Some newer construction condos in San Francisco come with additional, high-cost taxes because they’re located in what’s known as a Community Facilities District (CFD).
Before you write an offer on that South Beach or Yerba Buena view condo you’ve fallen in love with, be sure to check the disclosures for a breakdown of special taxes that will be collected annually alongside your regular property taxes.
Why do these districts exist? When Prop 13 passed in 1978 and restricted how much California could increase property taxes, public agencies (and real estate developers) had to seek other sources for funding public infrastructure.
In response, the state legislature passed the Mello-Roos Community Facilities Act of 1982, which allows for a special tax to be levied within a defined geographic area. These districts require approval from two-thirds of qualified voters in the area and are used to finance a wide range of facilities.
These extra taxes can significantly impact your bottom line. For example, the Transbay CFD applies to certain newer condo buildings in the South Beach/Yerba Buena area and can add thousands of dollars to your annual tax bill. The amount is typically based on factors like building height, unit square footage, and other variables.
I reviewed one property tax bill for a 1,544-square foot two bedroom, two-bath condo at 488 Folsom (The Avery) that included a $15,259 annual tax in addition to property taxes.
Other new buildings within the Transbay CFD are 280 Spear/Mira, 181 Fremont and One Steuart Lane.
Sellers and developers are required to provide a California property tax disclosure for new homes, and resales require a natural hazard disclosure report which includes a list of taxes that run with the property. Make sure you read the fine print when signing the paperwork so you’re not caught off guard by expensive district taxes.
From an investment standpoint, consider whether buying into a building into a CFD building makes sense; that $15,000+ annual tax adds up. You could be paying $75,000 more over five years than if you’d bought a similar condo outside the district. That kind of expense may also affect future resale value and buyer interest.