In 1978 Californians enacted Proposition 13, which limited many local public agencies

ability to finance new projects. In 1982, Senator Henry Mello and Assemblyman Mike

Roos affected the passage of the Community Facilities District Act (CFD). This act

authorized local governments and developers to create CFD's for the purpose of

selling tax-exempt bonds to fund public improvements. Subsequently, property owners

that participate in the CFD's pay a "special tax" to repay the bonds.

The Act allows any county, city, special district, school district or joint powers of

authority to establish a "Community Facilities District" which allows for the financing of

public services and facilities. The services and facilities Mello-Roos Districts can

provide include streets, police protection, fire protection, ambulatory, elementary

schools, parks, libraries, museums, and cultural facilities.

A requisite for the Mello-Roos districts' establishment is that it be approved by twothirds

margin of qualified voters in the district. If there are fewer than twelve registered

voters within the proposed district, the vote may be passed by current landowners. At

the close of legal proceedings, an established Mello-Roos District has all the legal

privileges of a legally sanctioned governmental body.

Property owners in Mello Roos Districts are responsible for payment of the "special

tax". The amount of the "special tax" is not (directly) based on the value of the

property. Special taxes are based on mathematical formulas that take into account

property characteristics such as square footage of the home and parcel size. The

special tax is typically included in the annual County tax bill, however it can also be

paid off on a monthly basis.

A Mello-Roos District has the legal right to adopt stringent penalties and foreclosure

priorities; in the event that the special tax payment is delinquent. Ergo, if the "special

tax" is not paid, the District may exercise its legal right to foreclose and sell the

property. Foreclosure rights can be initiated after 150 - 180 days in arrears.

Seller shall make a good faith effort to obtain a disclosure "Notice of Special Tax" from

local agencies which levy on the property a special tax pursuant to the Mello-Roos

Community Facilities District Act, and shall promptly deliver to the prospective buyer

any such notice made available by those agencies. If the Transfer Disclosure

statement or the Mello-Roos disclosure notice is delivered to Buyer after the offer is

signed, Buyer shall have the right to terminate this Agreement within three (3) days

after delivery in person, or five (5) days after delivery by deposit in the mail, by giving

written notice of termination to the Seller or Seller's agent.