Community Development Districts
Taxation without Representation ?
An Opinion by Jan Bergemann
More and more new communities in Florida are part of a Community Development District. Especially many politicians praise the advantages, while many knowledgeable homeowners consider it building more dictatorships in the "Land of the Free"!

If you're not familiar with Community Development Districts, here is a good definition:

CDDs (Community Development Districts) are special purpose taxing and development districts created in 1980 through passage of  Florida State Statue # 190.  The purpose of this Chapter 190 law was and is to promote housing development through use of tax-free bonds that developers use to lower the initial cost of these residential communities.  Developers issue bonds to pay for initial infrastructure (sewers, roads, water supply, grading, utilities, etc.).  Bonds are eventually paid off by residents over periods of 10-30 years. 

The main advantage of CDDs is that housing is initially less expensive since major development costs are deferred and are financed through the use of tax-free bonds.  This leads to the main disadvantage that housing costs are inflated over time as the bonds need to be repaid. 

Developers like the Chapter 190 law because they are able to offer housing at a lower initial cost than would otherwise be the case.

County governments like the Chapter 190 law because developments that might otherwise not be built are in fact built because of the tax incentives and pricing advantages.  Property tax revenues are eventually higher than would otherwise be the case since the developments are, in fact, built.

Residents like the Chapter 190 law because the initial buy-in cost of the housing is often lower than otherwise would be the case because the initial infrastructure costs are deferred and the houses cost less.

Unfortunately, developers have perverted the concept of the Chapter 190 law and turned it to their advantage at the expense of the residents.

How do they do this?

First, developers maintain control of the decision-making mechanism in CDDs though unusual maneuvers.  These maneuvers allow developers to effectively make all the major-decisions in the CDDs for their own advantage.  Residents are not allowed to make these major decisions.

Second, developers appoint their own hand-picked board supervisors to these special CDD boards.  Residents never have the opportunity to elect these supervisors who make all the major decisions, mostly at the direction of and for the benefit of the developer.

Third, developers use special appraisal techniques, approved and accepted by their hand-picked boards, to sell common properties back to the residents in the CDDs at grossly inflated prices.  Residents often originally buy in to the development not realizing that common properties are not owned by the development and that they, the residents, will have to buy these facilities eventually at inflated prices.

Fourth, developers appoint administrators, without regard for the wishes of residents, who represent the views of the developer and who often ignore the needs and interests of residents.

Fifth, a variety of lawyers, accountants, consultants, etc., often work for combinations of developers, county governments, CDD boards, etc., in ways that suggest conflict-of-interests problems.  However, the Chapter 190 law effectively exempts these operatives from state conflict-of-interests laws.  The losers here are often residents who end up on the wrong side of the conflict-of-interests issue.

In our area local politicians just approved "Nocatee", a community that will add an estimated 35,000 new residents to the county over the next 25 years. It will include parts of St. Johns and Duval County. Despite the fact that in a local survey 59% of the participants voted that this development would harm the quality of life, the local politicians voted 3 : 2 in favor. It is pretty obvious that the almighty tax dollar is often blurring the vision of these representatives of our communities. The fact that the developer is DDI Inc., part of the Davis family empire, which controls as well Winn-Dixie Stores, Inc., definitely helped the cause. Obviously not all county commissioners in Florida have realized that they are giving up part of their power when allowing a CDD to be created in their counties. Because it seems that developers are not further interested in anything county commissioners have to say after the District is once approved. Just ask the Marion and Sumter County commissioners?

Paying Double ?
Please take a closer look into what Community Development Districts really are : a place where homeowners pay more than once for the goodies coming with their "Dream Home"! When you, as a prospective buyer, are shown your new community, you will be shown all the nice amenities coming with your home : golf course, swimming-pools, club houses, tennis courts, shopping malls and many other facilities, very impressive on first view. And the seller, normally an employee of the developer, will tell you how valuable all this is! I don't think they will tell you that the developer paid initially very little for the acre and that your future home is the collateral for the public bond the developer used to build all this? Or that your future "amenity fees" are being used to pay back this public bond? And that your "dues" will pay for everything, including law suits?

That will be the first time you're being asked to pay twice for the same thing all over again and again.

