There are several communities here in North Florida that are part of community development districts or CDDs. There are numerous instances where people purchase a new home and are unaware that there is a CDD in place and you will pay for the privilege of living there.
CDDs or Community Development Districts are a growth management tool implemented by the State of Florida under Chapter 190 of the Florida Statutes. Here is a simply worded snippet of information from credit analyst, Dr. Jay H. Abrams, describing the purpose of the CDD:
Here’s how they work: A real estate developer identifies a piece of land to develop into a new housing project. To build this project, including the roads, water service, clubhouse and other amenities, the developer needs to find a source of funding for all the things that make the housing project a community. The city or county in which the development is to be built doesn’t want to increase taxes or fees on existing residents since they wouldn’t benefit from the new infrastructure. If existing residents were to bear the costs of these improvements, they would likely reject the project.
Another choice the developer could make would be to build the cost of the common infrastructure into the prices of the homes that will be built. However, this approach could make the cost of housing too high for the targeted potential home buyer, i.e., first-time purchasers or retirees, while making the cost of housing uncompetitive with rival housing developments.
Instead, the more popular approach since the late 1970s has been to create a governmental district whose boundaries are coterminous with the housing project to be built. This special district serves as the entity to issue debt for, build, and then own the infrastructure necessary for development of the housing project. The bonds are repaid by the residents who directly benefit from the infrastructure improvements, and not by those who live in other neighborhoods. Further, by spreading the bond payments over many years, subsequent homeowners who will benefit from the project’s roads and wastewater system also share in paying the cost for the benefits they receive as well.
That’s pretty much it in a nut shell. Currently in Northeast Florida there are 28 CDDs, nearly all of them outside of Duval County. The benefit is that CDDs have created larger communities with more amenities. But all of these come at a cost such as increased property taxes.
CDDs are usually managed by specialty companies, specializing in the different governmental tasks associated with bond issuance and management. These specialized management companies typically manage the amenities that the bond money paid for such as drainage, roads, amenity centers and other recreational facilities. The management boards that direct these services are put in place by the developer to protect their interests until a majority of the lots have been conveyed to private owners.
If you reside in a Community Development District and want to gain a better understanding of their operation, meetings are held routinely and are governed by Florida’s Sunshine Laws. A quick internet search of a few CDDs indicates that most of the Northeast Florida CDDs have an online presence where you can view dates for upcoming meetings.
For your association and condominium management needs, contact us at Property Management Systems, Inc., for more information.