The Villages and the IRS. From Lauren Ritchie

[Lauren Ritchie]

Hello Villagers,

I'm Lauren Ritchie, the Sentinel columnist who wrote the 3/1 column about the Villages and the IRS. I've been reading your notes about how my columns are "slanted."

Yes, they are. They are supposed to be slanted. That's what the Sentinel pays me to do. I am not a news reporter. Those folks are paid to get all sides of the story and lay it before you without comment.

I'm a columnist, which means that I write opinion. I'm paid to research, form an opinion and write it in a way that convinces readers. I DO have an opinion about this IRS investigation and about the way that the developer has used the community development districts to his benefit -- at terrible expense and liability to Villages residents. Do you realize, for example, that the outstanding bond debt on each of your homes is roughly $18,000? I wonder whether you would have bought your place if that had been tacked onto the purchase price up front? And, in addition, that $18K is the face value. Over the life of the bonds, homeowners will pay another $18K-$20K in interest. (Consider that the amortization schedule of the $64 million in bonds the IRS is investigating is about $134.5 million over the life of the bond.)

I have a second column about the IRS investigation that is to be published on Wednesday. If you don't get the paper, you can access the column online at www.orlandosentinel.com/lake and look for my picture with a list of columns by it.

In any event, I hope this helps you understand what I do. Regardless, the real question here is about the validity of the bonds, not what anyone might write about them.

Lauren

[Canabarrybarb]

Thank you for making us aware of this issue.

[graciegirl]

I appreciate your taking the time to tell us this.

Lauren. I do believe that most of us are aware of the bond debt before we buy. I certainly hope so. We discuss it here a lot I know.

What do others think?

[starflyte1]

Aren't there two bond debts? One that is added on to the cost of each new home, and the over all bond debt of the owners of homes in TV that pays for the purchase of the golf courses, entry gates and various other things that are sold by the developer to the homeowners?

[aln]

I know when I looked at a home in the Village of Winefred in 2004, the bond to be TACKED on was $10,000.

When I looked at a home in the Village on the Shores of Lake Miona in 2008, the bond to be TACKED on was $50,000.

I don't know if that's the same bond Lauren is talking about and if there's more I'd like to know.

[tucson]

Thank you for all your research and info on all that affects us here re; bonds. I'm very grateful, keep up the GOOD work...

[SteveZ]

Good grief! Another Slantinel Slap at one of the few things that actually work without "government" help.

Ms. Richie. We are not a bunch of doddling old fools who need protection from the big bad developer. We're well seasoned on how people make money from other people, and don't really mind as long as we get something of value for our funds.

Yes, there is a "bond" that is tacked on, and while the marketing and presentation of it sounds strange to some, it's no different than when "shipping and handling," "tax," and a host of other add-ons appear.

Yes, if one decides to finance a $10-50K bond for 20-30 years, it will indeed result in interest equivalent to the size of the loan - just like any other 20-30 year loan. Duh!

And yes, there is an annual common-area fee similar to what a homeowner's association (Orlando is full of them!) levies on all within a development for maintenance and upkeep of the common areas. Why is that such a surprise?

The CDD concept is not all that bad, in that when it works, it works very well.

I wonder if The Villages advertised in The Sentinel if there would be a slanted piece trying to make this place sound like a rip-off? There was a time when Disney didn't advertise in The Sentinel, and negative articles about Reedy Creek Development Corp. appeared with some regularity. Or is it because The Villages has its own newspaper and The Sentinel sees such articles as a possible way to break into the market here?

With all of Orlando's problems - examples: South Orange Blossom Trail is still an "interesting" place, Avalon Park's developers are still being chased, Metro West has its share of "history," and the Winter Park / Orlando Naval Base property acquisition saga is still a gem - one would think there was plenty of things within a ten-mile radius of Lake Eola for commentary before venturing into the far reaches of Sumter, Lake and Marion counties.

But then again, us old fools need protecting.....

[Whalen]

I appreciate your taking the time to tell us this.

Lauren. I do believe that most of us are aware of the bond debt before we buy. I certainly hope so. We discuss it here a lot I know.

What do others think?

There seems to be a bond issue that is in addition to or separate from the bond that is tacked on to the purchase of a home in TV.
Explanations sound like the discussions about derivitives or default swaps and are not very clear.
Can someone please explain.

