Probing the Fiscal Implications of Multipurpose Development Districts: An Institutional Analysis of Florida Community Development Districts

• Author: David P. Carter,Tyler A. Scott,Aaron Deslatte
• Published date: 01 March 2021
• Date: 01 March 2021
• DOI: http://doi.org/10.1177/0160323X211010911
• Subject Matter: Research Articles

Research Article

Probing the Fiscal Implications

of Multipurpose Development

Districts: An Institutional

Analysis of Florida Community

Development Districts

Aaron Deslatte

1

, Tyler A. Scott

2

, and David P. Carter

3

Abstract

Across the U.S., private land developers are forgoing traditional financing of new suburban

infrastructure in favor of an institutional innovation in special government—multipurpose devel-

opment districts. This article presents an exploratory analysis of the fiscal characteristics of this

relatively novel financing and governing mechanism. Focusing on residential developments financed

through the creation of Florida multipurpose development districts, or community development

districts (CDDs), we ask: What is the general profile of CDD borrowing and spending? What

functional trends are reflected in CDD borrowing and spending and how do they compare to those

of their general-purpose counterparts? How does CDD borrowing and spending change over time

as residents, not developers, take over responsibility for district administration? We consider two

institutional design principles important for self-governance of such developments—accountability

and representation. The discussion raises self-governance implications, particularly whether multi-

purpose development district financing creates incentives for developers to “oversupply” infra-

structure to maximize profits.

Keywords

special district finance, urban governance, institutions

Introduction

Many private land developers are forgoing

traditional financing of new suburban infra-

structure in favor of an innovation in special

government institutions. Traditionally, develo-

pers relied on an adjacent government or utility

to extend existing services, secured financing

from banks or private investors, or carried

infrastructure costs themselves until property

build-out and sale (Peiser 1983). In many

states, developers now form a particular variant

of sub-municipal government to fund both

basic and ancillary residential amenit ies, from

roadways to recreational centers. In doing so,

they pass debt repayment responsibilities on

to future homebuyers—shielding themselves

1

Indiana University Bloomington, IN, USA

2

University of California, Davis, CA, USA

3

University of Utah, Salt Lake City, UT, USA

Corresponding Author:

Aaron Deslatte, Indiana University Bloomington, Bloomington,

IN, USA.

Email: adeslatt@iu.edu

State and Local GovernmentReview

2021, Vol. 53(1) 43-61

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DOI: 10.1177/0160323X211010911

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from risks associated with infrastructure

financing, while borrowing with no input from

to-be residents and little oversight from

officials.

Such developer-friendly conditions are

enabled by a distinctive type of special district

government. Although labels and particular

service mixes vary between the states in which

they are enabled, these entities fall collectively

under the umbrella concept “multipurpose

development districts” (“development dis-

tricts” for short). Three characteristics set them

apart from their more conventional special dis-

trict counterparts (Billings and Thibodeau

2013; Carter, Deslatte, and Scott 2019; Burns

1994): they finance and administer broad and

flexible suites of services; they are typically

initiated and designed by private interests—

usually developers—with little input from other

governments, and; they are often created out-

side of municipal boundaries in unincorporated

areas.

The proliferation of multipurpose develop-

ment districts across states such as Colorado,

Florida, and Texas is easy to explain—they

allow developers to finance city-like suites of

infrastructure and services while side-stepping

the risk of personal/firm debt and the collective

action challenges of other financing mechan-

isms (Peiser 1983; Billings and Thibodeau

2013). Yet, they pose serious implications for

residents and other local governments that

scholars have yet to adequately probe (Carter,

Deslatte, and Scott 2019). To that end, in this

article we undertake an exploratory foray into

the fiscal characteristics and implications of

multipurpose development district financing.

Our examination takes place in the context

of Florida, where multipurpose development

districts are officially labeled “community

development districts” (CDDs). Absent the

counterfactual (a Florida in which no CDDs

exist), we compare trends in CDD debts and

expenditures with those of adjacent local go v-

ernments, as well as over time. We pursue three

overarching questions: First, what is the general

profile of CDD borrowing and spending? Sec-

ond, what functional service-delivery trends are

reflected in CDD borrowing and spending and

how do they compare to those of their

general-purpose counterparts? Third, how does

CDD borrowing and spending change over time

as residents, not developers, assume responsi-

bility district administration?

Combining administrative da ta from multi-

ple sources, we construct a panel dataset of rev-

enue and expenditures for the 700-plus CDDs

and their adjacent general-purpose government

counterparts over time to offer a temporal foray

into district borrowing and spending decisions.

We draw from the institutional design literature

(Ostrom 2011; Tang, Callahan, and Pisano

2014; Ostrom 1990) to consider our findings

in light of two institutional design principles

deemed important for self-governance:

accountability and political representation. The

examination raises noteworthy implications for

effective self-governance, particularly whether

the availability of multipurpose development

district financing creates incentives for develo-

pers to oversupply infrastructure to maximize

profits.

The Institutional Incentives

of Multipurpose Development

Districts

The central aim of this study is to probe the fis-

cal implications of multipurpose development

districts as a distinctive type of special district

in a growing number of U.S. states. Our moti-

vation stems from the mix of institutional

incentives and opportunities which set develop-

ment districts apart from other special district

governments (Billings and Thibodeau 2013;

Carter, Deslatte, and Scott 2019; Burns 1994)

and, we argue, may undermine principles of

effective self-governance (Ostrom 1990). In

particular, we are concerned with accountabil-

ity and political representation, as dimensions

of self-governance institutional design which

scholars have found particularly prescient in

local government fiscal contexts (Tang, Calla-

han, and Pisano 2014).

Our focus on multipurpose development dis-

tricts, as well as these dimensions of self-

governance, is best explained by a fuller

44 State and Local Government Review 53(1)