[Lauren Ritchie]

edvinmass,
to clear up the questions of the developer being the district and vice versa.

the IRS has been trying to prove the developer IS the district in the sense that he exerts considerable control over it, not that he is [I]legally[I] one and the same entity. the IRS' attempt to prove that is in the context of whether these are 'arm's length' transactions, not whether the district and the developer are legally the same critter.

legally, they are separate entities, and i don't there anyone has raised a question otherwise. hope that helps on that issue.

ed, you are totally correct that the two powerful CDDs do not have ad valorum taxing power outside their geographic boundaries and that their only real source of income is the amenity fees, which they receive because they've bought the rights to receive them. the amounts of amenity fees, i believe, are tied to the consumer price index by a covenant in your deeds.

one last thot -- i don't disagree with your common sense conclusion that the district and the developer are one, even tho i know that legally they aren't. however, don't let janet tutt hear you say that the district is morse's government. she will chop your tongue off. the district very carefully preserves the distinction that the developer and the district are totally separte -- which, of course, is totally what the developer wants. the last thing he needs right now is for someone to prove that they are one and the same.

opus - regarding the bond counsel that gave the opinion that the bonds are A-OK. you are right on. that is one of the things that bond experts i've been talking to all week are buzzing about. of course, it's not automatic...someone has to take them to court. the one thing you have to realize is that this proably will not affect other CDDs. i don't know of any others in florida that have "perverted" the law (to us the IRS agent's phrase) in the way that these have to enrich the developer. the irregularities are what attracted the IRS to these bonds, along with the blue sky purchases.

12rideHD -- you have hit the main issue on the head. what the IRS is trying to force is for the CDD to issue taxable bonds. however, your spread may be a little off. the bonds experts i've been on the phone all week with are saying that the district may end up paying a pretty serious premium for past transgressions -- IF they can get money in the market. however, by the time this shakes out, the market could be in better condition. let's hope.

chuckinca -- you ask if the developer had influence over the district and the district issued the bonds, why isn't the developer liable? jimjoe who responded is correct. what we've been discussing here is tax liability, not general liability. morse bears no TAX liability because he is a separate legal entity. he paid his taxes on profits he made from the sales. if this were to somehow come back on the homeowners and they sued, the question of whether the developer might be liable in court is a different one.

my guess is that it all boils down to whether morse wants to keep developing here. (he does have another 'downtown' district already approved and ready to go). if he wants to keep going, i suspect he's going to have to step up in some way and help settle this. if not, i think he could walk away without fear of repercussion, at least from the IRS. (remember -- he paid taxes on gains from the sales) what the homeowners might do is another issue. this all comes from that oh-so-convenient (for morse) arrangement where he gets to control a government of his own, including perks that go with it like tax exempt bonds. that's the "perverted" part of this to which the agent referred. others CDDs in florida have migrated the power of the governmental district from the developer to the homeowners.

hope that all helps.

steve, sorry if we're boring you. i realize your interest in this is your pocketbook and lifestyle. other folks, however, have broaders interests in it, including some pretty fascinating public policy questions if you're intrigued by that sort of thing. i'm pretty much of a political science junkie, so i find the whole situation with its tentacles nin private/public partnerships worth consideration. it's certainly unique situation, even though districts such as this one exist elsewhere, such as calfornia. i'm looking at some of those this week and will write something if i find anything that might have a bearing on this particular situation.