WHAT IS A CDD?
Most newer planned communities in Florida have CDD fees, Home Owner Association (HOA) fees, or both.Municipal governments are reluctant to provide the infrastructure required for new neighborhoods. As a result, land developers are responsible for installing utilities, roads, water, waste/sewer, schools, conservation areas, streetlights and bridges. To defray upfront expenses and offer homes at a lower cost, developers takeout bonds to fund these improvements.
CDDs Fund Neighborhood Infrastructure
There are over 600 Community Development Districts (CDDs) in Florida, including over 120 in the Tampa Bay area. Florida law allows for the establishment of Community Development Districts to fund infrastructure needs and neighborhood amenities. A CDD has the authority to issue tax exempt bonds at favorable rates and spend the proceeds on developing and improving a neighborhood infrastructure.
CDDs Fund Amenities
In addition to basic needs, some communities build amenities such as parks, club houses, swimming pools, tennis courts, trails, golf courses, security gates, etc. The cost of construction is covered by the initial CDD bond.
Paying CDD Fees
CDD bonds are repaid through an annual property tax assessment divided amongst the residents of a community, usually over a 20-30 year period. If you pay property taxes as part of the mortgage payment, then the CDD fees will be included in the mortgage payment (accumulated in the escrow account).
CDD fees usually vary depending upon the neighborhood, the amenities and lot size. Typical fees range from $75 – $300 per month. To verify the amount of the annual CDD payment for a home, look up the home on the county tax website and examine the non-ad velorum taxes. If you are looking at tax costs on a Realtor listing, be sure to clarify if the CDD amount in included in the overall tax amount, listed separately, or included in both places on the listing (property tax field and CDD field – thereby double counted).
Fees are Stable
While the bond portion of the CDD payment usually remains fixed, the maintenance portion could increase if the community decides to take on additional expense, such as revamping the landscaping or amenities. The largest portion of the CDD fee normally goes toward repaying the initial bond, while a small portion may be used for on-going maintenance.
CDDs Eventually Stop
The CDD bond will eventually be paid off after 15-30 years. There may be a small fees that continues to cover maintenance after the bond is paid, depending upon what expenses are covered by the Home Owner Association.
A Community Development District (CDD) is actually a special purpose neighborhood government that is authorized by Chapter 190 of the Florida Statutes. CDDs have the right to enter into contracts, the right to obtain funds by borrowing, the right to levy assessments, the right to own property, the right to adopt by-laws, the right to sue and be sued. The developer controls the CDD governing board initially. As homes are built, residents eventually take control of the CDD.
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