Some condos in San Francisco carry additional, high-cost taxes because they fall within a geographical region known as a community facilities district (CFD).
Before you write an offer on, for example, that South Beach/Yerba Buena view condo you’ve fallen in love with, make sure you check the disclosures for a breakdown of individual taxes that’ll be collected annually alongside your 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.
The California state legislature subsequently approved the Mello-Roos Community Facilities Act of 1982, which allows for a special tax within a defined geographical area. Creating these districts requires approval by two thirds of qualified electors in the area, and the districts generate funding for a broad range of facilities.
The district tax that ends up on a condo’s annual bill can be quite high. For example, the Transbay CFD tax applies to some newer residential condo buildings in South Beach/Yerba Buena neighborhoods and can cost thousands of dollars. The amount per unit is based on the height of the building, condo’s square footage and other factors.
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 that fall 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 you’re signing the paperwork so you’re not surprised by pricey district taxes.
From an investment standpoint, consider whether buying into a building that will cost you thousands of dollars more per year to own is a better move than purchasing a condo in a non-CFD building. A condo with a $15,000+ annual tax will cost more than $75,000 over five years to own than another condo that’s not part of the district. Resale can potentially end up being more challenging as a result, too.