[Advogado]

Fort those of you not on the POA e-mail list, this just arrived:

***** POA NEWS Alert *****
AUGUST 4, 2011 --- IRS UPDATE ---
On July 27, 2011, the VCCDD (Village Center Community Development District) received the Report of Alice Price, State Certified General Real Estate Appraiser, State of Florida, which was solicited by the IRS, to address the 2nd issue presented by the original IRS investigator, which is as Follows:
“The Opinions of Value (Fishkind and PRMG appraisals) do not support the price paid by the District to the Developer - facilities were purchased from a related party, the Developer, who has controlling ownership of the property within the District and thereby maintains control of the governing board of the District… The proceeds of the Bonds exceeded the amount necessary for the governmental purpose of the issue by more than 5% of such amount. This is considered an ’over issuance’ and therefore interest is not excludable… The payment of the $59+M sales price to the Developer by the District is the payment of gross proceeds of the Bonds to a related party and therefore not a governmental use of those Proceeds… Using tax-exempt bond proceeds to provide private golf courses not available for use to the general public on the same basis as the residents of a private gated community is not an essential government function. Therefore, these Bonds are taxable bonds…” Ms. Price's conclusions were as follows:
“Based upon my review of the Public Resources Management Group (PRMG), Inc. report, I have concluded that the estimate of the value of the amenity stream of $60,500,000 is overestimated and not credible. It should be noted that for analytical purposes and using data contained in the appraisal report under review as well as data provided by the VCCDD, I developed an opinion of the value of the Subject Purchased Assets. Based upon my analysis as outlined within the attached Appraisal Review Report was as follows:
Real Estate and Personal Property $3,990,000
Amenity Fees Income Stream $24,000,000
Total Market Value of Purchased Assets $27,900,000 ”

Excerpts from Ms. Tutt’s email to the VCDD Supervisors on July 27, 2011, regarding this finding by the IRS are as follows:
“…Importantly, the Appraisal Review does correct the essential error that was made by the initial IRS agent handling the audit, by not excluding the value of the amenities fees from the value of the assets purchased with the proceeds of the bonds. However, I believe the value arrived at in the Appraisal Review is substantially less than the actual value of the purchased assets…” “…it has been my experience that while bond issues may vary in length, municipal bonds issued for infrastructure and other governmental operations such as water and sewer systems (which is the model the District used) have used a 30 year income stream when determining value based upon the capitalization of revenue method. I believe that Ms. Price’s use of a 15 year period is based on the assumption that is the typical holding period for a business or property, which is not an assumption that is applicable to this purchase by the District…” (Mr. Ori from PRMG, had advised Ms. Tutt that the 30-year holding period was appropriate because the time frame for such period was equal to or less than the useful life of the capital facilities acquired and the revenue stream being generated supported the acquisition. Additionally he said that he also recognized the 30 year holding period has been a typical holding period for state and local goverments." “The second item of concern is the Amenity Fee Cash Flow Analysis prepared by Ms. Price . . . Initial review of the figures indicates that some of the analysis and assumptions are not accurate which lead her to assert an incorrect value of the net amenity fee cash flow after taking into account the expenses allocable to the amenity fees purchased…”
“Finally, it appears an arbitrary decision was made to change the capitalization rate assumption used to determine the present value of the cash flow…” Ms. Tutt concluded the report to the VCCD by stating that, “…staff will be reviewing the valuation, addressing the issues with the District’s attorneys, and preparing questions and comments for the IRS regarding Ms. Price’s Appraisal Review.”

The POA'S Position in this Matter.
The POA has not taken a position on the relative merits of the positions of the IRS and the VCCDD in this controversy, although we sincerely hope that the VCCDD is able to prevail. In regard to the current IRS investigation, the POA's primary objective is to try to protect the rights and interests of the residents of the Villages, who have made The Villages their retirement home.

Most Villagers are not wealthy and have worked hard in order to now enjoy an active life style in The Villages. Any action that takes away what Villagers have worked so hard to gain is an action that the POA opposes. In this regard, we continue to follow closely the developments in order to try to ensure that any resolution of the IRS investigation does not jeopardize the residents' amenities or result in the costs of an IRS victory being passed on to the residents.
P. S.’s
1) If you are new to the area or want a ‘refresher course’ about the issues we would suggest you review the article entitled “How the IRS Bond Inquiry Affects You” which can be found on our website, poa4us.org. Click on the archived Bulletin link and go to the August 2009, issue.
2) Both Janet Tutt’s memo to the VCDD Supervisors and Ms. Price’s Report are on the District web site. (districtgov.org - left hand column of home page – click on IRS Updates)