What are Mellow-Roos Taxes?

When Proposition 13 passed in 1978, it severely limited the ability of local governments to use property taxes to construct public facilities and services. Consequently, Californians were forced to find new ways to fund public improvements in their communities such as roads, schools, etc. The Mello-Roos Community Facilities Act of 1982 was enacted by the California legislature, the Act enabled “Community Facilities Districts” (CFD’s) to be established by local government agencies as a means of obtaining this crucial community funding. The amount of Mellow-Roos Taxes varies from one CFD to another. Typically, an adopted formula that relates to the size of the home (square footage or lot size) is used to determine the amount of an individual assessment. In general, the special taxes and assessments do not exceed 1% to 1.5% of the market value of new homes. Additionally, the total amount of all annual taxes (including property tax) usually does not exceed 2% to 2.5% of the home’s market value. Most often Mellow-Roos Taxes are applied to newly built communities such as large scale Planned Unit Development (PUD) Communities where there have been thousands of new homes built at once and the taxes are needed to establish the city services. Before purchasing a property with Mellow-Roos you will be informed either in the initial negotiation stages or during escrow that these taxes apply.