California builders and home buyers have a more complex way to finance community infrastructure than those most of the rest of the country. A special bond issuance law called Mello-Roos is a common way to pay for needed streets, elementary schools, parks, fire protection, police and other municipal services. In places where Mello- Roos districts are created, new-home buyers are obligated to pay back these bonds through a special tax.
The law is named for California state senator Henry Mello and state assemblyman Mike Roos who together shepherded the law into being in 1982. Formally known as the Community Facility District Act, the law remedies a funding problem created by the statewide passage of Proposition 13 in 1978.
Prior to Proposition 13, such services were simply paid for by local governments out of property taxes. When cities and towns were no longer able to collect enough property taxes to cover the costs of these improvements, it became the responsibility of new-home buyers to cover the costs. Before Mello-Roos those costs were simply added on to the price of a new home.
Property owners in Mello-Roos districts are responsible for payment of a special tax. The amount of the special tax is based on mathematical formulas that take into account property characteristics, square footage of the home and parcel size. It is usually included on the county tax bill.
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