The U.S. Supreme Court this week declined to hear a development association’s petition for review of a California Court of Appeal’s decision that the Mello-Roos Act of 1972 allows the City of San Ramon to levy a special tax to fund additional services for a new development. The California Supreme Court also denied review in December. The denial of review by both the U.S. and California Supreme Courts upholds the ability of local agencies to use Community Facilities District special taxes to fund services required to serve the increased demand of new development.
 
As we advised in a previous Legal Alert for Building Industry Association v. City of San Ramon, a developer sought approval from San Ramon to develop a 48-unit townhouse project. After conducting a study that showed the cost of providing services, such as police, stormwater and parks, to the new development would exceed the revenue generated by the project, the City conditioned its approval of the project on the developer providing a funding mechanism to cover the difference.
 
The developer petitioned the City to form a CFD for this purpose. A CFD was formed by a landowner vote (in which the developer was the only landowner), and the City authorized the revenue raised by the CFD to be used for multiple services authorized under the Act. The Building Industry Association of the Bay Area challenged the validity of the tax on the following grounds:
1.) the tax does not provide for “additional services,”
2.) the tax is an unconstitutional general tax, and
3.) the City’s ordinance authorizing the tax is unconstitutional because it retaliates against property owners by providing that the City will cease to provide the tax-funded services in the CFD if the CFD property owners repeal the tax in the future.
 
In October, the Court of Appeal disagreed and rejected all of the Building Industry Association’s arguments. The U.S. Supreme Court’s declining review maintains an important funding mechanism for local agencies to provide sufficient revenues to fund additional services required to serve new development.

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