What Is a Community Development District (CDD) Fee?
Demystify the Community Development District (CDD) fee. Understand this common property assessment and its role in funding planned community infrastructure.
Community Development District (CDD) fees are charges associated with living in certain planned communities. These assessments, common in newer developments, can confuse property owners. Understanding CDD fees is important for anyone considering property in these communities, as they directly impact homeownership costs and financial obligations. This article clarifies the structure, collection, and implications of CDD fees.
What is a Community Development District
A Community Development District (CDD) is a special-purpose unit of local government. It finances, constructs, operates, and maintains infrastructure and services for residents. These districts are typically formed by developers or landowners and require approval from local governmental bodies under state statutes.
CDDs provide infrastructure like roads, water management systems, utilities, and streetlights. They also manage community amenities such as parks, recreational facilities, and conservation areas, ensuring these are available early and maintained.
CDDs possess legal powers similar to municipalities and counties, including the ability to enter contracts, own property, and issue bonds. They are governed by a Board of Supervisors, initially elected by landowners, with control transitioning to residents. This structure allows the district to manage facilities and services, with annual audits and public hearings ensuring transparency.
Components of a CDD Fee
CDD financial obligations have two main components: bond assessments and operations and maintenance (O&M) assessments. These distinct charges fund different aspects of the community’s infrastructure and services, contributing to the overall CDD fee.
Bond assessments repay debt from bonds issued by the CDD, which finance initial construction of major infrastructure like roads, utilities, and amenities. Property owners pay a fixed annual amount, often for 20 to 30 years. This portion can sometimes be paid off in full by the homeowner.
Operations and maintenance (O&M) assessments cover ongoing costs of managing and preserving CDD facilities and services. This includes landscaping, common area upkeep, and amenity management. Unlike bond assessments, O&M assessments are set annually by the CDD’s board and can fluctuate based on budget and operational needs. These assessments continue as long as the community requires maintenance.
How CDD Fees are Collected
CDD fees are primarily collected through the annual property tax bill. These “non-ad valorem assessments” are not based on property value but on benefits received from CDD services and infrastructure. The county tax collector includes these assessments in the total amount due on the property tax statement.
When property owners receive their annual tax bill, the CDD fee is itemized alongside other taxes. For homeowners with mortgages, these assessments are often escrowed, with the lender paying on their behalf. Property owners without an escrow account pay the CDD assessment directly when property taxes are due.
While CDD fees are billed with property taxes, they are distinct from ad valorem property taxes. They are typically paid in advance for the upcoming year, unlike some property taxes paid in arrears. This distinction is often reflected in real estate settlement statements, where prorations for CDD fees may differ from property taxes.
Understanding Your CDD Fee
Property owners can find CDD fee information on their annual property tax bill. CDD assessments are usually listed under “non-ad valorem assessments,” detailing charges based on services provided by the CDD, not property value.
For a detailed understanding of the fee breakdown, property owners can access public records and official CDD websites. These resources provide information like annual budgets, assessment rolls, and contact details for the CDD manager. Reviewing the annual budget clarifies how the operations and maintenance portion of the fee is allocated and may fluctuate.
Understanding these details is important when considering a property purchase within a CDD. Real estate agents should provide information on current CDD assessments. This allows potential buyers to factor the ongoing financial commitment into their budget and assess long-term implications.