The Georgia legislature passed a constitutional amendment this spring to allow the creation of infrastructure development districts (IDDs). If voters approve, private developers will be able to issue tax-free bonds to pay for infrastructure in the communities they build and assess homeowners for the long-term repayment of the bonds. Various forms of IDDs exist in 17 states and are under consideration in several more, but some organizations oppose their spread.

Supporters of Georgia's legislation, such as the Atlanta-based Association of County Commissioners of Georgia (ACCG), say it will encourage development and relieve local governments from paying some infrastructure costs. The Georgia bill is based on a 1980 Florida statute, says Rob Willis, a lobbyist with the Atlanta-based Troutman Sanders law firm that helped draft the bill. “We got a lot of input from residents, developers, and county officials in Florida [and] Texas,” he says. “[IDDs] are the ultimate impact fee, a user-pay scenario where development pays for development.”

Critics call it “private cities legislation,” saying it will allow real estate developers to create their own quasi-governments with little public oversight while providing few protections to homeowners should the developments fail. “The concept is a good one, but there is room for abuse,” says Joe Gorman, president of the Lady Lake, Fla., Property Owners Association. For example, at The Villages, a 65,000-resident retirement community in an IDD in central Florida, developers typically appoint representatives to serve on district government boards, and those appointees often make decisions for the entire community that further the developer's interests, Gorman says. Additionally, while homeowners pay an assessment for common properties, such as golf courses and swimming pools, the developer retains ownership and may sell the property back to the district at grossly inflated prices, Gorman says.

Environmentalist groups, such as the Sierra Club, are skeptical about the Georgia legislation. “We hate the idea,” says Mark Woodall, legislative chair for the club's Georgia chapter. Woodall says Florida IDDs are more prevalent in rapidly growing communities, and, therefore, could be located near Atlanta, the fastest growing metro area in the United States. “We shouldn't be encouraging any more big development [in metro-Atlanta],” he says.

Clint Mueller, ACCG's legislative director, says he hopes IDDs can be used as a growth-management tool and a way to pay for infrastructure without burdening counties. “It will be a big effort to educate the public about them,” he says.

While the national trend to establish IDDs is growing, most states — except for Florida, California and Texas — limit the districts to single-purpose functions, says Florida State University Urban Planning Professor Tim Chapin. “Local governments love [the broader-scoped IDDs] because they are not liable for any defaults,” he says. “At the end of the day, the homeowners are on the hook for their share of the debt.”

IDDs in Texas vary widely in design, with most focusing on a single utility like water or sewer service, while others more closely resemble the Florida IDDs, according to Brian Rider, an adjunct law professor at the University of Texas in Austin. They are prominent in Houston, he says, but are frowned upon in Austin. Hundreds of thousands of Texas homes have been built using the districts. “People readily buy into that program,” Rider says.

Annie Gentile is a Vernon, Conn.-based freelance writer.