Oct 4, 2012

Florida Community Development Districts (CDDs)

There are over 600 Community Development Districts (CDDs) in the State of Florida. They have issued over $6.5 billion in municipal bonds to finance infrastructure and community development.  How much do home owners really know about their CDDs? What are they and how do they affect the cost of owning a home?

What are CDDs?

CDDs are special-purpose governmental units authorized by Florida law to operating as independent taxing districts.  Their primary function is to issue tax exempt bonds and spend the proceeds on financing the construction and maintenance of community or subdivision infrastructure or improvements. CDD funds pay for building utilities, sewer, roads, schools, conservation areas, streetlights, as well as many community amenities such as parks, club houses, swimming pools, tennis courts, trails, security gates and more. CDDs are able to borrow funds at low tax exempt interest rates the same as cities and counties. Contracts for goods and services are subjected to publicly advertise competitive bidding. CDDs are meant to provide a solution to Florida’s need for community infrastructure generated by its rapid growth, without overburdening the taxpaying residents. They are considered a major advancement in Florida’s effort to manage its growth effectively and efficiently.  

How do they affect the cost of owning a home?

Community Development Districts (CDDs) are responsible for assessing annual fees for operation and maintenance of all the common areas and the amenities they own. CDDs may impose and levy taxes or assessments or both on properties within their districts. These taxes and/or assessments are in addition to county and other local governmental taxes and assessments including all other taxes and assessments provided for by law.  The districts may issue long term or short term special assessment bonds. The short term bonds are paid off by homebuilders and are not assessed to the homeowner. The long term bonds are re-paid from a portion of the district taxes based on the value of real estate or personal property, (non ad valorem taxes) homeowner’s are assessed on their annual tax bills.  The long term debt is a fixed amount and may be paid off at any time by the homeowner. The property will continue to be subjected to the annual operating and maintenance assessment for maintenance of the common improvements provided by the CDDs.

When you buy a home or condo in a subdivision or planned unit development (PUD) in Florida, you automatically become a member of the Home Owners Association (HOA).  Some communities have both HOA and CDD fees. A growing number of homeowners buying in CDD areas are saying they were not adequately informed about the fees. Florida law does not require sellers of homes in CDD areas to voluntarily inform homebuyers how much they have to pay the CDDs or that they can lose their homes if they do not pay the CDD.

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