By Deborah Goonan, Independent American Communities
The vast majority of home buyers and homeowners have very little understanding of Special Tax Districts, particularly the kind that are set up for residential housing. They go by several different names, but in Florida, these are called Community Development Districts (CDDs).
A CDD is not a city or town. And it’s not a homeowners association either. In fact most homes in a CDD are also governed by a Property Owners Association (POA), which is essentially the same thing as an HOA. Multifamily structures are governed by a condominium association.
Think of a CDD as a multi-function special district that helps to fund construction of new infrastructure (such as roads and storm water systems) and recreational amenities, and then continues to collect tax assessments to maintain those assets. The CDD does not offer as many services as a city or small town, but it operates similar to a small town with regard to basic services.
But there’s one key difference between a CDD and real local government: unlike a city or town, a CDD begins life under control of private developers or landowners. Instead of a Mayor or City Council elected by its residents, a CDD under construction is governed by a board of supervisors handpicked and elected by the developer.
Control of a CDD generally starts to shift away from the developer in 7 – 10 years from the start of construction. When the transition is complete, all 5 members of the board of supervisors are elected by residents of the CDD who are registered to vote. As in elections for your city or town, candidates must announce their intention to run for election by the deadline, and voters go the polls on election day and cast their ballot.
However, a developer can do a great deal of damage during the time he controls the CDD. For one thing, the developer can, and often does, acquire more land parcels to add to the CDD. He also has the authority to issue more and more bonds to pay for ongoing development. But it’s important to remember that the more bonds are sold, the greater the debt that CDD members will eventually have to repay on their property tax bills.
Of course, this arrangement is convenient for developers, who are given the opportunity to use other people’s money to invest in real estate and build entire communities. But what if the developer uses the bond money for other purposes? What if the infrastructure and amenities are never completed?
The story of Grand Venezia, a proposed condo resort complex, to be located in Clearwater Cay Development District, is an example of what can and did go wrong with CDDs in the wake of the economic chaos that began circa 2007.
Developer Dave Clark ran a Ponzi scheme from 2005 – 2007, when the market crashed. He took on $30 Million in debt, but never built elaborate resort style amenities – including a water park – that had been promised to buyers at the time. When crime caught up with Clark, he found himself sentenced to 40 years in prison.
But now condo owners have to pay property taxes, condo assessments, AND additional CDD assessments to pay off the huge debt that Clark left behind.
Imagine paying an additional $1,600 annually on your tax bill for the next ten years, largely to pay for seaside resort attractions that will never be built. You’d probably be especially upset if this fact wasn’t plainly and explicitly disclosed to you prior to purchase of your condo.
No, instead it was a fact buried in the fine print of your deed, and filed with the County. If you happened to miss that detail, you’d be in shock to receive a huge property tax bill.
Well, that’s exactly what happened to property owners in Clearwater Cay CDD. They are truly experiencing taxation without representation. And now they are suing in order to get the CDD dissolved. (Condo owners will still keep their condo association.)
Will the lawsuit succeed? We will have to wait until at least January to see what happens.
More details follow below:
Developer in prison, but Clearwater condo owners still paying the price
Tracey McManusTracey McManus, Times Staff Writer
Thursday, December 1, 2016 7:43am
CLEARWATER —When Wayne Chase retired from his nuclear plant job in 2012 and bought a waterfront condo overlooking Tampa Bay, he knew he’d pay the typical fees that come with gated community living.
But when he got his tax bill that year for his two-bedroom unit in Grand Venezia off U.S. 19 and Belleair Road, he was surprised to see $1,600 in assessments on top of the $1,000 in property taxes.
It wasn’t until he started asking neighbors that he discovered most of that $1,600 bill was an assessment to pay off a debt run up by a convicted felon who ran the development as a Ponzi scheme years before Chase settled there.
Although the mastermind of the failed Grand Venezia luxury resort project in the Clearwater Cay Development District is serving a 40-year federal sentence for fraud, residents of the 336-unit complex are still paying for his crime. Former developer Dave Clark’s company took out a $30 million note for his promised resort in Clearwater, one of 14 Cay Clubs from Las Vegas to the Keys, but a decade after the plan crumbled, residents are still paying back the debt through assessments.