Understanding Florida CDDs - Community Development Districts
Posted by Calum and Kathleen MacKenzie on Monday, December 21st, 2009 at 2:45pm.Over the past several years, concerns about Florida’s rapid population growth have led to concerns about the quality of services and infrastructure supplied to the state’s residents. These have in turn led to the increasing popularity of community development districts as a means of improving residential service levels. Community development districts provide several advantages for residents, but also involve paying extra taxes, so there are plenty of things to consider when deciding whether living in a CDD is for you.
What is a Community Development District?
Many Tampa and Florida property developers began using CDDs as a way of creating communities that are well-designed, aesthetically attractive, pleasant to live in, and offer residents a variety of recreational and functional amenities to enhance their lives.
There’s a little bit more to it than that, however. A CDD can be thought of as a special-purposes government, with authorization from Chapter 190 of the Florida Statutes to serve as a legal entity in its own right for a variety of purposes.
A CDD has the right to:
- Adopt by-laws, rules, and regulations
- Enter into contracts
- Own real and personal property
- Borrow funds
- Issue bonds and levy assessments
- Sue and be sued
This provides several advantages, both for the CDD and for the larger community. The CDD can create its own by-laws if they serve the community more appropriately, and as long as their by-laws conform to local government development regulations. By delegating this power to communities to allow them to make certain decisions autonomously, Florida as a whole can better manage its own growth. The community itself benefits because it decides for itself on appropriate operation and management, rather than being governed by state or county regulations which may be less beneficial.
Some other important things to note about CDDs are that as an independent government unit, their records are subject to public scrutiny, and CDD supervisors are subject to financial disclosure just as other local officials are. Once it has been created, a CDD can effectively govern itself in the long term as well as the short term, due to the payment of special taxes by residents of the community.
What Benefits do CDDs Provide for Residents?
Living in a CDD provides several advantages for residents. The most obvious advantages are that members of the community have easy access to a wide variety of public amenities. Depending on the community these might include swimming pools, tennis courts, golf courses, clubs or recreation centers, theatre rooms, pathways, and public parks. These are conveniently placed, consistently available, and well-maintained.
For people who enjoy getting involved in community life, CDDs offer another important advantage in the fact that the community can direct and financially support its own growth in many respects. For example, many CDDs allow residents to elect a Board of Supervisors which is responsible for determining the types of amenities the community will operate, and for maintaining community amenities.
A CDD also has the power to make decisions on improvements made to the community, and can also finance its own improvements. With government approval, a CDD can make its own decisions in matters relating to schools, water and waste management, pest control, and streetlights, roads, and bridges.
Why does Living in a CDD Require Paying Extra Taxes?
Planning and building a CDD incurs extra costs due to the provision of recreational facilities and other design aspects. In most cases, therefore, living in a community development district means paying extra levies or assessments, the value of which may be decided upon by the community itself. The money paid by residents is then used to pay for the community’s construction, operation, and maintenance costs for public facilities and services. Any money paid to the CDD is in addition to (rather than instead of) taxes paid to the county or other local government.
CDD taxes may consist of two parts: a bond (also known as a capital assessment), and working capital. The bond is usually paid for a pre-determined period of time, of up to twenty years, and homeowners can choose to pay their bond in installments, or pay in full at any time. In most cases there is no penalty for early payment.
A CDD which collects working capital from its residents uses the money to develop and maintain the community’s common areas. It provides residents with the long-term assurance that the amenities and infrastructure the community was created with, will continue to operate long after the developer has ceased their involvement with the community.
In some cases, a CDD may cover its development and maintenance costs via Homeowner’s Association Fees, rather than a working bond. These fees are payable annually based on the community’s budget, and typically vary depending on what types of amenities and services the community provides its residents.
The working bond or association fees aren’t usually able to be paid off in advance as the value of these change from year to year, again depending on the community’s budget and services.
One important thing to note is that all of these fees are tied to the property, not the owner. If the property changes hands, the new owner becomes responsible for paying all associated fees. However, the bond portion of the tax does not ‘reset’ if the property changes hands. For example, if you buy a property in a ten-year-old CDD which has a twenty-year bond, the bond will be payable for another ten years, and you are responsible for paying it once you assume ownership.
Florida’s CDDs
There are more than 250 community development districts in Florida, and many of them are located in Tampa. A CDD is definitely an attractive option, whether you are relocating to Tampa or you already live here and are moving to a new Tampa home. There are extra expenses involved in living in a CDD, it’s true, but there are also plenty of benefits. As well as the opportunity to live in a more attractive community with access to extra recreational facilities, you’ll also benefit from the fact that homes located within CDDs usually achieve higher values compared to similar properties located outside them.
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