Bottom Line

Some property owners in San Diego pay additional annual fees beyond the annual property tax. Be sure to check with your Realtor to find out if the property you want to purchase is subject to a Mello-Roos fee.

Background

The passage of Proposition 13 in 1978 limited the ability of public entities to increase property taxes based on a property's assessed value. To raise additional funds for improvements and services, the Mello-Roos Community Facilities Act was passed in 1982. This Act allows for a special annual tax to be imposed on property owners in certain communities.

The Mello-Roos Community Facilities Act of 1982

The Mello-Roos act allows any public entity (e.g. city, county, special district, school district, or joint powers authority) to establish a Community Facilities District (CFD) to finance public improvements and services. These improvements can include: sewers, streets, police, ambulance, fire prevention services, schools, parks, libraries, museums, cultural facilities, and other basic  infrastructure.

Is Mello-Roos Needed?

The Mello-Roos Act establishes a source of funds needed for the development of required infrastructure when no other funding sources are available. Typically, Capital Facilities Districts (CFDs) are formed in undeveloped areas or to build roads, and water and sewer infrastructure for new homes and commercial space. In some cases, CFDs are used in older communities to fund new schools or additional community improvements.The tax stays in effect as long as it is needed to pay for the bonds, interest and administration costs, not to exceed 40 years.

How Much is Mello-Roos For My Property?

Not all properties incur a Mello-Roos fee. For properties subject to this fee, a formula is used at the time the CFD is created to determine the amount charged to each property owner. This formula incorporates the square footage of each property, lot size and intended use of the property. The amount of the Mello-Roos fee may adjust each year, but cannot exceed the maximum amount established when the CFD was created. Your Realtor can provide information about the current Mello-Roos fee (if any) for the property you are interested in buying.

When is the Mello-Roos Payment Due?

A CFD operates as a Special Tax Lien against each property that benefits from the improvements. . Homeowners then pay the Special Tax each year, as one item on their general property tax bill. You will normally pay your Mello-Roos fee in conjunction with your general property tax bill.

Foreclosure Rights?

Property owners within a CFD should know that a CFD has the right to foreclose on properties when special taxes are delinquent for more than 90 days.

Caution

The details of each CFDs are complex and unique. Be sure to contact the San Diego County Treasurer and Tax Collector (web site) to get answers to any questions you may have before buying real estate within a CFD.