CDDs explained and how it affects your monthly housing expenses
What is a CDD?
Community Development Districts (CDDs) in Collier County, FL are quasi-governmental entities that borrow money by issuing bonds and selling them to investors to fund the infrastructure and amenities of new communities. The CDD bonds are paid back over 20-30 years through a CDD Fee collected by the local tax collector. CDDs were created to provide a mechanism for new development beneficiaries to bear the burden of growth instead of existing taxpayers. The Chapter 190 of the Florida Statutes defines a CDD as a local unit of special-purpose government created for managing and financing infrastructure to support development of a community.
Why do CDDs exist?
Before the advent of CDDs, developers would borrow money from banks to construct infrastructure, which they would later pay down as they sold lots to builders or homebuyers. Today, developers use Chapter 190 to create a CDD, which provides more property tax income and a growing tax base without increased government spending. The CDD bonds are paid back over 20-30 years by the lot owners through a CDD fee collected by the local tax collector.
CDD fees for some communities include a portion that is not debt but is intended for the ongoing cost of maintaining community amenities. The fees are not pre-payable, can decrease or increase, and are due and payable in perpetuity unless eliminated by the CDD Board of Supervisors. Developers can argue that they can sell lots for lower prices because they don’t have to include the cost of infrastructure, but this is not always the case, and prices can even be higher in some cases.
What to look at when buying in a home or condo in a CDD
To ensure financial soundness, buyers and real estate agents must learn as much as possible about the communities they are considering. Information on the operation of CDDs, including meeting minutes and budgets, can be found on the CDD’s website, which is required by law. CDD communities can provide many lifestyle amenities popular with today’s home buyer, but they come at a cost, and CDDs are complicated entities that add another layer of complexity and cost to home ownership.