[Russ_Boston]

Do you realize, for example, that the outstanding bond debt on each of your homes is roughly $18,000?

Lauren, Steve, V7, anyone help please:

Is this the bond that we know about when we purchase the home or is this something that is yet to come down the pike?

If it is the former then what the heck is Lauren talking about. Every new homeowner knows about the bond that can be paid off over the 30 years or just paid up front like any other home debt.

What am I missing?

Thanks for the help.

[villages07]

Ms Richie is talking about the Recreation Bonds that are used to purchase amenity facilities (Rec Centers, golf courses, etc) from the Developer. We pay our amenity fees to the Central commercial Districts (Sumter or Villages Central districts). These central districts are run by a board essentially appointed by the developer. These districts establish budgets for the amenity fees. Approx 60% of our amenity fees go to payoff the recreation bonds. The other 40% goes to ongoing maintenance and operations of the amenities. I believe it is these recreation bonds that are in question by the IRS as to whether they are floated for a municipal govt and hence should be tax free. Whether they are tax free or not affects how marketable they are up front and what interest rate they will be floated for. Not tax free then higher interest rate and more expense for us to pay back.

There is a whole separate issue on whether the cost that the central CDDs agree to pay for amenity purchases is fair value or not. I have some concerns about these terms as well since those agreeing to the purchase price with the developer are appointed by the developer. But, this issue is different than the IRS investigation.

The bond each of us pays on our homes is a differnent bond...it paid for the upfront infrastructure in our neighborhoods. These are considered tax free municipal bonds and I don't believe they are in question.

[Russ_Boston]

Thanks V7 - so if the IRS rules against us will we be socked with some new fee? Or will the amenities fee need to be raised beyond its usual cost of living increase?

[collie1228]

Ms. Ritchie's column brings to light my biggest concern about the structure of The Villages financial foundation. And that concern is that I don't understand it completely, and need more information before I would ever consider a purchase. I appreciate her bringing up these issues, even if some in this forum think her columns are "snarky" or "slanted". If she's incorrect about something, call her on it! All I've seen in rebuttal so far are "snarky" comments from the other side of the argument. Wow, if she replied to our comments with "Good grief" or "Duh", we would all be writing letters to her editor calling for her scalp. I guess we have the right to our opionions, but the paid opinion writer doesn't have the right to hers . . . . I, for one, appreciate the fact that she is concerned enough to address our issues in this forum and in a subsequent column. I look forward to reading it.

[Russ_Boston]

Collie - I appreciate the 'let's give her a chance theory' but when we do that we get back and forth comment about what a columnist should or shouldn't be etc.

Let's try and keep this thread to a real fact based thread. Q & A about the issue at hand.

So where do we stand if the IRS rules against the deal?

[golfnut]

She has had a chance to see all of our comments now, if she's done a thorough investigation at this point hopefully she will be able to explain it to us..............GN

[Halle]

I feel I have a good understanding of the Bond Issue and I agree with V07 the real issue is how the Non-Taxable status may change and the effect that may have on our Amenity Fees.

[iaudit]

Steve

Your response was way out of line. It is obvious that, in this case, you do not know what you are talking about. Read what Villages07 wrote, these bonds are the ones incurred by the Central District and are being repaid by our amenity fees. They are not the infrastructure bonds we pay with our tax bill on an annual basis.

Ms. Ritchey was pointing out how an adverse IRS ruling will have financial implications on the residents of the villages. This means more money out of our pockets, like raising the on-line golf scheduling, that benefits the developer to our detriment.

[ohiogolf]

Lauren:

I fully appreciate your obligation as a column writer to put an educated slant on your writings. I thought your article was excellent and informative. However, like some of the others who have replied herein, please do not think of the Village resident as some fool who simply buys into the Village lifestyle without their eyes wide open to the obligations, including the bond. I am a retired attorney for one of the largest corporations in the world. We bought new in the Villages last year with full knowledge and understanding of the bond, its cost and its interest rate obligation. We were not fooled or shocked by the bond.
Your article about the IRS ruling is enlightening for the fact that the IRS did not buy into the nature of the bonds as meeting tax exempt standards. I will be very interested in your follow-up article tomorrow. But again, please do not view a Village resident as a feeble minded person who does not understand their circumstances. You would be pleasently surprised otherwise.
Take care and keep up the good work.

