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In Florida this is called a Community Development District. It is a very bad idea.

The developer borrows the money from the government to pay for infrastructure. This includes roads, drainage, club house, pool, expensive landscaping, and other amenities meant to attract buyers. The developer’s idea of imposing property taxes on himself is really imposing the taxes, in the form of CDD dues, upon whomever buys into the development. These CDD dues must be paid by the property owner until the initial loan is paid off (30 years). The CDD is managed by a board that sets the payments.

For starters, there is a huge conflict of interest. The developer will borrow as much money he needs in order to add enough amenities in order to sell his lots and make his profit. Once the lots are sold, he walks away and the buyers are stuck with the bill. Conversely, the government will loan as much money as the developer wants. If the government doesn’t have the cash on hand, it could borrow it from a bank or bond holders at a lower rate than what it charges the development. This results in a steady income stream for 30 years or more.

The CDD board established by the developer is controlled by him until he decides to turn it over to the homeowners (usually when 90% of the lots are sold). The board, staffed by developer employees, can raise dues at will without input from homeowners. The board can borrow more money against the CDD and use it for more amenities (or in some cases, financing another phase of developmen). When all is said and done, the developer hands the board to the homeowner and wlaks away, leaving a financial mess.

When homes go into foreclosure, the rest of the homeowners must pay extra to make up for it. That’s because the debt service is assessed against the entire CDD, not individual owners. If some are in bankruptcy/foreclosure, they cannot pay. The rest must pay more.