Quote:
Originally Posted by djl8412
Panic over the on-going Villages CDD vs. IRS issue is certainly not adviseable, but neither is an attitude of becoming totally disconnected with events that could potentially impact your life.
It just amazes me how some look at hundreds of millions of dollars in possible CDD liability to satisfy the IRS as if it's a mere check for dinner at a local restaurant.
Again, we see examples of the automatic, knee-jerk "disgruntled reporter" response to information being provided by the fourth estate, as is their responsibility. Do these reporters have axes to grind with all of the subjects and/or individuals they write about. I don't think it's possible to manufacture that many axes.
IMHO, being informed and making rational decisions is a great balance. Making off-the-cuff, unsubstantiated insults because the news may not suit you is not a rational exchange.  |
To djl8412:
You (and Lauren Ritchie) are right about this matter. The implications are POTENTIALLY huge for Villagers, but it is still too early to say how the matter will play out. Unfortunately, the posters who ascribe the IRS's position to a low-level agent gone wild are overly optimistic about what is going on and misinformed about how the IRS operates. The current investigation is, in fact, part of a well-organized, national IRS crackdown on perceived abuses in the issuance of tax-exempt bonds. One can be fairly certain that a matter of this size is receiving high-level IRS attention.
To try to put this in perspective, set forth below is an attempt to quantify the costs and analyze the consequences of an acceptance of the IRS settlement offer, based on what we know now. Remember, if this settlement offer is turned down, the IRS is threatening to go after even bigger bucks.
According to the IRS, the current TOTAL tax exposure on all Series of bonds is $16,458,484. The first condition in the IRS settlement offer is that the IRS will settle for just "the tax exposure for the Series 2003 bonds", which is ONLY $2,877,366 plus post-2008 taxes that accrue until the bonds are redeemed.
The real cost, however, to the Central Districts (the owners and providers of our amenities) and to the Developer (technically, the Villages of Lake Sumter, Inc.-- a corporation that is owned by the Morse family) lies in conditions #2 and #3 of the IRS settlement offer:
Condition 2. The Center Districts would have to buy back about $360 million of outstanding bonds. How do the Districts raise this money? They would either have to (a) tax properties within their Districts, i.e., the Developer's properties, which the Central Districts obviously won't voluntarily do, since they are controlled by the Developer and, in any event, the Developer does not have $360 million in cash lying around, or (b) sell taxable bonds. Taxable bonds will presumably have to pay a higher interest rate than the Districts are currently paying on the tax-exempt bonds. How much more? I don't know since it would depend on the bond market, and the financial condition of the Central Districts, when the bonds are issued.
In fact, one would think that, with their underlying history, such taxable bonds might be a little tough to sell at all. But let's assume the cost is an extra 3%/year, which seems reasonable, over the interest now paid. That would be an extra ANNUAL cost of about $11 million. Amenity-fee increases are contractually capped at the CPI rate. So, how do the Central Districts cover this additional cost and still provide our amenities???
Condition 3. The Center Districts can no longer issue tax-exempt bonds. The Developer's strategy has been based on the ability of the Center Districts to issue low-cost tax-exempt bonds to pay the Developer for physical-amenity assets and for the assignment of the amenities' contracts, the latter resulting in a huge profit for the Developer. What happens to the future viability of the Developer's business model if that ability is lost???
The answers to the questions arising out of #2 and #3 are unclear at this point. If there is an attempt to offload the additonal costs on the Villagers or if the amenities that we were all promised by the Developer are reduced or destroyed, then another class action against the Developer, as well as against the two Central Districts and the others involved in the bond transactions, may be necessary. In that case, as an earlier Poster said, "Thank God for the Property Owners' Association."