[downeaster]

Originally Posted by Advogado

This is from Fitch, a bond-rating agency: IRS Ruling Unlikely to Impact Village's Residential CDDs

I would feel better, however, if Fitch hadn't qualified its opinion by saying that is "unlikely" that the ruling will impact the bonds issued by the residential (numbered) districts. Those are the bonds that are "attached" to our houses.

Originally Posted by villagerjack

I don't think they did.

development for retirees located in central Florida. VCCDD, created by the developer to sell the development's recreational facilities to the residents, issued $426 million of tax-exempt bonds to finance the purchase of the facilities.

Following a five and a half year investigation, the IRS ruled on May 30 that VCCDD is not a political subdivision and consequently cannot issue tax-exempt bonds. Therefore, the existing bonds of VCCDD were decla"Fitch Ratings-New York-19 June 2013: The recent Internal Revenue Service (IRS) decision regarding the Villages Center Community Development District (VCCDD) WILL NOT IMPACT Fitch-rated Village community development district bonds as they have different governance structures, Fitch Ratings says. Village Community Development District's No. 5 (CDD No. 5) and No.6 (CDD No. 6) special assessment bonds are rated 'A', with a Stable Outlook."

The HEADLINE you quote, was likely written by someone else, not FITCH.

19 Jun 2013 3:28 PM
IRS Ruling Unlikely to Impact Village's Residential CDDs
Fitch Ratings-New York-19 June 2013: The recent Internal Revenue Service (IRS) decision regarding the Villages Center Community Development District (VCCDD) will not impact Fitch-rated Village community development district bonds as they have different governance structures, Fitch Ratings says. Village Community Development District's No. 5 (CDD No. 5) and No.6 (CDD No. 6) special assessment bonds are rated 'A', with a Stable Outlook.

We are not aware of any current or pending investigation into the taxability of bonds issued by CDDs No. 5 and 6 and believe their independent governance structure insulates them from the IRS decision. They are exclusively residential and governed by representative boards elected by residents within the districts. The developer has no control over the internal affairs of either district. In our view, this structure is positive as the interests of the developer, property owners and bondholders are not always aligned.

We do not rate bonds issued by VCCDD. The Villages is a popular red taxable. The IRS noted the developer's exclusive control of the VCCDD board over the past 20 years and actions taken by the developer during that period to perpetuate that control. The IRS stated that the VCCDD board, by not being "accountable, directly or indirectly, to a general electorate" did not meet the definition of a political subdivision under Section 103 of the Internal Revenue Code.


There seems to be some contradictions and/or confusion in the above report from Fitch. Or, are they mixing the two CDD's? Aren't 5 and 6 in SLCDD and not part of the IRS decision?

I would also like to hear Edv's opinion on this.