If you own or are planning to buy a home in a “CDD” and aren’t sure what that means, this post is for you. A community development district, often referred to as a “CDD,” is a special purpose unit of local government created under Florida law, for purposes of financing, constructing, operating and maintaining community-wide infrastructure, improvements and services for the benefit of the properties within its boundaries. Examples of some of the types of improvements that might be included within a CDD are stormwater management systems, conservations areas, roadways, street lighting, and landscaping. Some CDD’s also own and operate utilities and recreational facilities such as clubhouses, swimming pools, and parks.
How does a Community Development District Operate?
A CDD is governed by a five member board known as the Board of Supervisors, which is responsible for establishing policy of the CDD, including any rules governing usage of CDD property and facilities. The board is initially elected by the landowners within the CDD (any person owning land within the boundaries of the CDD, regardless of residence) and later transitions to a general election process wherein the board is elected by a vote of the registered voters residing within the CDD. Regardless of which type of election, CDD board members are considered public officials and are subject to state ethics and financial disclosure laws. Similarly, the CDD’s business is required to be conducted in accordance with Florida’s “Sunshine Law,” which means all meetings and records of the CDD must be open to the public.
A CDD is required to hire a district manager to implement the policies established by its board and oversee the day to day operations and contracts of the CDD, its facilities and improvements. CDD’s typically also retain other professionals to provide ongoing legal and engineering services.
What does a Community Development District Cost Me?
The infrastructure and improvements constructed and/or acquired by a CDD are generally financed through the sale of tax-exempt bonds issued by the CDD. The bonds are repaid by levy of an annual capital assessment against all properties within the CDD that benefit from the infrastructure and improvements. These assessments are typically fixed for the term of the bonds, and this component of the annual CDD assessment is often referred to as the “debt service assessment”.
The costs to operate the CDD, and operate and maintain the infrastructure and improvements owned by the CDD, are likewise the responsibility of the property owners within the CDD. These costs are also assessed on an annual basis, the amount of which can vary from year to year based on the operation and maintenance budget adopted for that particular fiscal year. This component of the annual CDD assessment is often referred to as the “operation and maintenance assessment.”
While there are some circumstances in which a CDD will collect these assessments by directly sending a bill to the owner, for most homeowner’s the assessments are collected on their annual real estate tax bill.
What else do I need to know?
There is much more to understanding CDD’s than the general overview of this post. However, there are two very common questions that often come up which are worth addressing.
Can non-residents of the CDD utilize the CDD property?
Yes. The reason is based on the nature of the revenue that was used to construct and acquire the CDD’s facilities. Despite the fact that only the property owners within the boundaries of a CDD are subject to assessments for the bond debt and operational expenses of the CDD, because the improvements and facilities are financed through the use of proceeds from the sale of tax-exempt bonds – a form of public financing – they must remain open and available to the general public. Many property owners struggle with this concept, as it is contrary to the property use rights they are accustomed to as members of a homeowners’ or condominium association, where only the members of the association paying the fees may use association facilities. The key difference is that a CDD is a public entity, while an association is a private entity.
What is the duration of a CDD?
Much to the chagrin of many property owners who think that a CDD terminates once the bond debt is fully repaid, a CDD continues in existence unless dissolved by ordinance or repeal of rule which created it. Once the bond debt is repaid, however, the annual CDD assessments are limited to the annual assessment for the ongoing operation and maintenance costs (assuming no subsequent bonds or debt are issued).
Property owners that reside within a CDD and have questions related to what facilities and property are the responsibility of the CDD, their annual assessments, or general questions about its operations should visit their CDD’s website (which all CDD’s are required to have as of October 1st), contact their CDD’s district manager, or attend the CDD’s next scheduled meeting.