[collie1228]

Thanks Russ - I'm sure I needed to be scolded from you. I remain thankful to her for surfacing this issue that might, at some point, impact my decision to purchase real estate in The Villages.

[Russ_Boston]

Thanks Russ - I'm sure I needed to be scolded from you. I remain thankful to her for surfacing this issue that might, at some point, impact my decision to purchase real estate in The Villages.

I'm sorry that you felt scolded. I really didn't mean it that way.

[Carla B]

In rereading Ms. Ritchie's article in the Sentinel, in that piece she was talking about the recreation bonds. In her post on TOTV today, she threw into the mix the bonds we each pay on our residence and asked if we knew about them when we bought. Well, yeah, we did. Maybe her comments on these bonds in her thread today caused confusion in the minds of more than just myself.

[Russ_Boston]

Carla - after re-reading it I can see the confusion and why Ohio and others might get miffed. So I apologize to any that I've offended.

This is confusing though and that is why I asked for just facts and not opinion towards Ms. Ritchie.

[starflyte1]

Thanks V7, you explained it well. Everyone knows about the bonds that are paid with the purchase of the house, but not everyone is aware of the high debt other bonds for amenities bought from the developers. That fact kept us from buying in TV many years earlier, but when we did buy in Dec, we were aware of the bond liability, and purchased a smaller home than we would have had the bonds not existed. The IRS liability may become a totally new liabilty, but we are comfortable with our purchase.

[shuffleboard]

The real problem is that... will the properties that we are paying for, be still here when the bonds are paid off?

I did not know when I bought here that I owed $18,000 debt for the common areas and would be paying for them through my amenities fees for the next 30 years. I did not realize that 1/2 of my ammenities fees goes toward paying off bonds!

Take for example the Savannah Performing center. Will it be still functionong in 30 years? Look what happened to Paradise Center.. It was temite infested and ready to fall down, before they gutted it and rebuilt it!

If they take away the favored tax status for these bonds and we (the residents) have to pay a higher interest rate, will it take away from the maintenance of our common properties? Will we get a special assessment to cover the shortfall? I think the increase in the ammenity fee is tied to CPI so that can't be changed

Will this situation result in home prices going down as prospective buyers are turned off by the negative practices of the developer?

Time will tell

I appreciate your taking the time to tell us this.

Lauren. I do believe that most of us are aware of the bond debt before we buy. I certainly hope so. We discuss it here a lot I know.

What do others think?

[Alex]

Good article Ms. Ritchie.
Once I figured out I had no say in The Villages I sold (with profit) and relocated to a very nearby community. Good news, I am happier all the way around. I did a great deal of research and realize many people are very happy where they live outside The Villages.
Don't knock other places if you have never lived there. I think you are all paying too much to the developer and I really hope you don't end up paying more.

[Russ_Boston]

I did not know when I bought here that I owed $18,000 debt for the common areas and would be paying for them through my amenities fees for the next 30 years.

How is that possible? There must be some paperwork that mentioned that you had a bond to pay.

[batman911]

After all is said and done, who owns the ammenities now and who will own them after the bonds are paid? When will the home owners be able to elect Central District board members? Does the developer currently subsidize the cost of maintenance for the ammenities?

[SteveZ]

Steve

Your response was way out of line. It is obvious that, in this case, you do not know what you are talking about. Read what Villages07 wrote, these bonds are the ones incurred by the Central District and are being repaid by our amenity fees. They are not the infrastructure bonds we pay with our tax bill on an annual basis.

Ms. Ritchey was pointing out how an adverse IRS ruling will have financial implications on the residents of the villages. This means more money out of our pockets, like raising the on-line golf scheduling, that benefits the developer to our detriment.
As someone who has lived in Central FL for the past 25 years (except for 4 in DC), I'm no fan of the Sentinel. In the Orlando area, it's the only"game in town." I'm glad to be in an area outside its normal distribution.

Whatever the IRS does, that's between the IRS and the account being audited. If IRS rules against an account, then both sides are off to tax court because of the money level involved. When the final answer comes is anyone's guess.

Tax issues come up all the time in businesses, and most large businesses have a cadre of accountants and lawyers on call just for situations like this. The law firm representing Mr. Morse and all is one of the most respected in Central FL and the nation, and not one inexperienced in these matters.

Ms. Ritchie wrote her article in a manner of judge, jury and executioner, and intentionally sculpted it so as to cause fear and make herself (and the Sentinel) as the savior of us all. Shades of Harold Hill and 76 Trombones!

