Five years after the passage of Proposition 13, which restricted property tax increases and consequently shrunk a major source of funding for municipal agencies, California’s state legislature enacted the Community Facilities District Act (CFD), sponsored by Senator Henry Mello and Assemblyman Mike Roos. A mechanism to restore public funds, the Mello-Roos Act permits local governments and agencies to form CFDs to pay for municipal services and facilities through the sale of tax-exempt bonds. Property owners within the CFD are then assessed a special tax to pay back the bond debt. However, in order to form a CFD, two-thirds of qualified voters residing in the district must approve the measure.

What does this mean for you as a homeowner? In San Francisco, it means that you will likely see at least one Mello-Roos assessment on your annual tax bill, as most real property in the City is subject to these levies. Bear in mind that if you fail to pay a Mello-Roos assessment, the CFD has the legal right to impose penalties and even foreclose on your property if your payment is in arrears by 150 to 180 days. You should also know that the special tax is not necessarily based on property value. Instead, the CFD agency applies a formula that factors in certain features of your property, such as the square footage of your home and the size of your lot. For details on a special assessment, contact the particular agency levying the tax. Look at the part of your tax bill labeled “Direct Charges and/or Special Assessments” which will list the code, agency name, and phone number relating to any additional taxes that appear.