What is Mello-Roos in California?

Mello-Roos is a special tax a California local agency puts on your property tax bill to pay for infrastructure or services in a defined area, usually a newer development. This line item confuses buyers more than almost anything else on a tax bill. Here’s what it actually is.

Where the name comes from

Mello-Roos is shorthand for the Mello-Roos Community Facilities Act of 1982, named for its authors, Senator Henry Mello and Assemblyman Mike Roos. It lives in the Government Code starting at section 53311, and it lets a city, county, school district or special district form a Community Facilities District, or CFD, and levy a special tax inside it.

A new subdivision needs roads, sewer lines, parks, sometimes a new school, before anyone can move in. Instead of the city paying up front or the builder folding the full cost into the sale price, a CFD lets the district sell bonds against future tax revenue and build now, then collect from the homeowners who end up living there.

How a district gets formed

A CFD isn’t created by a developer alone. The local agency adopts a resolution of intention, holds a public hearing, and puts the special tax to a vote. Under Government Code section 53326, if at least 12 people have been registered to vote within the district for the 90 days before that hearing, the vote goes to those registered voters, two thirds of whom have to approve it. Almost all new-development CFDs have far fewer than 12 registered voters at formation, so the vote instead goes to the landowners, weighted by how much land each one holds. The tax gets approved before most of the future homeowners who will actually pay it ever move in.

What the tax pays for

Government Code section 53313 lists services a CFD can finance directly: police and fire protection, flood control, and maintenance of parks, streets and public facilities. Beyond that, CFDs commonly fund capital facilities such as roads, water and sewer systems, schools and parks, paid for by bonds that the special tax then repays. The law does not allow bonds to fund ongoing services, which come straight out of the annual special tax, year after year, with no bond behind them.

Special tax, not a percentage of value

This is the part that trips people up. Your regular property tax under Proposition 13 is based on your home’s assessed value. Mello-Roos is not. It’s set by a rate and method of apportionment adopted when the district was formed, a formula that typically looks at lot size, square footage or land use category, not what the home sold for. Two similar houses on the same street, in different phases of the same development, can owe different amounts, and neither one moves when the home’s market value goes up or down.

The maximum tax, the escalator, and how long it lasts

The law limits how the number can grow. Under Government Code section 53321, the maximum special tax on a residential parcel funding bonded facilities has to be set as a specific dollar amount when the resolution is adopted, and it cannot rise by more than $2 for every $100 of the prior year’s maximum each year. The resolution also names the final tax year after which that tax stops being levied, though a tax that went unpaid earlier can still be collected later. The honest answer to “how much” is whatever dollar figure is printed for that parcel, rising by no more than $2 per $100 a year, until the district’s stated final year.

Services-only districts work differently. There’s no bond behind a services-only special tax, so there’s no fixed payoff date, and that charge can continue for as long as the district keeps levying it. The only way to know which situation applies to a specific house is to check that parcel’s CFD documents or disclosure notice, not a statewide range.

How it shows up on your tax bill

Mello-Roos appears as its own line item in the special assessments section of the annual property tax bill, separate from the general tax. A charge that doesn’t look like the standard Proposition 13 rate is very likely a Mello-Roos special tax or a 1911 or 1915 Act assessment, and the bill itself usually names which one it is.

What sellers and buyers are each entitled to

Under Civil Code section 1102.6b, a seller of property subject to a Mello-Roos special tax has to make a good faith effort to obtain the official Notice of Special Tax from the levying agency and deliver it to the buyer. The agency has a matching duty: Government Code section 53340.2 requires it to furnish that notice to anyone who requests it, including a property owner, within five working days, for a fee capped at 15 dollars.

Is it deductible?

Mostly no, and the reasoning matters more than the answer. IRS Publication 530 draws the line at whether a charge is for a local benefit that tends to increase your property’s value, things like new streets, sidewalks, or water and sewer systems. Amounts paid for that kind of benefit aren’t deductible as a tax, they get added to your home’s basis instead. The one exception is the part of an assessment that covers maintenance, repair or interest, deductible only if you can show exactly which part of the charge that is.

Most Mello-Roos special taxes repay bonds that built new infrastructure, which puts them on the non-deductible side of that line. If a bill separately breaks out a maintenance or interest component, that piece may be different. Ask a tax advisor to look at the actual notice for your parcel rather than guess.

Mello-Roos versus 1911 and 1915 Act assessments

These often ride on the same tax bill, but they come from different laws. Mello-Roos is a special tax created under the Government Code, approved by a vote of registered voters or landowners, and doesn’t have to be tied to the specific benefit a parcel receives. A 1911 Act or 1915 Act assessment works differently. The Improvement Bond Act of 1915, in the Streets and Highways Code starting at section 8500, secures bonds with a fixed lien against each parcel, set by how much that parcel benefits from the improvement being built, following a benefit-assessment method rather than a vote. Both can look similar on a bill, but they trace back to different statutes with different rules.

The short version

Mello-Roos is a special tax, not a percentage of your home’s value, created by a 1982 state law so new developments can finance their own infrastructure through bonds that homeowners repay over time. The maximum amount and its yearly increase are capped and disclosed when the district forms. Sellers must provide the official notice, agencies must produce it on request, and most of it isn’t deductible because it pays for improvements that add value rather than for upkeep. Read the actual notice for the parcel you’re buying or selling.

For the district-specific version of this question, see how much Mello-Roos adds to a Murrieta tax bill and when Mello-Roos ends on a Temecula house. For what else a seller has to disclose, see the seller disclosure guide.

If you’re pricing a home with or without a CFD on it, start with the home value tool.