Understanding Home Ownership in a Community Development District
For those who own or are thinking of purchasing a home in a Community Development District aka "CDD" and are unsure of its meaning, this post explains.
A CDD is a specific type of local government entity established by law. Its purpose is to finance, build, operate, and maintain community-wide infrastructure, improvements, and services that benefit the properties within its designated boundaries.
Some examples of improvements that can be included in a CDD's community amenities are stormwater management systems, conservation areas, community pools, roadways, street lighting, and landscaping. Some community development districts also possess and manage utilities and recreational amenities, including clubhouses, swimming pools, and parks.
All of these contribute to making communities more livable and enjoyable places to live.
How a Community Development District Operates
The CDD operates under the guidance of a five-member board called the Board of Supervisors. These people are responsible for setting policies and rules that dictate the usage of CDD property and facilities.
Initially, they are elected by the landowners within the CDD, but later on, they get a taste of the general election process where the board members are chosen by the registered voters residing within the CDD.
CDD board members, no matter the type of election, are deemed public officials and are bound by state ethics and financial disclosure laws. The CDD's business operates under the law of the state and all meetings and records are to be open to the public.
Also, in some states, a district manager must implement board policies while overseeing contracts and daily operations. The district may also hire legal professionals for ongoing services or engineering services if necessary. With these measures in place, residents can rest assured that their local government is doing everything it can to ensure their best interests are taken into consideration when managing resources within their district.
A CDD typically requires a district manager to implement board policies and oversee the daily operations and contracts of the CDD, its facilities, and improvements. Additionally, CDDs usually hire other professionals to provide ongoing legal and engineering services.
Community Development District Cost
A CDD's infrastructure and improvements are made possible through the sale of tax-exempt bonds, which are then repaid by a capital assessment on all the properties that enjoy the benefits of these developments. The annual CDD assessment, or the "debt service assessment," remains steadfast throughout the term of the bonds, ensuring stability and financial success.
The CDD is responsible for all costs associated with operating and maintaining its infrastructure and improvements. These costs, known as the "operation and maintenance assessment," are assessed annually and can vary depending on the budget for that fiscal year. While some owners may receive a direct bill for these assessments, most homeowners will see them included on their annual real estate tax bill. So, rest assured, the CDD is taking care of everything so you can enjoy your property hassle-free!
What Else Do I Need to Know?
While this post only scratches the surface, here are some more commonly asked questions and answers.
Q: Can non-residents of the CDD utilize the CDD property?
A: Certainly. The secret behind the revenue used to build and acquire the CDD's facilities lies in its nature. While only property owners within the CDD boundaries are responsible for assessments, the improvements and facilities are financed through the sale of tax-exempt bonds, making them open to the general public. This concept often leaves property owners scratching their heads, as it goes against the exclusive use rights they're used to in homeowners' or condominium associations. A CDD shines brightly as a public entity, while an association sparkles as a private entity.
Q: What is the duration of a CDD?
A: Contrary to the belief of some property owners, a CDD remains in existence unless it is dissolved by ordinance or repeal of the rule that created it, even after the bond debt is fully repaid. However, once the bond debt is repaid, the annual CDD assessments are limited to the ongoing operation and maintenance costs, assuming no further bonds or debt are issued.
Q: What is the Relationship with Homeowner's Associations?
A: The CDD works alongside community homeowner's associations (HOAs) to fulfill certain maintenance functions. While the CDD may handle some of these responsibilities, the associations are also responsible for operating amenities and enforcing deed restrictions and quality standards. The CDD can enter into a contract with the master homeowner's association to carry out maintenance tasks.
Q: Benefits to Residents?
A: In a community with a CDD, residents are in for a triple threat of major benefits! First, get ready for top-notch public facilities and services that are managed and financed through self-imposed fees and assessments. It's a win-win for all the landowners! The CDD guarantees that all the fabulous community development facilities and services will be completed at the same time as all the other exciting parts of the development. The power lies in the hands of CDD landowners and electors as they get to handpick the magicians behind the scenes - the Board of Supervisors. They can conjure up the perfect blend of top-notch facilities and services, tailored to meet every need and desire.
Additional savings are realized because a CDD adheres to the same laws and regulations as other government entities. The CDD can secure borrowing at lower, tax-exempt interest rates to fund its facilities, just like cities and counties. Contracts for goods and services, including maintenance contracts that are negotiated annually, are typically required to go through a competitive bidding process that is publicly advertised.
In a CDD, residents and property owners are the masters of quality, while the CDD works its magic to provide perpetual maintenance of the beautiful environmental conservation areas. By implementing a rock-solid management strategy, it safeguards the sanctity of property values within a community.
Q: Is there a Lasting Value?
A: The CDD enables a community to provide the most desirable features of a master-planned community. Residents benefit from well-maintained infrastructure and services, with the assurance that community standards will be upheld even after the developer's departure. Residents can rest easy knowing that with a CDD in place, they hold the power to shape the future with unwavering control over quality and value.
Q: How are CDD services financed?
A: The CDD uses bonds to fund community infrastructure, and property owners pay annually to repay the debt. The developer will generously contribute a significant portion of the capital assessment for the CDD upon closing, ensuring a strong foundation for future growth and success! The Board of Supervisors charges an assessment on your property to fund this budget.
All residents pay for a share of the maintenance of the CDD improvements through this annual assessment.
Q: How are annual assessments determined?
A: The annual assessment amount is determined by the Board of Supervisors each year and is influenced by factors such as inflation and changes to service levels. The adjustment in the assessment is based on inflation and changes to service levels.
Q: Can I pay off the bonds on my property?
A: In most cases, yes! You can request bond payoff information here.
Q: What are the ongoing responsibilities of the CDD?
A: The CDD has ongoing responsibilities, which include administering CDD bonds and operating and maintaining community facilities for the benefit of property owners.
So, imagine a place where all your community's needs are met and taken care of. That's exactly what a Community Development District is all about!
If you're looking to invest in a CDD property or relocate to Long Island in general, be sure to hire professional Realtors like Taleene and Ritchie Krug Jr. who can find you exactly what you're looking for in terms of the best home, house, condo, or townhome. Lifelong residents of Long Island, are part of a team with more than 40 years of combined real estate experience. They have a deep understanding of how real estate has evolved through the years which results in a team with unique dynamics and expert negotiating skills being put to work on your behalf. With 20 offices spanning Brooklyn Queens & Long Island, nobody is better equipped to handle your real estate needs.