Despite the fact that Florida Statutes require full disclosure according to FS 689.26 and FS498/021.022  (LAND SALES PRACTICES) even call violations a felony of the third degree, nobody seems to bother about these laws. No wonder, since our government agencies refuse to prosecute violators of these Statutes. Florida is still a State where 'Caveat Emptor' is the 'Buy Word'. Do you think that the developer will disclose that you will have absolutely no say where your dues will be spent? Are you made aware that the chance that you ever democratically vote again on issues concerning your home, your money and your daily life are slim to none, if you are retired when moving into these Districts? Are you made aware that the developer appoints the members of the board as long as he is in charge, mostly employees and business partners? The same people, who will later vote to buy "common property", "retention ponds" and other "utilities" from the developer at outrageous prices with your money? An article headlined "Top dollar for plain old stuff", published within a big article series in the Orlando Sentinel in autumn of 2000, possibly explains it better than anybody else can. In order to pay these outrageous prices, new public bonds are issued, paid for by the same homeowners, once again?

But the developer-written laws allow them to do it. 

The Orlando Sentinel published an award-wining series of articles on CDD problems in October, 2000.  The key article in the series was entitled "Top Dollar For Plain Old Stuff."  It details the series of deals in The Villages of Lady Lake, Florida, from 1996 to 1999 involving a $84 million payment for $8.8 in property.  The $8.8 million value was determined by appraisers in Lake and Sumter counties.  An "income-approach" appraisal method, however, was used rather then a "market-based" appraisal technique.  The Sentinel said that the economic consultant who devised the appraisal technique worked for both The Villages developer (seller) and the VCCDD (buyer) in this transaction.  Tax-fee bonds valued at $84 million were issued to make the payment to the developer.  These bonds will be repaid over 20-30 years from the "maintenance fees" paid by residents.  The purchase was approved by CDD supervisors hand-picked by the developer.  Resident had no say about whether to accept the deal or assume the debt that they are now obligated to repay.  Many residents now view this as an example of "taxation without representation."

The Sentinel also pointed out that the University of Florida urban planning professor, who wrote some of the original 1980 law, said that the goals of the law are still worthwhile; but that some of the abuses by developers suggest that major portions of the law need to be completely revised.  Furthermore, a Volusia County attorney, who is both a lawyer and a developer, has said that CDDs are a means of "legalized land fraud."

Taxation without Representation !
Our founding forefathers started the American Revolution with the battle-cry: "Taxation without Representation". Only today the person this cry is aimed at is not sitting in a palace in London, but in a fancy office near by. The British King wanted taxes for tea, but only once! Nowadays you're being asked to pay for the same goodies even two or three times. But so far only a very few people have started to complain about this unjust system. Our daring forefathers threw the tea in the harbor. I haven't heard about any golf carts thrown into the expensive retention ponds?

But not only are you being asked to pay more than once for everything, you are as well forced to give up part of your constitutional rights, for example freedom of speech! No more campaign signs of your favorite politician, if you have one, on your front lawn, the one you supposedly own and paid for - and are "allowed" to maintain according to the guide-lines - or flying the American flag from a flagpole. That are all "No, Nos" in these Districts. And you better obey by the rules, or you might lose your home already paid for more than once because of some outrageous fines imposed by some over-eager managers. Your chance to fight it? More or less : ZERO ! 

Because the people imposing these fines are accusers, judge, jury and executioner - all in one person. They don't really care about existing Florida Statutes or rulings from the Supreme Court. You want to fight them in a Court of Law? You better think twice, because your dues will be used to defend their violations. You want to oppose their lust for more power and money? Careful, they might file a SLAPP suit ( STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION ) against you until you waive the white flag, because you plainly run out of money! The law suit brought against you is not a question of merits - mostly there are none - but just a matter of legal fees you can't afford.

And in case you're still tempted to buy your "Dream Home" in a Community Development District: think twice before signing on the dotted line. Remember, not only will you sign part of your constitutional rights away, you as well agree to pay for the same thing more than once!

And last not least: Don't forget that our founding forefathers risked their lives to fight "Taxation without Representation". Are you willing to give away all they achieved telling them that they died for nothing, just by signing on a dotted line?