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FAQ

Is a CDD feasible for my project?

What development costs can I finance?

Can I create a CDD if I haven't closed on the purchase of all the land?

Can I establish a CDD if there is a mortgage on my land?

How long will it take to close on the bond issue?

Can I start construction on my project before closing the bond issue?

What's the first step in the CDD process?

Who runs the CDD?

How are the CDD bonds issued and sold?

How much are the special assessments on lots and how are they determined?

How do I market my project as a CDD community?

How long will I keep control of the CDD?

Who maintains the CDD infrastructure?

With a CDD, do I still need an HOA?

How much will a CDD cost me?


Is a CDD feasible for my project?

There is no legal limitation or minimum size for the use of a CDD to finance infrastructure improvements for a project.  Rather, the limitations are from a practical and economic standpoint.   Projects need to be of sufficient size more in terms of the number of units to be developed than in terms of the number of acres.  The conventional wisdom used to be that projects with fewer than 500 units were too small to make a CDD economically viable.  Recently, however the CDD bond issues are smaller, financing the construction of the public infrastructure for 150-300 residential units.  These smaller financings are more manageable from a development perspective and are more attractive to bond investors. 

The typical CDD project is a master planned development containing some or all of the following land uses: single-family residential, multi-family residential (including townhouse, condominium and apartments), retail, office and commercial land uses.


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What development costs can I finance?
Chapter 190 permits the financing of basic public infrastructure improvements, including roads, water lines, storm water management facilities, wastewater management facilities, landscaping, streetlights, park and recreational facilities and security gates.  In addition to the "hard" costs of constructing or acquiring these infrastructure improvements, the associated "soft" costs, such as engineering, legal and financial fees, testing and permits, etc. can also be financed.  Lastly, in some cases the land to be used for the construction of public improvements (such as road rights-of-way, retention ponds, recreational facilities, etc. ) can be purchased by the CDD and financed with bond proceeds.
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Can I create a CDD if I haven't closed on the purchase of all the land?
If the property is to be purchased under a rolling option or similar arrangement, the seller must consent to the creation of the district.  Because the seller's land will then potentially be subject to special assessment liens, the seller may be unwilling to consent to the establishment of the CDD.  If possible, this issue should be addressed when the option agreement is negotiated.  If it is not addressed then, this hurdle must be addressed and overcome at a very early stage.
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Can I establish a CDD if there is a mortgage on my land?
Generally, yes.  The consent of a mortgage holder is not formally required to establish a CDD.  However, because special assessment liens have priority over mortgage liens, the mortgage should be reviewed to determine if the creation of a CDD and the levying of assessments is an event of default.  Also, the developer should ascertain from the bond underwriter whether prospective bond buyers will insist upon getting mortgage holder consent to the bond issuance and levy of special assessment liens.  On the one hand, the capital improvements funded by the bonds enhance the value of the mortgage holder's security.  On the other hand, however, the assessments securing the bonded indebtedness enjoy priority over mortgage liens and place a first mortgage holder, in effect, in a second position.
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How long will it take to close on the bond issue?
Getting to a bond closing where funds are in the bank is a two-step process.  The first step is to establish the CDD which requires preparation of a petition, submittal to the city, county or state (depending on the location and size of the project) and a public hearing.  This process normally takes approximately 90-120 days.  Once created, the CDD must then (a) determine the financial structure of the bonds to be issued, (b) hold public hearings to levy the required special assessments to repay the bonds and (c) obtain a final court judgment validating the issuance of those bonds.  These activities normally take approximately 90-120 days after the CDD has been created.  Thus, the entire process can be expected to require six to eight months.
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Can I start construction on my project before closing the bond issue?
Yes.  Most developers have done some engineering work - and sometimes some actual construction activities - before the bonds are issued.  The CDD can purchase the engineering plans and the construction work in process from the developer by either (a) issuing a bond anticipating note which is repaid from bond proceeds at closing or (b) entering into a development acquisition agreement with the developer pursuant to which the assets are acquired by the CDD simultaneously with the bond closing.  Under either approach, there must be appropriate documentation in the form of paid invoices, cancelled checks, etc. to justify payment to the developer.  The CDD's engineer typically approves the reasonableness of these "prior costs" before payment.
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What is the first step in the CDD process?
If the proposed CDD contains less than 1,000 acres, the developer must file a petition with the appropriate local governmental unit (city or county) to adopt an ordinance establishing the district.  If the city or county has previously established districts for other developments (and the project itself is not highly controversial), the petition process should be relatively straightforward.  If your project is the first CDD in a particular jurisdiction, more work is usually required.  Local officials typically have concerns that a default on the bonds by the CDD might adversely affect the credit rating of the city or county.  There also may be concern that the CDD will usurp the powers of the general purpose local government or impose additional obligations or liabilities on the local general-purpose government.  Local officials sometimes worry that the creation of a CDD may have some impact on zoning and land use regulations.

