By Bruce Cathcart

My virtual email bag with questions submitted by CV Weekly readers has doubled in the past month from one to two… so in order to keep up with this flood of inquiries this week I will answer the one question that actually involves real estate.

What is a Mello Roos? In 1978 the voters of California passed the now famous Proposition 13 which restricted the ability of local governments to raise property taxes. In order to get around the provisions of Proposition 13, in 1982 State Senator Henry J. Mello and State Assemblyman Mike Roos co-authored the Community Facilities Act which allows local governments the right to form Community Facilities Districts (CFDs) which are also known as Mello-Roos Districts named after the co-authors of the act. These districts are able to raise funds for the development of public improvements (such as streets, water, sewage and drainage, electricity, infrastructure and even schools and parks) and services (such as police, fire and paramedics) from the sale of tax-exempt bonds.

New development, such as a large tract of new homes, requires new streets, utilities, storm drains etc. The developers of these new projects have two ways of paying for these improvements. They can either pay for them with their own money (or borrowed funds in a construction loan), in which case they will include these costs in the price of their new homes when they sell them to their homebuyers; or, they can form a CFD (or Mello-Roos district) and pass the obligation of paying off the bonds used to finance the improvements to their new homebuyers. If a home is sold with a CFD Bond on it, then the homeowner usually pays off the bond with their semi-annual property tax bill over the next 20 to 30 years.

Here in the Coachella Valley we have several newer developments that were built in CFDs and have CFD Bonds that are paid off by individual homeowners in their property tax bills. Specifically, most of the tracts of homes north of I-10 in Indio in the general area known as Shadow Hills were built with CFD bonds. This is not necessarily a bad thing, but it is a very important thing to be aware of before deciding to purchase a home in this area, or any other area where there may be a CFD/Mello-Roos bond. In the Shadow Hills Area, homes with CFD bonds pay around $200.00 to $250.00 PER MONTH more for their property taxes than homes that do not have CFD/Mello-Roos bonds! This can make a huge difference in a buyer’s monthly payment and is also a factor in qualifying for a new loan as these costs are included when calculating a buyer’s qualifying ratios. In many cases, home sale prices will be less for homes in CFDs than for comparable homes not located in CFDs because of this.

As of January 1, 2002 California law requires that all California property owners furnish a notice of special assessment to buyers PRIOR TO CLOSING ESCROW if their property is located in a CFD and subject to assessment installments. Sellers must fully disclose which special tax and or assessment district a property lies in and provide a detailed breakdown of all costs associated with them. Your agent can guide you through this process, but you should ask BEFORE you make an offer on any home if the property is located in a Community Funding District or Mello-Roos District. In addition, for homes located in the Shadow Hills area of Indio you can go online to the City of Indio’s website at and search “CFD” to learn more about their CFD districts.

This week’s real estate tip: It is important for homeowners in CFDs to pay their property tax bills on time! The CFD has the right (and if bonds are issued, the obligation) to foreclose on a property when special taxes are delinquent for over 90 days! This will include the costs of collection and penalties and is different than the 5 year waiting period for non-payment of regular property taxes.

Bruce Cathcart is the Broker/Co-Owner of La Quinta Palms Realty, “Your Friendly Professionals” and can be reached by email at or visit his website at