Overview: The Background and Evolution of the CFD

Special Financing Districts (SFDs) include a range of special benefit assessments and special/parcel tax districts. SFDs have played an important part in funding ongoing services and financing infrastructure in California for over a century. With the introduction of Proposition 13 in 1978, signaling the beginning of the modern anti-tax movement, local governments’ general taxing powers have been severely limited. Since then, SFDs have often played a critical role in many communities to overcome such limitations and provide needed services and infrastructure.

The Community Facilities District, or CFD, has proved to be one of the most flexible and popular SFDs over the past few decades. Adopted by the California legislature in 1982 as the Mello-Roos Community Facilities Act, the introduction of the CFD was, in many ways, a reaction to Proposition 13. Many cities, counties, special districts, and school districts were simply unable to provide certain services and build the desired infrastructure. The CFD provided a “special tax” mechanism for voters, or in some cases landowners, to approve funding for services, infrastructure projects, or both.