Speaker Intro:
Welcome to the Southwest Florida Realty show with Billee Silva and here’s your host Billee Silva!
Billee Silva:
Hi there, it’s Billee Silva with the SW Florida Realty show. If you’ve been scrolling the internet for homes in a master planned community you may often see the verbiage, no CDD fees. Like any industry, Realtors tend to talk in acronyms. So, what the heck is a CDD fee? Well, I bet you can’t guess what I am going to be talking about today, yep you guessed it! The Community Development District Tax, better known as a CDD.
Community Development District, or CDD, refers to a community that assesses fees to pay for infrastructure and amenities within the community. By forming as a CDD, the developer is allowed to take out bonds to pay for building and preparing the development's infrastructure and amenities. It helps keep the purchase price of new homes down because of the deferred infrastructure costs. Repayment of these bonds is then passed along to the homeowners of the community. The bond repayment may last for many years and will be collected from homeowners who live within the CDD boundaries in their annual tax bill. CDD fees are different from HOA fees in that they are incorporated into your annual property tax bill. This means that the fee will be bundled into your mortgage, rather than paid separately, like an HOA fee. When you pay your CDD assessment through your annual tax bill, a portion of your assessment will be budgeted to pay back the bond, and the remainder will be budgeted to pay for the repair and maintenance of the community. CDD fees vary by development and are based on the amount of the bond taken from the county divided by the number of homes responsible for paying it back. A portion of the CDD fee is the actual repayment of the Municipal Bonds, which is typically 25 to 30 years, while the other part of the fee goes towards operation and management fees. So, the infrastructure assessment can and will eventually be paid off, but you will always have the CDD maintenance assessment to contend with, that will never go away.
CDD fees have actually been around for quite some time. They were created by the Florida State Legislature back in 1980 under Chapter 190 of the Florida Statues. A Community Development District is a local unit of special-purpose government, but it doesn’t have the regulatory powers of a county or city. Basically, they provide a special-purpose bond, which is established by the developer, to offer a cost-effective way of financing the initial infrastructure, such as, sewers, roads, water supply, grading, utilities, amenities, stuff like that.
Prior to the creation of CDDs, the local government would pay for the infrastructure, such as the roads and utilities, and then the developer would pay for other development costs like the grading, sewers, storm water management and all of the amenities, the clubhouse, the pool, tennis courts, all that kind of stuff. However, with a CDD, the entire cost of the infrastructure is added to home ownership within the community. County officials like this option, as it keeps their costs down while helping to ensure that property values and taxes will go up for the community. Developers like CDDs because they don’t have to pay the upfront infrastructure costs out of their own pocket. And homeowners like CDD’s, because they get the amenities early in the development of the community and they get the house they want with a lower initial price. CDDs help to keep the purchase price of new homes lower because of the deferred infrastructure cost.
Initially, CDD Boards are usually controlled by the developer because they are the primary property owner and then they are gradually turned over to the residents once the community is more built out. The CDD Boards consist of a five-member Board of Supervisors who are elected. To run for election for a CDD Board, candidates must register with the County's Supervisor of Elections Office to have their names on a Ballot. The homeowners within the CDD Boundary will then vote for their CDD candidates at the same time and polling place that they vote for other elected officials. So, in order to vote for your CDD board members, homeowners must be registered voters in the State of Florida. The CDD operates in the same way and manner that County Commissioner's operate and CDD Boards are subject to Florida Sunshine Laws and Public Records law.
One of the best aspects of a CDD community is that often a homeowner can afford to move into a more upscale community with nicer amenities than they might otherwise be able to afford if they had to pay for the full cost of their home and improvements at closing. CDD's allow you to spread out your payment through many years via annual bond repayments. With a CDD in place, residents will never have to worry about whether their community’s quality and value will drop after the developer is gone. Having a CDD in place helps ensure that the roadways, lakes and ponds, street lighting, and community amenities are maintained and kept in top condition as the community continues to grow and age. Also, because a CDD is a governmental unit, they are able to borrow money to finance its facilities at lower, tax-exempt, interest rates, the same as cities and counties do. So, if you to need to update the clubhouse after 20 years, because it’s worn and dated, a CDD will allow you to borrow money at lower, tax-exempt, interest rates for the renovations.
As always, I hope you found today’s podcast informative. Hopefully, when you’re searching communities, you’ll now have a better understanding and be able to compare your options when looking at both CDD and non-CDD community costs and benefits. Thank you for tuning in today and make it a great day!
Speaker’s closing remarks:
Thank you for listening to the Southwest Florida Realty Show with Billee Silva. To learn more about Billee Silva go to www.sw-floridarealtor.com. That’s www.sw-floridarealtor.com. Or call 239-247-2490.