What Is A CDD?

A community development district (CDD) is an independent special-purpose unit of local government established by a developer or landowner with government approval.

CDDs offer an attractive and cost-effective means of providing for the financing and management of major infrastructure systems and services to support the development of new communities.

Because Florida is behind the pace of population growth in providing basic infrastructure and services, developers face more pressure to provide those facilities and to do so at a faster pace. In part, these demands are fueled by intense political pressure to not raise taxes. Permitting agencies make additional demands for long-term assurances that infrastructure will be maintained even after the developer’s involvement in a project has ended.

Establishment of a CDD can help address all these pressures. Although CDDs are independent local special-purpose governments that may levy taxes and assessments and issue bonds, the landowner-developer can remain in control of the CDD in its early years.

When used effectively, CDDs help spread out development costs, utilize tax-free financing methods, meet the concerns of permitting agencies with respect to long-term maintenance of infrastructure and address the concerns about politically unpopular property tax increases.

A homeowners’ association established under Chapter 720, Florida Statutes, as a special type of not-for-profit corporation may be adequate to address certain issues, but it does not have a CDD’s range of powers and options to effectively finance major capital improvements. CDDs are empowered by general law to finance, construct, operate and/or manage water and sewer facilities, water management and control facilities, roads and streetlights, and bridges.

With permission of the local government with jurisdiction, by general law a CDD also may provide parks, recreational amenities, security, schools, waste collection and mosquito control. Conversely, a CDD is not authorized to perform many of the duties that a homeowners’ association may perform. Although CDDs recently were given the authority to enforce architectural controls, for several reasons we typically recommend that CDDs not get exercise that power.

Of course, the suitability of a CDD for a project as compared to a homeowners’ association depends upon a number of variables, such as the size and nature of the project, the on-site and off-site infrastructure needed to accommodate development, the local political environment and other factors. A homeowners’ association may be the better choice for some projects; a CDD may be the better choice for others. Many projects use a homeowners’ association for some purposes and a CDD for others.

Yes, many new communities are developed in conjunction with establishment of a CDD. A CDD is initially established through a petition and hearing process, but the establishing entity depends upon the size and location of the proposed district. The Governor and Cabinet establish districts of more than 1,000 acres while districts of 1,000 acres or less are established by the city or county in which they are located.

There are many examples of new communities in Florida that rely upon a CDD for infrastructure financing and operations. Lake Nona in Orlando, developed by the Lake Nona Land Company, has multiple CDDs. So does Celebration in Osceola County, developed by the Celebration Company, an arm of the Disney interests. The St. Joe Company uses CDDs for Southwood in Tallahassee and River Town in St. Johns County. Our firm established and/or serves as District Counsel for these and many other CDDs around the state.

Although CDDs have been set up for many projects below DRI thresholds, CDDs fit well into the DRI process. CDDs can enhance the appeal of a DRI to local officials because CDDs are one of the most efficient and politically palatable ways to provide basic services and infrastructure for large new communities.

Conversely, the existence of a DRI development order will enhance the prospects for approval of a CDD during the establishment process. If the role of the CDD has been clearly defined in the project’s development order, local concerns about the CDD can be minimized.

Depending upon the nature of the development and the type of infrastructure needed, a CDD may be able to issue long-term tax-exempt bonds to finance certain facilities. Such bonds will enable the developer-landowner to enjoy a lower overall cost of debt. In addition, because bonds are paid off over many years through special assessments on the land, costs will be passed along to the people who will use those facilities, the future residents and landowners.

In the initial years of a CDD, the Board of Supervisors is elected on a one-acre, one-vote basis, a procedure that the Florida Supreme Court has upheld as constitutional as presently written and enforced. Since the developer-landowner usually controls a majority of the land, he or she will choose the board members during the project’s critical early years. Thereafter, elections are held every two years and landowners are allowed to vote on a one-acre, one-vote basis.

After 6 or 10 years, depending on the size of the CDD, and once certain population thresholds are attained, the district begins the transition to voting on a one-person, one-vote basis. Through that process, the actual residents of the district take control of the district board.

In a DRI project, the CDD must follow the requirements of the DRI development order even after residents assume full control of the board. In addition, the CDD is bound by conditions in permits obtained by the developer and transferred to the CDD.

