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From the V' News...

Villages bonds earn A+, A ratings despite IRS, lawsuit concerns
September 15, 2014 By Marv Balousek

A lawsuit apparently has stopped efforts by the Sumter Landing Development District to refinance amenity and utility bonds.

In August, The Village Community Center Development District began the process of refinancing millions of dollars in bonds to take advantage of low interest rates. About $88.7 million of these bonds are expected to be sold this week.

But officials of the Sumter Landing District were advised recently that they could not move forward with a similar plan in the area south of County Road 466 due to the lawsuit.

Filed last March by attorney Carol Anderson, the class-action lawsuit claims that the developer benefiitted a decade ago by illegally using amenities fees as collateral to issue bonds for community expansion.

About a third of the current amenities fee budget is appropriated for the debt on about $65 million in bonds that were issued, according to the lawsuit, which claims that homeowners should not be responsible for this debt.

“Permitted uses do not include using subdivision amenities fees to finance a purchase of subdivision assets and thereby create an excessive bond debt,” the lawsuit complaint stated.

A response filed Sept. 12 by attorneys Stephen Johnson and Stephanie McCulloch asked the court to dismiss the lawsuit, calling it “frivilous.”

“There is simply not one factual allegation that the obligations of the developer in the plain language of the declarations were breached in any way,” the response stated.

Plaintiffs in the lawsuit include Community Development District 5 Supervisor and Property Owners Association Vice President Gerald Ferlisi as well as Thomas Burke and Susan Richmond. Defendants are the Sumter Landing District, The Villages of Lake-Sumter Inc. and developers Gary and Mark Morse.

“I have never filed a frivilous lawsuit,” said Anderson, the plaintiffs’ attorney. “They have a duty to be absolutely loyal to the plaintifs and correct these amenity-fee (problems).”

An earlier lawsuit brought by the Property Owners Association resulted in a 2007 settlement in which the developers agreed to pay $40 million over 13 years for repairs and improvements to recreation centers and other facilities in the area north of County Road 466. Gary Morse praised the settlement.

Filing the latest lawsuit was delayed in 2010 because of an Internal Revenue Service investigation into the use of tax-exempt bonds to finance development in The Villages.

n an agreement also signed by Sumter Landing District chairman Michael Berning, the same plaintiffs agreed then to hold off filing the lawsuit. The parties agreed they would extend the statutes of limitations on filing their claims.

Now, the IRS investigation is nearing a conclusion and the dispute could wind up in the courts. The agency has claimed the center district was not authorized to issue tax-exempt bonds because it did not qualify as a political subdivision under the law. A final IRS ruling is expected soon.

Despite the turmoil over the lawsuit and IRS probe, Fitch Ratings recently gave A and A+ ratings to bonds issued by the Villages Center Development District. This week’s bond sale will shift tax-exempt bonds to taxable bonds and could help alleviate the IRS concerns.