Fees & public finance
Mello-Roos (CFD)
The Mello-Roos Act (Gov. Code §§ 53311+) lets agencies levy non-ad-valorem special taxes through CFDs — parcel liens that secure infrastructure bonds.
Definition
The Mello-Roos Community Facilities Act of 1982 (Gov. Code §§ 53311–53368.3) lets cities, counties, school districts and JPAs form community facilities districts that levy special taxes — non-ad-valorem, outside Proposition 13's rate limits and outside the Mitigation Fee Act — to finance facilities and services, usually securing bonds. The recorded Rate and Method of Apportionment fixes each parcel's maximum tax, escalator and term; the tax is a continuing lien, sellers must deliver the § 53340.2 Notice of Special Tax, and bond covenants require accelerated judicial foreclosure of delinquent parcels.
Why it matters in an underwrite
Treat an existing Mello-Roos levy as senior, escalating, foreclosure-backed debt attached to the parcel — maximum taxes commonly escalate around 2% per year, and lenders test the total effective tax rate (ad valorem plus special taxes plus assessments) against value, with roughly 2% as the level where pricing and agency-loan sizing start to feel it. Read the RMA itself for the term and the prepayment formula; on stabilized buys, compare prepaying the tax against capitalizing it at your cap rate.
Sources & related guides
See also
See the term in the law itself
Read the controlling text in the Code Library, or ask the AI how it applies to your project.
Last reviewed 2026-07-29. General information, not legal advice.