Time - and the legal process - will resolve the matter, and all the flame-fanning of the Sentinel won't change that. Facts, not insinuation, will prevail.

The Sentinel is in the business of selling newspapers, and wants to penetrate this market. Whipping up retirees into a frenzy is one way to try to make it appear as necessary reading, but it is a cheap marketing ploy.

I really don't care whether one auditor within the IRS isn't satisfied. There's a lot of auditors in IRS, and IRS also has a hierarchy to deal with before and if anything ever becomes "final." And then there's tax court and the appellate process.

In other words.....much ado about nothing. But that's my opinion, and it's as valid as any columnist - and I am not being compensated in any manner on the subject or to create the subject into more than it is!

In the end, I'm content to be living here. It's more affordable than anywhere else I"ve found, and I believe I more than get my money's worth.

[iaudit]

The Sentinel had a link to the entire IRS report:

http://www.orlandosentinel.com/media/acrobat/2009-03/45365631.pdf

It is a rather long read, over 100 pages, but it shows the extent to which the Central district highly overpaid for all the recreation facilities. I would suggest starting around page 73, where the appraisal method used to purchase the facilities is analyzed.

[djl8412]

Thank you Lauren. I, for one, tried to convey an opinion to some Villages residents that they need to be concerned about the meat of your column and not consumed with a possible personal agenda. I think you have explained yourself extremely well. KEEP WRITING!

[djl8412]

OhioGolf:

Please don't infer that Ms. Ritchie was inferring that Villages residents are old fools and feeble minded. While the majority of us did research the bonds, amenity fees, taxes, etc. before we bought here, I can't believe there are some who didn't fully understand all these facets and the more Ms. Ritchie writes, the more we can see how confusing it can be. I think all of us will have surprises in the future and it should be transparent.

[RCT]

Hello Villagers,

I'm Lauren Ritchie, the Sentinel columnist who wrote the 3/1 column about the Villages and the IRS. I've been reading your notes about how my columns are "slanted."

Yes, they are. They are supposed to be slanted. That's what the Sentinel pays me to do. I am not a news reporter. Those folks are paid to get all sides of the story and lay it before you without comment.

I'm a columnist, which means that I write opinion. I'm paid to research, form an opinion and write it in a way that convinces readers. I DO have an opinion about this IRS investigation and about the way that the developer has used the community development districts to his benefit -- at terrible expense and liability to Villages residents. Do you realize, for example, that the outstanding bond debt on each of your homes is roughly $18,000? I wonder whether you would have bought your place if that had been tacked onto the purchase price up front? And, in addition, that $18K is the face value. Over the life of the bonds, homeowners will pay another $18K-$20K in interest. (Consider that the amortization schedule of the $64 million in bonds the IRS is investigating is about $134.5 million over the life of the bond.)

I have a second column about the IRS investigation that is to be published on Wednesday. If you don't get the paper, you can access the column online at www.orlandosentinel.com/lake and look for my picture with a list of columns by it.

In any event, I hope this helps you understand what I do. Regardless, the real question here is about the validity of the bonds, not what anyone might write about them.

Lauren The thing you are not stating is, that in most other communities, these fees ARE included in the price of the home. Impact fees for infrastructure ARE a reality that almost every developer has to pay the city, town, state, etc. where they are. There is NO way around this, the only question is wether it is totaled in the price of the home, or separated, as TV's chose to do. Now, the interest is alot, IF you choose to do it this way, if you pay it right away, then of course, that interest isn't a factor. I respect what you say about you are a columnist, but get ALL the facts, please, BEFORE you make YOUR opinion public.

[RCT]

Good article Ms. Ritchie.
Once I figured out I had no say in The Villages I sold (with profit) and relocated to a very nearby community. Good news, I am happier all the way around. I did a great deal of research and realize many people are very happy where they live outside The Villages.
Don't knock other places if you have never lived there. I think you are all paying too much to the developer and I really hope you don't end up paying more. Yes, but look at so many communities around this area that advertise "close to The Villages". What is the reason? People from the areas come into The Villages for entertainment and such. I'd rather pay a little more to be here, instead of living in another area, and have to commute to here.

[djl8412]

Steve:

Everyone should be able to express a view in the form of a statement or question without being chastised for it. While I don't question your level of knowlege on these issues, I do have a concern on your comments toward those who may not be at your level. If you feel you're getting a good bang for your buck, no one should try to make you feel otherwise, but we all should be vigilant and ask that all the layers of these issues be easier to understand.

