I looked thru the thread and didn't see this article by Bond Buyer Online posted here, and I think it has some good information:
".......Sanford said the facts in the Village Center CDD are unusual. CDDs typically are initially created by developers, which issue bonds to finance the development of infrastructure in a community, and then sell lots to homeowners. While the developer or related parties may initially control the board of supervisors that governs the CDD,
under Florida law once there are 250 residents members of the board must be elected by the “qualified electorate,” meaning residents who can vote.
The Village Center CDD was set up as a non-residential CDD with a board of supervisors controlled by the developer or affiliated parties for about 20 years, according to the IRS.
The CDD’s bond documents stated that because of the non-residential nature of the development, there would never be “qualified electors” of board members, the IRS said.
The CDD’s board petitioned four times to shrink or otherwise move the district’s boundaries so that it would not include residences. Sanford said he had never seen a CDD take such actions.
The Village Center CDD contained recreational, water and sewer, and postal facilities as well as fire stations, that were constructed or acquired, owned and operated by the developer. Bonds were issued by the CDD to finance the purchase of these facilities from the developer. In its TAM, the IRS said that in some cases the “amount of [bond] proceeds paid to the developer and its affiliates significantly exceeded the developer’s costs of the assets acquired.”
Lots sold in other nearby CDDs were subject to deed restrictions requiring services to be provided by the developer, including an obligation by the developer to “perpetually provide the recreational facilities.” Property owners were required to pay the developer a monthly “amenities fee,” even if recreational facilities were located outside of their districts.
The IRS said in its TAM: “The issuer [CDD] was organized and operated to perpetuate private control and avoid indefinitely responsibility to a public electorate, either directly or through another elected state or local governmental body. That fact is not consistent with qualification as a political subdivision.”.......
Bond Buyer Online - IRS Ruling Against Fla. CDD May Have Limited Reach