More than 15 community development districts face default
The real estate meltdown has caused 17 South Florida community development districts to go into default on bonds totaling more than $500 million, according to a new Web site tracking the epidemic.
Community development districts, or CDDs, are units of local, special-purpose government. They were a creature of a past boom — Florida legislators set them up in 1980 as a way to allow massive home developments some financial autonomy as growth ballooned.
They were given the authority to issue bonds and levy fees, mostly for infrastructure, such as roads, sewers and utilities. Many then raised funds for amenities, such as golf courses and clubhouses.
By the time of the 2006 bust, many were overextended. Some districts existed on paper, but their houses had not been built, and CDDs were left with adequate debt reserves and an unreliable future source of revenue to pay off bond holders.
Note: Correction appended.
As a result, 17 of South Florida’s 101 CDDs in Broward, Miami-Dade and Palm Beach counties are in some form of default on bonds, said Richard Lehmann, founder of www.floridaCDDreport.com, a Web site that tracks finances for these districts.
Lehmann launched the site in August. He’s also president of Investor Securities Advisor, a Miami Lakes company that maintains a database of about 3,000 municipal bond defaults. It shows that about 100 of Florida’s 600 community development districts are in default on bonds totaling more than $3 billion.
More than 50 other CDDs in Florida, including 15 in South Florida, are on FloridaCDDReport’s watch list, meaning they are having difficulties.
Lehman expects another 90 CDDs to default on bonds before the market turns up. Moreover, the state’s population growth slowdown and projections for further net migration from Florida convinced many developers they need to alter their plans, scaling back projects or scrapping them altogether.
“Florida is notorious for housing booms and busts. But this is as serious as I’ve seen,” Lehmann said. “And the old adage that time will take care of it — well, we really can’t count on it.”