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Buyer & Seller Guide

What Every Silicon Valley Buyer and Seller Should Know About Mello Roos

What Is Mello Roos?

Mello Roos is a colloquial name for a Community Facilities District (CFD) tax, established under California’s 1982 Mello-Roos Community Facilities Act (co-authored by Senator Henry Mello and Assemblymember Mike Roos). When a city or county needs to fund expensive infrastructure in a developing area — roads, sewer systems, fire stations, schools, or parks — it can form a CFD and issue bonds backed by a special tax levied on properties within the district. Unlike a general property tax, Mello Roos taxes are charged at a flat amount per parcel (or per square foot of building), not as a percentage of assessed value.

How Mello Roos Affects Your Property Tax Bill

If your home is in a CFD, the annual special tax appears as a separate line item on your Santa Clara County (or other county) property tax bill — typically labeled with the district name and "Special Tax." In high-infrastructure communities like Communications Hill, Evergreen, or Milpitas’s newer developments, Mello Roos adds $1,500 to $4,500 per year on top of your base 1% ad valorem tax. For a $1.5M home, that can push your effective tax rate from 1.25% to 1.55% or more — a difference of $4,500/year in additional carrying cost that many buyers overlook until escrow.

How Buyers Should Evaluate CFD Costs

Before making an offer, request a preliminary title report and verify whether the property falls within a CFD. Your agent should pull the county tax bill to identify all special assessments. When evaluating total ownership cost, treat Mello Roos as a fixed monthly expense: a $3,000/year assessment equals $250/month, which reduces the mortgage amount you can qualify for by approximately $50,000–$60,000 at prevailing rates. Some lenders factor special assessments into DTI calculations for jumbo loans, so disclose any CFD taxes to your loan officer early. See also: Seller Net Proceeds Calculator and Silicon Valley Seller Disclosure Checklist.

Expiration and Voting Provisions

Most CFDs have a defined term — typically 20 to 40 years from bond issuance. Once the bonds are fully repaid, the special tax is eliminated and no longer appears on your bill. Some districts, however, levy ongoing “services” taxes (for police patrols, park maintenance, or landscaping) that continue indefinitely unless terminated by a supermajority vote of the registered voters within the district. When evaluating a CFD property, note the expiration year and whether the tax is bond-only or includes a services component. A district expiring in 2035 versus 2045 represents a $10,000–$30,000 difference in total remaining tax burden.

Disclosure Obligations for Sellers

California sellers are legally required to disclose Mello Roos taxes. The Transfer Disclosure Statement (TDS) includes a specific question about special assessments. Additionally, the Mello-Roos Community Facilities Act requires sellers to provide buyers with a Notice of Special Tax within 14 days of opening escrow, disclosing the maximum annual tax, the current tax amount, and the conditions under which it may increase. Failure to provide this notice gives buyers the right to rescind the purchase agreement within three days of receipt. If you’re selling a home in a CFD area, include the annual tax amount prominently in your marketing materials — buyers who discover it late in escrow may renegotiate or walk. Review the full Seller Disclosure Checklist to make sure your listing is fully compliant.

Frequently Asked Questions

Mello Roos FAQ

  • Mello Roos refers to a Community Facilities District (CFD) — a special tax district authorized under the 1982 Mello-Roos Community Facilities Act. Local governments use CFDs to fund new infrastructure like roads, schools, parks, and utilities in developing areas. The tax is added to your property tax bill each year and is specific to your parcel.
  • Annual Mello Roos assessments in Silicon Valley typically range from $800 to $4,500 per year, depending on the district, parcel size, and what the CFD funds. High-infrastructure districts in newer communities like Communications Hill in San Jose or Milpitas CFD 2005 can reach $3,000–$4,500/year. Confirm exact amounts with your title company during escrow.
  • No. Mello Roos / CFD special taxes are not deductible on your federal income tax return as of the 2018 Tax Cuts and Jobs Act. Unlike ad valorem property taxes (based on assessed value), Mello Roos taxes are charged at a fixed rate per parcel and do not qualify for the property tax deduction on Schedule A.
  • Yes, most CFDs have a fixed term — typically 20 to 40 years from the date of formation. After the bonds are repaid, the special tax is terminated. Some CFDs have service-based taxes (for police, fire, or parks maintenance) that continue indefinitely unless terminated by a two-thirds vote of the district’s registered voters.
  • Yes. California law requires sellers to disclose known CFD taxes in the Transfer Disclosure Statement (TDS). Additionally, if a home is in a CFD, the Mello-Roos Act requires sellers to provide buyers with a Notice of Special Tax within 14 days of opening escrow. Failure to disclose is a material omission that can give buyers rescission rights.

Have questions about property taxes on a specific home?

Xavier Williams is a licensed Silicon Valley REALTOR® who reviews every line of the property tax bill — including Mello Roos — before you make an offer.

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