Do CDD Fees Go Away? Bond vs. Permanent O&M Fees

Community Development District (CDD) fees are financial obligations associated with properties in certain planned communities. These fees contribute to the development and ongoing upkeep of infrastructure and amenities that enhance the quality of life within these neighborhoods. Understanding the nature and duration of these assessments is important for both current homeowners and prospective buyers. This overview aims to clarify what CDD fees entail and how they impact property ownership over time.

Understanding Community Development Districts and Their Fees

A Community Development District (CDD) functions as a local, special-purpose government entity established to finance, construct, and maintain infrastructure and services for a specific community. These districts are created to ensure that new developments have the necessary facilities, such as roads, utilities, drainage systems, and recreational amenities, without relying solely on existing municipal resources. Developers often initiate CDDs to help manage the significant costs associated with large-scale community projects.

CDD fees typically consist of two distinct components: a debt service assessment and an operations and maintenance (O&M) assessment. The debt service portion, also referred to as the bond assessment, is allocated to repay the bonds issued by the CDD to fund the initial construction of major infrastructure. This includes elements like primary roadways, water and sewer systems, and shared community facilities such as clubhouses, pools, and parks. The O&M assessment, conversely, is designated for the continuous upkeep and operational costs of these community assets. This covers expenses for landscaping, street lighting, storm drain maintenance, and the ongoing management of recreational amenities.

These fees are generally collected as non-ad valorem assessments, meaning they are not based on the property’s assessed value but rather are a specific charge for services or improvements. They are typically included as separate line items on the annual property tax bill. While property taxes are often paid in arrears, CDD fees are commonly paid in advance. Property owners within a CDD contribute to these costs, ensuring the continued functionality and appeal of their community’s shared spaces and facilities.

The Duration of CDD Fees

The question of whether CDD fees eventually disappear is central to understanding their long-term financial impact on property ownership. The duration of CDD fees depends entirely on which of the two components is being considered: the debt service assessment or the operations and maintenance assessment. Each component has a distinct timeline, which influences how long a property owner will incur these charges.

The debt service assessment, which repays the bonds issued to finance the community’s initial infrastructure, is a temporary charge. These bonds typically have a repayment schedule similar to a mortgage, often spanning a period of 20 to 30 years. Once these bonds are fully repaid, that specific portion of the CDD fee is eliminated from the property’s annual assessment. Property listings sometimes highlight “bond paid” or “no bond” to indicate that this debt service component has been satisfied, reducing the overall annual CDD assessment. Homeowners often have the option to pay off their property’s remaining bond assessment in a lump sum, thereby removing this charge sooner.

In contrast, the operations and maintenance (O&M) assessment is generally an ongoing charge that does not go away. This portion funds the perpetual maintenance and operational expenses required to keep the community’s common areas and infrastructure in good condition. Such ongoing costs include landscaping, repairs to recreational facilities, upkeep of storm drains, and administrative costs of the district. Because the need for maintenance and operational services continues as long as the community exists, this assessment typically continues as well.

While the O&M assessment is ongoing, its amount can fluctuate annually. The Community Development District’s Board of Supervisors sets the O&M budget each year based on the community’s needs and projected expenses. These fluctuations can be influenced by inflation, changes in service levels, or unexpected maintenance requirements. Therefore, while the bond portion provides a finite financial commitment, the O&M assessment represents a variable, long-term expense for property owners within a CDD.

Identifying CDD Fees on Your Property

For homeowners and prospective buyers, determining whether a property is subject to Community Development District (CDD) fees and ascertaining their current amount is a practical necessity. The most direct method for identifying these fees is by examining the annual property tax bill. CDD fees are typically listed as separate line items under “non-ad valorem assessments” on this document. This section of the tax bill itemizes specific charges that are not based on the property’s value, providing a clear breakdown of the assessments.

Public online resources offered by county government agencies, such as property appraiser or tax collector websites, also provide detailed property tax information. Users can typically search for a property by address or parcel identification number to access records that include any CDD assessments. These online portals are a reliable source for current and historical assessment data, allowing for thorough due diligence. The Truth in Millage (TRIM) notice, sent by the county around August, is another document that can provide details on these non-ad valorem assessments.

When purchasing a new home, information regarding CDD fees is usually included in the required disclosure documents provided by the builder or seller. These disclosures outline the financial obligations associated with the property, including the amount and nature of any CDD assessments. This ensures that buyers are fully informed about these costs before finalizing a purchase.

Consulting with real estate professionals, such as real estate agents or attorneys specializing in local property transactions, can also be beneficial. These professionals often have direct access to CDD information or can guide buyers to the relevant public records and disclosure statements. They can help interpret the financial implications of CDD fees and clarify how they fit into the overall cost of homeownership. While CDD fees are not generally deductible for federal income tax purposes as they are considered assessments for specific benefits rather than ad valorem property taxes.