Also, how many other local newspapers are there around The Villages other than the Daily Sun?

[shermark]

After reading Laurens article about 25 times, I e-mailed her to thank her for the informative article. She replied back to me and all she is doing is letting the Villagers know what is going on with this bond issue. Her intent is not to be condescending nor does she think the Villagers are in anyway old,feeble,uneducated and can't think for themselves. She does not have any agenda towards the Villages. She is simply doing her job and giving the Villages a heads-up.

[starflyte1]

RCT, I am not sure that we are all talking about the same bonds. Yes, there is the one that comes with your home when you buy it new. You can pay it off with no interest.

However, the bond that is being talked about here is a different bond, for many millions of dollars, that the owners of TV owe the developer for the amenities, ie golf course, etc., sold to the owners. (I think that many assume that the amenities belong to them when they buy, but that is not always the case.) That pay off is a large % of your monthly expense charge paid to TV. There is no way for an owner to pay off their share that I am aware of.

[golfnut]

Maybe she will do a follow up post here since she started this thread.....GN

[SteveZ]

OhioGolf:

Please don't infer that Ms. Ritchie was inferring that Villages residents are old fools and feeble minded. While the majority of us did research the bonds, amenity fees, taxes, etc. before we bought here, I can't believe there are some who didn't fully understand all these facets and the more Ms. Ritchie writes, the more we can see how confusing it can be. I think all of us will have surprises in the future and it should be transparent.

I'm the one who made the "old fool" comment, and did read the entire examiner's report. I still believe in the "innocent until proven guilty" concept. I don't like it when a newspaper uses its journalistic pulpit to whipsaw people and cause consternation for its own commercial gain.

If this is an accounting dispute between the IRS and others, that will be determined according to the law. If there is anything beyond that, then the appropriate state and/or federal authorities will get involved.

So far only one side of the story has been heard, and that's of the IRS examiner, and based on only that side an "opinion" has been published. There's still a lot to hear before any real "truth" becomes evident, and everyone deserves that before being "opined" negatively.

[RCT]

RCT, I am not sure that we are all talking about the same bonds. Yes, there is the one that comes with your home when you buy it new. You can pay it off with no interest.

However, the bond that is being talked about here is a different bond, for many millions of dollars, that the owners of TV owe the developer for the amenities, ie golf course, etc., sold to the owners. (I think that many assume that the amenities belong to them when they buy, but that is not always the case.) That pay off is a large % of your monthly expense charge paid to TV. There is no way for an owner to pay off their share that I am aware of. The second article does address the bond on your home, yes. I understand the article, the first one, is about amenities, and all this was disclosed, and talked about, when the lawsuit came up, and the developers agreed to pay millions and millions for future upkeep of all the centers and such. My complaint still being about her is, that I agree, she is an opinion writer, but still, to form an opinion, you still must gather facts, to state and informed opinion, don't you? Not just gather enough to make a shocking story. This avenue makes her no better than a radio shock jock, in my opinion.

[Lauren Ritchie]

Hi again,

I don't want to bore you folks -- just thought I'd try to clarify a couple things. First, I don't see Villages residents as feeble minded or stupid. Most of the folks I've met up there are retired professionals with excellent minds. I particularly enjoy the League of Women Voters ladies who have asked me to speak several times. They're sharp.

That said, if I were looking for a retirement home, I'm not sure I'd do a ton of behind-the-scenes investigation to figure out some murky financing structure that doesn't on the surface seem to affect me. Unfortunately, it actually does in this case.

Several of your posters got it right -- there are two types of community development districts in The Villages, and they issue two types of bonds. The bond that is "attached" to your house, the one that you're told about and appears on your tax bill, is issued by what are usually referred to as the "numbered districts." Those bonds buy concrete properties, such as sewer plants, and only the residents of those districts are obligated to repay those bonds.

The Village Center Community Development District is a different critter, and I've never heard anyone say that this was explained at the time of purchase. But perhaps it is. I'd love to hear if someone was told about it.

The Village Center CDD has the authority and power to issue bonds and to levy property taxes, though it has never done the latter yet to date. It also has the power to make everyone in the Villages repay the bonds, not just property owners inside the district, which, as I'm sure most of you know, are all commercial. The board is controlled by the developer, who acknowledges this openly in all the bond documents and in replies to the IRS, which are public record. The district is set up so that Morse always will control it until he choses to relinquish that control.

