilities. Consequently, these funds were added to the cost of homes. These price increases hurt new home buyers as fewer people were able to afford higher-priced homes. Those who could had to wait for the public facilities to be built.

Under Mello-Roos Community Facilities Act, landowners put up their land as collateral so that public agencies, like a school district, could raise money to pay for vital basic public facilities. The public agency forms a Mello-Roos Community District that sells bonds to fund the construction of these new public facilities. A bond allows for payment over a specific amount of time through special taxes levied on property owners in that particular district. Mello-Roos taxes are collected by the County Tax Collector as part of the normal property tax system.

Not all new home communities are affected by Mello-Roos special taxes. For example, sometimes a new neighborhood is built within existing communities. Because public facilities are already in place, they are not subject to Mello-Roos taxes.