All of these concerns can be addressed, but the petition process is more time consuming if your proposed CDD is a pioneering effort.  The developer will need a financial consultant and CDD attorney to prepare and file the petition and supporting exhibits.  Some preliminary cost estimates prepared by an engineer are also needed.  After conducting an advertised public hearing, the CDD is formally created by local ordinance. Proposed districts which contain more than 1,000 acres are created by rule adopted by the governor and cabinet.  A local public hearing is also required. Otherwise the procedure is similar.
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Who runs the CDD?
For the first seven years or so following its creation, the CDD is controlled by the landowner(s), i. e. , the developer.  The developer elects the five members of the Board of Supervisors of the CDD.  Although controlled by the developer, the Board of Supervisors functions like a city council or board of county commissioners.  Supervisors are subject to the Government in the Sunshine law.  Supervisors must file short form financial disclosure forms.  CDD board meetings must be advertised and open to the public, although public participation is usually minimal until residents have actually moved into the project.
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How are the CDD bonds issued and sold?
The Board of Supervisors of the CDD authorizes the issuance of tax exempt bonds to construct community infrastructure.  These unrated bonds are secured by special assessments levied upon the benefited property within the CDD, i.e., the lots where homes will be built or other land that will be privately developed. The bonds are sold by an underwriter, usually in a negotiated private placement with one or more institutional investors.  Interest rates for unrated land secured special assessment financings are negotiated by the underwriter. Although rates fluctuate with general market conditions for tax exempt municipal bonds, the eventual interest rate will also reflect the risk associated with a specific deal.  Bond buyers will be concerned with lot absorptions and the track record of the developer in other similar developments.  Additionally the developer will probably need to have some contracts with builders in place at the time of the bond closing.
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How much are the special assessments on lots and how are they determined?
A CDD will typically issue two types of bonds to finance the construction of infrastructure improvements as follows:

Series A Bonds, which are long term (30 year maturity), are issued to construct master infrastructure improvements such as offsite roads, water, wastewater facilities, main entrances, major arterial roadways, park and recreational facilities or storm water management systems.  These master improvements will provide special benefit to all land within the CDD and will be repaid by "master" or "permanent" capital assessments which will remain fixed for the term of the bonds.  Since these assessments run with the land, they are passed through or externalized to future property owners thereby providing a financial benefit to the developer.  The amount of these assessments is determined by the developer based on the type of products planned and the level of assessments acceptable to the ulitmate homeowner.  Long-term assessment levels vary by location of the development and by product type. 

Series B Bonds, which are short term (5-7 seven year maturity), are issued to construct subdivision level infrastructure improvements such as roads, water and wastewater facilities for a particular subdivision within the CDD.  These improvements will provide special benefit only to the lands within the particular subdivision and will be repaid by "subdivision" or "capital reduction" assessments.  These assessments are typically paid when a lot is sold to a homebuilder or homeowner and are similar in nature to the partial release price of a conventional development loan.  Since these assessments are not externalized to future property owners, interest and principal is usually paid by the developer.
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How do I market my project as a CDD community?
Full disclosure to homeowners of the benefits of a CDD is essential to a successful CDD community.  This can be accomplished in part by providing potential homeowners with a homeowner-oriented brochure describing the CDD.  Residents should be educated on the positive attributes of the CDD.  The CDD is a governmental entity which will remain in place after the developer has completed construction and left the project to stand on its own.  The CDD will continue to maintain the landscaping, parks, recreational facilities, etc., at the same level which helps maintain property values on a long-term basis.
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How long will I keep control of the CDD?
The developer can generally expect to retain control of the CDD for about seven years.  Chapter 190 provides for the transition from landowner elections (usually controlled by the developer) to regular elections by qualified voters within the CDD.  (If the CDD doesn't have 250 voters six years after its formation, the developer will be able to stay in control longer; however, no developer wants to take advantage of this statutory bonus!)
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Who maintains the CDD infrastructure?
Typically, a CDD will convey or dedicate the roads, water and wastewater facilities to the local city or county for ongoing maintenance.  Many districts retain ownership of landscape tracts, storm water management facilities (including ponds and wetlands) and park and recreational facilities.  The cost of maintaining these facilities and the administrative costs of managing the CDD (including auditing, legal, engineering, management fees, legal advertising, etc.) are funded by operation and maintenance assessments levied on the lands within the CDD.  The operation and maintenance budget is determined annually and is based on projected expenses for the upcoming fiscal year.
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With a CDD, do I still need an HOA?
Since the CDD performs most of the functions ordinarily performed by a homeowner's association, some CDD communities have dispensed with any formal HOA.  An HOA is desirable, however, to enforce deed restrictions.  Of course, assuming this is the HOA's principal function, the annual HOA assessment should be nominal.
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How much will a CDD cost me?
The costs associated with a community development district fall into three main categories:

  1. Costs to Create the CDD.  There is a filing fee to create a CDD imposed by either the city, county or state (as the case may be).  These filing fees range from $-0- to $15,000, depending on the jurisdiction.  Professional fees (legal, engineering and financial) relative to the initial formation of a CDD typically range from $20,000-$30,000, again depending on the jurisdiction.
  2. Costs to Issue Bonds.  Fees, commissions, and other expenses associated with the issuance of bonds range from 3-1/2% to 4-1/2% of the par amount of the bond issue depending, among other factors, on the size of the bond issue.  These expenses are paid from bond proceeds.
  3. Costs to Administer a CDD.  The cost of the day-to-day administration of a CDD is typically $75,000 - $100,000 per year, exclusive of the cost of field maintenance of the infrastructure which has not been dedicated to the general purpose local government, e.g., landscaping, maintenance of recreation facilities, etc.  These ongoing operation and maintenance expenses are paid by the annual O & M assessment paid by the property owners within the CDD.  Of course, in the early stages the developer is the principal landowner so the CDD is subsidized by the developer much like a developer subsidy to an HOA in a non-CDD development.

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