The Community Facilities District Act (more commonly known as Mello-Roos) was a law enacted by the California State Legislature

California State Legislature

The California State Legislature is the state legislature of the U.S. state of California. It is a bicameral body consisting of the lower house, the California State Assembly, with 80 members, and the upper house, the California State Senate, with 40 members...

 in 1982. The name Mello-Roos comes from its co-authors, Senator Henry J. Mello (D-Watsonville) and Assemblyman Mike Roos (D-Los Angeles). The Act enabled "Community Facilities Districts" (CFDs) to be established by local government agencies as a means of obtaining community funding.

History

When California Proposition 13

California Proposition 13 (1978)

Proposition 13 was an amendment of the Constitution of California enacted during 1978, by means of the initiative process. It was approved by California voters on June 6, 1978. It was declared constitutional by the United States Supreme Court in the case of Nordlinger v. Hahn,...

 passed in 1978, it restricted the ability of local governments to raise property taxes by more than an inflation factor. The budget for services and for the construction of public facilities therefore could not continue unabated. As a result, new ways to fund public improvements in respective locales were considered.
The Mello-Roos fees are generally considered an end-run around Prop 13, which caps property taxes while Mello-Roos are not capped.

Districts and taxes

A Mello-Roos District is an area where a special property tax

Property tax

A property tax is an ad valorem levy on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality...

 on real estate, in addition to the normal property tax, is imposed on those real property

Real property

In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...

 owners within a Community Facilities District. These districts seek public financing through the sale of bonds

Municipal bond

A municipal bond is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds includes cities, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, and any...

for the purpose of financing public improvements and services. These services may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks and police protection to newly developing areas. The tax paid is used to make the payments of principal and interest on the bonds.

Mello-Roos is tax deductible in some cases but not in others.

New communities

Many communities requiring new schools and infrastructures such as public parks and roads impose Mello-Roos. While property tax is assessed as a percentage of the value of the home, Mello-Roos is independent and could rise or lower and is not subject to Proposition 13.