Quote:
Originally Posted by NJblue
I for one am not defending Morse. It just seems to me that we the residents were the ones benefitting from what you call "dancing around the law". Afterall, the result of this "dance" was lower amenity fees for us. If he had not structured the deal as tax-free bonds, we would have to pay higher amenity fees to cover the extra bond interest payment. If you see it another way, please explain.
|
Good question, but here's the way I see it. Had the bonds issued been taxable bonds, they would have cost the borrowers less than nontaxable bonds, assuming they both had the same coupon rate. We'd have to go back in time and see the bond prices at the time of bond issuance to see exactly the spread between taxable and non-taxable bond prices. Anyways, the developer would have had to sell more bonds to obtain the same amount of money, so he would have paid a similar amount of interest. Not to mention there may have been additional tax writeoffs, depreciation etc., to be considered. I am no bond expert, and neither I expect are you, but we both know bond issuance and underwriting, etc., is complicated.
My chief complaint has been that the developer was warned back in 2003 about the legalities of the bond issuance, and he continued to do so. Here's what W. Mark Scott, director of the IRS' tax-exempt bond division, wrote to the district on Jan. 29, 2003, when the bonds got a thumbs up after an earlier audit.
"Our closing of these cases, however, should not be construed as an approval of your method of operations. We have concerns regarding: the amount of control the developer has over the issuer; the questions of value of the assets sold by the developer to the issuer as these are not arm's length [transactions]; the treatment of income and expenses (whether income is properly reported and expenses deducted only once); compliance with state law."
Please note above , the IRS said directly that they had concerns with the developer's compliance with state law. I'm sorry you don't like my term "dancing around the law" but when they were warned and continued to push the limits of the law, so be it.
Now, many years later, if the bonds have to be re-issued and we the residents have to pay the IRS penalties, we are concerned about the financial consequences to The Villages and our amenities.