hello villagers,
i have hopped on your forum to answer some of your questions and explain a little more. i’ll start by explaining how the villages CDDs differ from every other CDD in florida. that is the key to understanding why the IRS is on the villages case and not the case of any other CDD in the state. i noticed that many of you said this stuff is difficult to understand. it is, without question. but i’m going to give it a try. please email me with questions:
lritchie@orlandosentinel.com
then i’ll respond to individuals – not the snippy ones. there’s no point in witty little exchanges bashing each other. this issue is too weighty for that sort of levity.
in florida, statutes (state laws) allow for the creation of a form of government called a community development district. the villages’ CDDs were created in the usual way, which is to ask the county commission to allow the district to be established. the commissions in lake, sumter and marion all said yes in this case.
the so-called “numbered districts” function in the same way as every other CDD in florida: they were created to pay for the infrastructure of the community – i.e., roads, sewer plants, water plants, street lights, stuff like that. the developer controlled all the seats on the governing board of the CD. that’s the way the law is set up, and that is perfectly legitimate. the CDDs sold bonds to pay for hard, tangible assets, such as those mentioned above. as the development was sold, more folks who owned lots were entitled to seats on the governing board. eventually, the homeowners controlled the board. the set fee rates so that the community would continue to run and the bonds could be repaid. i don’t personally care for this setup, but it’s not illegal. so, no problem.
however, the village center district and the sumter landing district work differently. those CDDs were created in the same way as the ones mentioned above.
however, no residents actually live in the VCCD and SLCDD districts. it’s mostly commercial property that is either owned or controlled by the developer. if you doubt this, get online and read the bond statements. they clearly state that the property is either owned or controlled by the morse family.
so the VCCD and SLCDD board members are morse employees or associates. they are looking after morse’s interests, not those of the villages’ residents. if you are thinking that they are concerned about the residents/homeowners, you should stop reading right here because i cannot help you.
those board members of the VCCD and SLCDD at various points since 2003 voted to buy both tangible assets, such as swimming pools and gate houses for example, and to buy the right to collect your ammenity fees for 30 years.
that’s a little weird – they bought a right. the right to collect fees is NOT a tangible asset. by that, i mean it is not something you can touch. it’s what is called a “blue sky” or “intangible” purchase because it’s an idea, not a “hard” asset.
so, these two developer-controlled districts bought -- from the developer -- the recreational ammenities and the right to collect the fees for 30 years. in that transaction, the developer essentially cashed in on thirty future years of fees for himself and bought the recreational assets from himself. if the board members had not voted to buy the right to collect fees, the boards would not have had to issue bonds. rather, gary morse and his family would have had to collect their ammentiy fees over a period of 30 years – not in a lump sum.
following me?
every bond must have a stream of money from which it will be repaid. in this case, your ammenity fees are pledged to repay those bonds.
and that’s the catch.
why is this a “catch” you might ask?
the answer is that this is the ultimate form of taxation without representation.
you as a homeowner have no representation on the VCDD or SLCDD – the developer owns or controls the majority of land and seats on the governing board. and despite the purchase with YOUR ammenity money, you do not now and never will own the assets. that’s because the developer controls the governing boards and owns most of the property in the district.
here’s where the IRS comes in.
to be able to issue tax-free bonds, governments have to be real governments, like cities or counties or townships or boroughs. they have to exist for the public good. they cannot exist to make one person rich or to conduct transactions that benefit a single person or persons. purchases have be what’s called “arm’s length” – in other words, “disinterested.” what that means is there can’t be a conflict of interest.
of course, in this case, there is a very big conflict of interest. the developer is essentially buying from himself and issuing tax-free bonds to do it – and you, the homeowner, are paying for it. and wont’ even own the assets when the bonds are paid off.
that annoys the IRS, whose agent says the VCDD and SLCDD bonds should not be tax-free because they don’t meet the tests of being for the interest of the people. in fact, the agent used the word “perverted.” he said the government so “perverted” the intent of how CDDs should function under florida law that the bonds should not be tax free. i totally agree with him, but you may have a different opinion, and that is OK because this is still america.
now, on to the comments, but totv says i must do it in another post. so stand by....