Orlando sentinel
Bond profits go to developer
Morse, 76, is the developer of The Villages, one of the world's largest retirement communities, located on 33 square-miles south of Ocala. Through his fully owned Holding Company of The Villages, he has built and sold more than 44,400 homes since 1983.
Morse has a fortune of $2.6 billion, at least $955 million of which comes directly from money paid to him from the issuance of tax-free municipal bonds -- including the bonds ruled taxable by the IRS, according to data compiled by Bloomberg from an analysis of 38 bond-offering statements.
Under Florida's community-development district arrangement, Morse built amenities in The Villages -- primarily golf courses, pools and guard houses -- and then sold them to residents through district boards that decided how much to pay for the assets. The boards were appointed by Morse, as state law allows, and in every case the majority of the members worked for Morse; one board included Morse, according to Bloomberg's analysis.
AND
Herald Tribune
In 2008, a sharp IRS agent conducting an audit figured out how the greedy Villages had perverted the law even further, adding a unique twist that kept the district's board of directors from ever being elected by the people who live there. That allowed the family of developer Gary Morse to pocket $925 million from the sale of tax-free bonds alone, according to Bloomberg News.
Morse, whose fortune Bloomberg estimated at $2.9 billion, used some of the proceeds of the bonds to pay for The Villages' expansion, but the biggest chunk of the cash went to purchase from him the right to collect amenity fees and the actual amenities themselves, such as golf courses and swimming pools.
As Agent Dominick Servadio Jr.'s audit got close to the heart of the matter, he began to write letters to the district questioning whether the proceeds from tax-free bonds were being used for a public purpose, whether the purchases were worth what was paid and whether the district was acting in the best interest of the public. Excellent questions, all.
Indeed, why would a board with the interest of the public at heart take out multimillion-dollar loans to buy the developer's responsibility and assets — unless, of course, the real goal was to make him rich? Consider that the developer is required by deeds to provide amenities to Villages homebuyers. Why not just stay out of enormous debt and let the developer collect amenity fees and take care of pools and such?
Suddenly, Servadio ran into trouble. The 25-year IRS bond expert found himself under investigation by agents of the Treasury Department's inspector general who accused him of illegally leaking his colorfully written documents to the press.
They tried — unsuccessfully — to charge him with a crime. The treasury agent who interviewed this columnist in 2011 stared in disbelief when told that the newspaper got all the IRS agent's documents through public-records requests. Obviously, the agent was uninformed about breadth of Florida's open-records law.
At the time, the agent denied that the investigation into Servadio's actions was a result of Morse's political influence. The developer, his family members and employees are among the largest contributors nationally to the Republican Party, its causes and committees. They kicked in at least $11.6 million in the last 13 years, including $2.4 million alone in the 2012 election cycle, according to OpenSecrets.org, an organization that tracks contributions.
Servadio retired to care for his ailing wife, and the case got bounced around to various agents of the IRS in different cities.
Meanwhile, in January 2012, dissatisfaction with community-development districts was brewing across the state, and Gov. Rick Scott ordered an investigation of Florida's 1,634 special districts. (The probe isn't expect to be done until January.)
Two months after Scott signed the executive order, Morse, his three children and The Villages itself donated a total of $180,000 to Let's Get to Work, a political-action committee whose millions in contributions are expected to help Scott get re-elected in 2014.
Then, in the last quarter of 2012, The Villages hired the two-time chairman of the Florida Republican Party to lobby for its CDDs in Washington. Apparently it didn't work.
Fast-forward six months to today and the IRS ruling.
Florida's director of bond finance says the ruling will have an icy effect on districts that want to issue tax-free bonds, which have been used to build much of the infrastructure inside Florida developments.
Good. CDD bonds are a rip-off — just a not-so-subtle way to shift the cost of doing business from developers to the people buying homes. Buyers in average developments with a CDD get to pay for some infrastructure twice: once in the price of the house and again as they pay off bonds.
In The Villages, however, it's more like paying triple: once in the price of the house, once (with interest) as the bonds are paid off and again (with more interest) in a bond attached to individual homes at the closings.