Alert June 25, 2009

Mello-Roos: Down But Not Out

The recent stall in California real estate development has virtually frozen the Mello-Roos bond market. Between 2004 and 2008, over 600 issues of Mello-Roos bonds were sold – an average of over 120 per year. Since the beginning of 2009, only five issues have come to market, and many experts expect no more than a dozen by year end. Despite the Mello-Roos deep freeze, defaults in the payment of special taxes have not increased significantly. Draws on the reserve funds that secure Mello-Roos bonds, however, have been rising since 2008.