Community Development District (CDD)

An independent, local governmental body that offers a financial mechanism for the construction and maintenance of master subdivision roads, street lighting, water and sewage systems, waste water management, recreational facilities, common areas, wetlands preservation, and interior community signage. There are variations on what the CDD manages and what the HOA manages, and the two often work together.

Simplified

The financial vehicle to allow large scale communities to be built, offering long term, low interest rate, tax free bonds to do so. By having these monies upfront, developers can put amenities in place at the beginning of a development versus the end. The CDD manages and maintains the infrastructure, not the individual home sites. Because the CDD is under strict governmental regulations, the certainty of financial accountability to CDD communities is assured.  

What are the major advantages of living in a CDD?

• CDD’s have access to long term (typically 20-30 yrs), low interest rate, tax free bonds to build infrastructure.

• Upfront financing allows amenities to be put into a development upfront versus at the end.

• This financing allows for greater amenities including numerous common park areas.

• Because the bonds are financed over a lengthy period of time, the shared cost of larger amenities to a community is substantially less.

• The CDD tax amount is combined with the yearly home tax bill and is an additional *tax write-off for homeowners.  *Seek the advice of CPA or accountant for detail on this.

• CDD’s provide long term services, overseeing maintenance of the common grounds.

• CDD taxes are paid even if a home goes into short sale or foreclosure, insuring that amenities that were originally included paid for with CDD funds continue to be paid for.

• If there is a clubhouse, this facility is owned and maintained by the CDD (if included in the CDD financing) or by the HOA.

• The District helps ensure that community facilities are completed as required by the Development Order imposed upon the property.

• District residents will ultimately choose the Board of Supervisors after 6 to 10 years and through these representatives will be able to determine the type, quality and expense of future District facilities and services.

• CDD’s are eligible for State Mutual Aid, monies available in time of disasters.

Why do developers seek to establish CDDs?

• In a development without a CDD in place, the cost of such amenities is passed on to homeowners through initial home sales and the home owners association fees.

• Environmental permitting entities generally prefer a CDD to a Home Owner’s Association for long term maintenance of facilities.

• CDD’s are required through governmental regulations to provide financial stability; thus, a higher degree of certainty that the facility will have the resources to maintain.

• Maintaining the infrastructure helps maintain property values, an important factor to developers and homeowners.

Do CDD taxes ever decrease?

• Yes. There are two parts of the CDD tax that show up on the tax bill:

  • Debt Service, a fixed amount paid yearly to pay of the bond.

    • The Debt Service is paid off at the maturity date of the bond.

  • Operations and Management (O&M), a yearly amount that is budgeted per services/structures needed.

    • The O&M continues, paying for ongoing infrastructure services and needs.

What is the difference between CDDs and Home Owner’s Association’s?

• CDDs provide:

  • Financing of large funds at a tax free, low interest rate for an extended period similar to a mortgage term

  • Long term maintenance of a community infrastructure

  • Ability to finance major capital improvements for a community

  • Offer sovereign immunity of $100,000 per incident, capping the liability of a community. 

  • CDDs, governed by chapter 190 of the Florida Statutes, must advertise open public meetings and are subject to the requirements of the public records law for disclosure.

• HOA’s provide:

  • Enforcement of deed restrictions

  • Recorded maintenance to covenants and restrictions

  • Architectural control of the community

  • Individual bulk home site services such as trash pick up and cable.

  • HOA’s operate under Florida Statue 720 and have separate public records law for disclosure.

How to sell Homes in a CDD Community 

• Know the amenities of the CDD community. Compare with those of close-by communities, which may have fewer amenities for lesser taxes!

• Know what the CDD takes care of and what the HOA takes care of in specific communities. The most common frustration of homeowners in a CDD is not knowing differences!

  *Have clients seek the advice of CPA or accountant for detail on this.

• Remember:

  • CDD taxes are paid upon property sale even in case of foreclosure or short sale. HOA fees (back fees) may or may not be covered upon a sale.

  • Explain that the CDD debt service portion of the tax will no longer be paid once the debt service term is met.

  • Homeowners are given the option of paying off the debt service in a lump sum usually once a year. Again, a tax advantage, and this will lower the total tax assessment for each year.

  • This is a great selling feature when a seller that has already paid the debt service off! Your client pays only the Operation and Management portion of the CDD tax yearly, unless new bond issuances are made!  *Seek the advice of CPA or accountant for detail on this.

• Know where the CDD communities are, visit them and see the amenities for yourself. This will benefit you in two ways:

  • If you have a client that is not interested in having the amenities, a CDD community may not be a choice to show.

  • When comparing properties close in proximity in MLS, CDD communities will often show higher taxes than another non-CDD community.