If you’re like many people, you know that owning a home comes with its own set of financial obligations. In addition to the mortgage, you’ll have to pay property taxes, assessment taxes and a number of other fees, and you may even have to pay dues to a homeowners association, or HOA. But what is a community development district tax, or CDD, and could it apply to you? This guide explains.
What is a Community Development District Tax, or CDD?
A community development district tax is a bond created by the initial developer of a subdivision, community or complex. You’ll see it on your tax bill, and it’ll be listed as a “community assessment.” Not all communities have these taxes; only some do. (More on that later.)
Why Do Developers Levy Taxes?
When a developer sets up the infrastructure for a community, it pays out of pocket to do so. That can cost a pretty penny – in fact, the developer may spend hundreds of thousands of dollars setting up the infrastructure on a community. Infrastructure can include things like sewer lines, electrical wires that connect the community to the main grid, and other connections to community services (including gas lines and, in some cases, internet cables).
Because the developers pay out of pocket for these expenses (and because they can’t build the community without connecting it to local services), they want to recoup those costs from homeowners.
Are CDDs New?
Community development district taxes are fairly new. In the past, developers generally absorbed the cost by charging buyers a higher price to purchase homes in the community. However, recently, some developers have begun creating these bonds (taxes) for future homeowners. The homeowner has always paid the cost of infrastructure development – but recently, developers have been charging these costs in a different way.
How Long Does It Take to Pay Off a CDD?
If you purchase in a community that has a community development district tax, you have to agree to pay that tax until the developer is repaid in full. (Don’t worry, though; it’s not for the whole community – just for your property within the community.)
Usually, CDDs take about 20 years to pay off. If someone has owned the home before you, they will likely have paid off part of the CDD (or all of it, in some cases).
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Do All Naples-Area Developments Have CDDs?
Not all Naples communities, condominium complexes, neighborhoods or subdivisions have CDDs. In fact, only a small handful do. Some of the most notable communities in the area that do have CDDs include many Lely subdivisions, Vasari, Fiddler’s Creek, Mediterra and Heritage Bay. There are others, as well, and you can find out if you’re interested in a home in a CDD community by asking your Naples REALTOR®. In the future, more developers may levy this type of tax on homeowners – but as of now, not all Naples-area developments have community development district taxes.
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