Finally, during the initial 6- or 10-year period, the CDD will usually issue bonds. The CDD is required to abide by all bond covenants and agreements. To the extent those bond covenants require or prohibit action by the CDD during the term of the bonds, a future CDD board elected by the residents is similarly bound.

Yes. A CDD is a unit of local government like a county or a city, although it does not have the regulatory and many other powers of a county or city. Board meetings must be noticed in a local newspaper and are always conducted in public. CDDs must make district records available for public inspection during normal business hours. Supervisors are subject to the same financial disclosure requirements as other local officials. Thus, CDDs can be particularly visible.

Indeed, the fact that CDDs are subject to public scrutiny provides other local governments and permitting agencies with a level of comfort for the governmental powers that CDDs have been given by the Legislature.

CDDs commonly issue revenue bonds, which are secured by the pledge of revenues from any district facility. That would include the rates, fees or other charges to be collected from the users of any facility, from any revenue-producing activity of the district, from special or non-ad valorem assessments, or from any other source or pledged security. The issuance of revenue bonds does not require a referendum.

CDDs also may issue general obligation bonds and levy and assess ad valorem taxes, subject to referendum approval. Issuance of general obligation bonds is limited to financing or refinancing capital facilities or to refinancing outstanding bonds. Ad valorem taxes are subject to variable millage requirements.

If a CDD imposes ad valorem taxes, landowner election of supervisors is no longer allowed, so all board members thereafter must be elected by residents of the district. For these reasons, CDDs commonly avoid issuance of general obligation bonds in their initial years.

Yes. We established and now serve as District Counsel for the Pier Park CDD, serving the 1,000,000-square-foot Pier Park shopping and entertainment complex in Panama City Beach. We also serve as District Counsel for the Enterprise CDD in Osceola County, which includes non-residential components of Celebration.

CDDs are required by statute to take affirmative steps to provide full disclosure of information relating to the public financing and maintenance of improvements to real property undertaken by the district. This information must be made available to developers within the district (such as individual homebuilders), to all existing residents of the district, and to all prospective residents. In addition, disclosure language must be included in contracts for the sale of land within the CDD.

Ordinarily, a CDD will remain in existence indefinitely unless it is merged with another district, is dissolved, or all of the specific community development services it has been authorized to perform are transferred to a general-purpose unit of local government. A transfer of services is accomplished by adoption of an ordinance demonstrating the ability of the local general-purpose government to provide the service as efficiently and economically as the district, and at a level of quality equal to or higher than the level of quality actually delivered by the district.

Yes. It is possible to have more than one CDD in a new community. For example, Disney’s Celebration has one CDD for the predominantly residential part of the community and another CDD for a non-residential area. This strategy makes sense when the project encompasses many years, multiple uses and a large site.

One reason to consider multiple districts, particularly for long-term projects, is that control of a CDD may begin to transfer to residents, through election of the Board of Supervisors by residents rather than landowners, before the necessary infrastructure has been implemented throughout the entire community. Therefore, it may be wise to have more than one CDD to ensure that the developer-landowner retains control longer than would be possible if only one CDD were utilized.

No. In recent years the Legislature has created a handful of “stewardship” districts by passing special acts sponsored by local legislative delegations. Each stewardship district is tailored to meet the needs of a particular planned community and a particular local jurisdiction, but all of them must meet certain requirements of general law. All are independent special districts like a CDD.

Those developers elected to seek creation of a stewardship district either because their planned community would be located in more than one county (which by law a single CDD may not serve), and/or they had unusually large areas of land for conservation and development over unusually long periods of build-out.

A single independent special district over the entire area of an unusually large project ensures more thoughtful, coordinated and long-term financing and management of horizontal development. It also avoids the fragmented responsibility for district lands among multiple special purpose entities. But – just as CDDs are not appropriate for every project – a stewardship district is not a suitable alternative to a CDD for every project that intends to utilize CDD for infrastructure financing and management.

The first were Ave Maria and Big Cypress in Collier County), created by the Legislature in 2004. Others are the Lakewood Ranch Stewardship District (23,000 acres in Manatee and Sarasota counties), created in 2005; and the Viera Stewardship District (14,000 acres in Brevard County), created in 2006. All of them were granted the same basic powers as a CDD, but each has a unique turn-over requirement for transition to resident control based on that project’s specific build-out period.

