People are sometimes confused about the difference between a Community Development District (CDD) and a Homeowner’s Association (HOA). Hopefully, this page will help readers understand what a CDD does and how it operates. Most of us are already familiar with what a HOA does.   Nevertheless, there is a brief overview following the discussion about CDD’s.

Chapter 190 of the Florida Statutes defines a CDD as a local unit of special-purpose government which is created as an alternative for managing and financing infrastructure required to support development of a community. The primary goal was to create a process through which those who would benefit from a new development would be the ones to bear the costs of growth, and not existing taxpayers. The law was intended to be used by local governments for re-development and growth purposes. However, it was eventually adopted by developers, with glee.

Before CDD’s became the new trend, developers would have to go to banks and borrow enough money to design a new community, meet regulatory requirements and build infrastructure within that new community. Examples of infrastructure are roads, utilities and recreational facilities like golf courses, tennis courts, swimming pools and clubhouses. Developers would add those costs to the price of the homesites and then pay off the loans when they sold lots to builders or, if they were also the builders, homes to homebuyers.

Thanks to the Florida Legislature, developers can now utilize Chapter 190 to create a CDD that can issue bonds to raise funds and sell those bonds to investors. The CDD then uses the money raised through bond sales to fund the construction of the infrastructure and amenities.

The developer does not have to risk its own resources, or borrowing power, to build the infrastructure. The CDD bonds are typically paid back over 20-30 years by the owners of the homesites through a CDD assessment collected by the local Tax Collector. The bond payments are added to the regular property tax bill. Just like other debt, bond payments include principal and interest. They can be prepaid, without penalty, to reduce the cost of interest that would accrue over the full amortization period. Once a homesite is sold to a new resident, that resident is responsible for the payment of the bond assessments until fully paid.

Not all the CDD fees on the property tax bill are bond repayments. Another portion consists of payments that are assessed through an annual budget process to pay for operating and maintenance expenses of the CDD. The Operating and Maintenance portion can decrease or increase and is due and payable annually. Those expenses cover maintenance of any CDD owned infrastructure, such as roads and stormwater systems.

During the Great Recession, many developers went bankrupt and did not pay their bond assessments or the annual operating and maintenance assessments. That put many CDD’s in financial difficulty, since they still had to pay the bondholders and maintain the infrastructure. Residents lost out, since they had to continue to pay their assessments, but lost services due to the lack of funds collected by the CDD’s because of the developers’ bankruptcies.

Since the CDD’s were not collecting bond assessments from the developers, they could not pay the bondholders, resulting in bondholders foreclosing on the remaining land within the development. That led to major headaches for residents who were now at the mercy of the bondholders who wanted to be repaid for the bond investments they made.

CDD’s are run by a five-member Board of Supervisors, all of whom are elected. The members are initially “elected” by the developer, which elects (chooses) its own employees. The problems with that are obvious.   One question that arises is whether the developer elected Board members are acting in the best interests of the developer or the homeowners.

After a statutorily mandated period of years, and after there are enough voters within the CDD, the Board begins to transition to resident control. Initially, two of the five members are elected by the residents, while the remaining three members are still elected by the developer. Those two resident elected members, of course, are minority voters meaning they can’t control any of the actions taken by the Board.

Two years later, during the next election cycle, two more members of the Board are elected by the residents, bringing the total to four, and giving majority control of the Board to the residents.  Finally, at the next election cycle, the last remaining member of the developer elected Board is replaced by a resident, resulting in all members being residents.

The transition to resident control of the River Hall CDD began in 2012 when Mike Morash and yours truly were elected. In 2014, Joe Metcalfe and Joe Lundquist were elected. In 2016, Kenn Mitchell was the final resident elected member. The Board now consists of all of the above, except for Joe Lundquist, who decided not to run for re-election in 2018 and was replaced by Bob Stark.

Positive changes started happening when the CDD became resident controlled in 2014. The Board immediately began the process of installing the traffic signal, which took almost two years. In addition, the Board paved the portion of River Hall Parkway owned by the CDD and also installed the second left turn lane onto Palm Beach Blvd. The Board has also implemented regular maintenance programs to ensure that all systems controlled by the CDD are functioning properly.

The River Hall CDD maintains a website, which contains items of interest to River Hall residents. I encourage all River Hall residents to familiarize themselves with that site so they can be informed of some of what is happening within the River Hall community. The website is https://riverhallcdd.org/.

HOA’s are regulated by Chapter 720 of the Florida Statutes, which are amended from time to time. HOA’s are controlled by a Board of Directors, which is the governing body of the HOA. The Board is comprised of developer representatives initially and then volunteer members of the community once turnover has occurred.

The HOA Board is responsible for representing the “best interests” of the residents within the community. That is the case even when the Board is not controlled by the residents, i.e., before turnover. That is a very important point. No matter who controls the Board, it “must” act in the best interests of the members of the HOA it represents.  As with a CDD controlled by the developer, problems can arise when the Board is comprised of non-resident members who are employees of the developer.

The Board is responsible for enacting and enforcing covenants and restrictions, which are the rules that residents have agreed to abide by. The Board is also responsible for assessing and collecting HOA fees. Those fees are used to pay for the maintenance of the community’s common areas, as well as other areas stipulated in the covenants and deeds.

There are currently five associations operating within River Hall, four HOA’s and the Amenities Center Association. Although the CDD covers all communities within River Hall, the HOA’s only govern specific sections.

The four HOA’s in River Hall are the Country Club, Hampton Lakes, Ashton Oaks and Cascades. Ashton Oaks has its own HOA, but is also included within the Country Club HOA, since Ashton Oaks is located within the boundaries of the Country Club.

Turnover of the Ashton Oaks and the Cascades HOA’s has occurred, which means they are controlled by the residents within those communities. The Country Club, Hampton Lakes and the Amenities Center Associations are controlled by GreenPointe.

All residents should have been provided with copies of their respective HOA Declarations of Covenants and Restrictions. Nevertheless, they are available online. Residents should become very familiar with their declarations since they are the governing documents.

It is important to note that only state and local law can supersede the provisions found in HOA declarations. Therefore, they are very powerful documents.

Since I am more familiar with the Country Club Declaration at this time, I will be providing information about some very interesting items found in that declaration in future posts.