After successfully completing this topic, you will be able to
• describe the purpose of a Community Development District,
• state how Community Development Districts are funded, and
• state the requirements for disclosure of a CDD to initial buyers.
A Community Development District (CDD) is an independent, local, special purpose entity that builds and maintains amenities in a new community. The CDD is a legal entity with the power and right to enter contracts; to own both real and personal property; adopt bylaws, rules and regulations, and orders; to obtain funds by borrowing; to issue bonds; to impose assessments and levy taxes on property within the District.
The landowners of the District elect the Board of Supervisors. The Board of Supervisors must comply with the regulations and procedures of local governments, including State ethics and financial disclosure laws. Taxes and assessments are set annually by the Board of Supervisors and are itemized on the property tax statement, in addition to County and other local government taxes and assessments as provided for by law.
The theory behind CDDs holds that services and public facilities used by residents and landowners will be available early in the development process, and are controlled by those who use them, and are paid for by self-imposed assessments and fees. Because the CDD is controlled by the landowners/residents, the decision of what services are offered and which facilities are constructed is up to the landowners/residents, not the developer.
The cost to operate a CDD is paid by property owners. The CDD levies a non-ad valorem assessment (meaning it’s a fixed fee, not based on the value of the property), which appears on their annual property tax bill from the county tax collector. The fee may consist of two parts—an annual assessment for operations and maintenance, which can fluctuate up and down from year to year based on the budget adopted for that fiscal year—and an annual capital assessment to repay bonds sold by the CDD to finance community infrastructure and facilities, which annual assessments are generally fixed for the term of the bonds.
Every contract for the initial sale of a parcel of real property and each contract for the initial sale of a residential unit within the district shall include, immediately above the purchaser’s signature the following disclosure statement in boldfaced and conspicuous type which is larger than the type in the remaining text of the contract:
“THE (Name of District) COMMUNITY DEVELOPMENT DISTRICT MAY IMPOSE AND LEVY TAXES OR ASSESSMENTS, OR BOTH TAXES AND ASSESSMENTS, ON THIS PROPERTY. THESE TAXES AND ASSESSMENTS PAY THE CONSTRUCTION, OPERATION, AND MAINTENANCE COSTS OF CERTAIN PUBLIC FACILITIES AND SERVICES OF THE DISTRICT AND ARE SET ANNUALLY BY THE GOVERNING BOARD OF THE DISTRICT. THESE TAXES AND ASSESSMENTS ARE IN ADDITION TO COUNTY AND OTHER LOCAL GOVERNMENTAL TAXES AND ASSESSMENTS AND ALL OTHER TAXES AND ASSESSMENTS PROVIDED FOR BY LAW.”Florida Statutes 190.048 – Sale of real estate within a district; required disclosure to purchaser.