In each case, the local legislative delegation agreed to sponsor the special act only after local county commissioners expressed their support following public hearings. In addition, each of these special acts was drafted to contain unique provisions tailored to meet local political requirements and the developer’s needs. Strong local political support is an unwritten pre-requisite for creation of a stewardship district.

Excerpt taken from online article found at www.ezineartilces.com
Written by Calum Mackenzie

Amid concerns over Florida’s population growth and over the quality of services and infrastructure supplied to residents, Community Development Districts are becoming popular in Tampa and other regions of Florida as a means of increasing levels of service for residents quickly and cost-effectively. CDDs provide funds not only to maintain communities, but also to direct and finance their growth.

Because there is increased pressure for developers to provide basic infrastructure and services to new communities, many developers in Tampa and Florida in general are beginning to use Master Planned Communities and CDDs as a way of developing cost-effective communities that are both attractive and pleasant to live in and offer a variety of amenities to their residents, such as recreation areas and public parks.

The extra cost of building such amenities is recovered by the developer by instituting a CDD tax which is typically payable for a pre-determined amount of time. This effectively allows those who choose to pay the extra tax the opportunity to live in an attractive community with a range of well-maintained amenities.

CDD taxes can consist of both a bond portion and working capital portion. The bond portion is typically payable for a pre-determined amount of time (up to twenty years). This bond is usually divided between all the homeowners in the community and the individual homeowner can pay off their portion of the bond in full at any time if they choose to. In most, if not all, cases there is no penalty for early payment.

The second portion of the CDD (if applicable) provides working capital to maintain the amenities and common areas. This working capital provides long-term assurance that the community’s amenities and infrastructure will be maintained after the developer has ceased their involvement in the community. However, not all CDDs handle maintenance via payment of CDD fees. In some communities, maintenance costs are covered by Homeowner’s Association Fees, which are payable each year based on the budget of the community.

These annual fees tend to vary based on the amenities available within the community, and also depending on the contracts negotiated with service providers in any given year. Note that these taxes and fees are tied to the property, not the owner of the property–if a resident leaves the community, the fees are payable by the new owner. Additionally, the length of time that the bond portion is payable does not change when the property changes hands. If you purchase a property in a ten-year-old CDD in which bond is payable for twenty years, then you are subject to paying that bond for the remaining ten years.

CDDs provide a number of benefits to their residents. First, of course, those who live in these communities have access to a number of conveniently located amenities which may include tennis courts, swimming pools, recreation areas, public parks and pathways. Additionally, these services and amenities are consistently well-maintained. Many CDDs also provide their residents with the ability to choose a Board of Supervisors who is responsible for determining the type and quality of amenities that will be maintained in the area–this means that the community itself determines how the community is maintained and the direction of its growth.

CDDs also offer more benefits in comparison to similar organizations such as standard Homeowner’s Associations. CDDs have a much more extensive range of power and abilities. Unlike a Homeowner’s Association, a CDD has the power to make decisions on the nature of improvements and amenities in the area, as well as the power to finance those improvements. For example, with government approval, CDDs are able to make decisions regarding provision of schools, waste management, pest control, and water management, as well as streetlights, roads, and bridges.

CDDs and their associated taxes are planned and executed independently of local and federal government; however they are established with government approval. CDDs can be thought of as a special-purpose government unit–public board meetings are scheduled with notice given to all residents, and CDD records are subject to public scrutiny.

Additionally, CDD supervisors are subject to financial disclosure in the same way that other local officials are. Once created, CDDs can effectively govern themselves in many respects–they can become self-sufficient in terms of providing both essential and non-essential amenities and services. Furthermore, they can continue to do so long after the original developer has ceased their involvement with the community.

There are more than 250 CDDs in Florida, many of them located in the Tampa area. If you are considering relocating to Tampa, or would simply like to move to a new home in the Tampa area, a CDD is certainly an attractive option.

While it’s true that there is an extra expense involved in living in such a community, there are also many significant advantages. Residents benefit from living in an attractive area with access to a variety of recreational amenities, and homes located within CDDs typically achieve increased value compared to similar properties that are not located within CDDs. Note that depending on the amenities offered within a community, the amount of CDD tax that applies will vary.

Excerpt taken from online article found at www.hgslaw.com

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