The Village Center CDD has the power to issue a different type of bond -- a recreational revenue bond -- which buys not only concrete things like swimming pools and golf cart paths, but also, "blue sky" items, such as the right to collect amenity fees.

One of the posters mentioned that people pay for these items, regardless of where they live, and I should get my act together before coming down on this method of payment.

To a degree, that is correct. Of course, any developer must charge for recreational things like pools and clubhouses and golf courses. I believe, however, that Villagers are paying twice and perhaps three times for the same items.

Think about it: When a developer builds a subdivision with clubhouses and pools and so forth, he typically includes those items in the cost of the house.

In this case, the developer has sold those goodie-type items to you through a purchase by the Village Center district, so those things ought to be deducted from the price of the house, right? In addition, he's sold you the infrastructure, such as sewer and water plants, through the numbered districts. Those items, too, ought to be deducted from the purchase price of the house, then.

Were they? Did you get a really sweet deal on your house? Did you pay far less for your house than people in other retirement communities pay? I think not. Ask yourself...when I bought a house, what did I buy? Theoretically, you bought only the actual lot and structure -- you're paying for everything elese separately, right?

If that's the case, you should have gotten a pretty cheap house. I don't think you did. The truth is that the cost of the amenties and the infrastructure was included in your house price. So, you're paying for them twice. Then, you're paying for them a third time because of the interest being paid on what are unnecessary bonds.

If that's OK with you, then God bless. Have fun. Ignore these columns. I disagree with your poster who doesn't think that Villages residents will be dragged into this IRS investigation. YOU are the district. YOU are its only source of income. It's not some disembodied entity. It's a taxing authority that issued bonds on YOUR behalf.

The fellow whose opinion is that nothng is going to happen may wish to do additional research. He will find that in other situations around the country where tax free bonds have been deemed taxable, the IRS typically requires that all or part of the bonds be redeemed or 'called'. To do that, the district would have to pay off the loan. And where would this money come from? It could come only from you, the property owner. I flatly asked the Village Center district manager if the district it had the financial capability to call the bonds (without bankrupty) and district officials did not answer. (tomorrow's column)

If the IRS can make stick its contention that the district and the developer are essentially one entity, then I think that opens the door to collect from the developer, too.

The notion that columnists who write for the Sentinel or any other newspaper do it to sell papers is a tired old claim without credibility that has long since lost any basis in reality. That's a diversion from the real issue, and if that were true, nothing in any paper would be believable. I don't mind when people disagree with my column -- and there's plenty of room to do so in this situation in particular -- but let's do it from a position of knowledge and respect.

I have done considerable research to try to present reasonable scenarios of how this might play out. There are more possible ways than I can detail, and I do not claim to be a bond expert. I don't think anyone can say what will happen yet. It's too early. But I think that there's at least a box to be drawn within which folks can see the possibilities, and that's what I've attempted to do with Wednesday's column.

Thank you for allowing me space to respond and to provide more information. I appreciate everyone reading the columns, too. And I look forward to hearing more from all of you.

Lauren

[iaudit]

RCT

The lawsuit did not address the bonds used to buy the recreation facilities. It involved the developer not using part of the amenity fee to establish reserves needed to cover capital expenditures to maintain/rebuild recreation facilities and the like, such as cart paths. Although the value paid the developer for these facilities has been criticized by many, the lawsuit had nothing to do with this type of bonds used, the method used to value the facilities and controlling interest held by the developer over the non-resident central district.

In addition, the lawsuit also involved the use of tee times for lifestyle previews. In settling the lawsuit, the developer was limited as to how many tee times could be used on courses north of Rt. 466. It is because of this settlement that tee times south of Rt. 466 are in short supply as he just increased the number available for lifestyle previews on these courses.

As far as the article being "shocking", all I see her doing is summarizing the opinion of the IRS documents and providing a link to them for all village residents to read and form their own opinion of the dealings of the developer.
Read them through and let me know what you think of her article then.

[RCT]

RCT

The lawsuit did not address the bonds used to buy the recreation facilities. It involved the developer not using part of the amenity fee to establish reserves needed to cover capital expenditures to maintain/rebuild recreation facilities and the like, such as cart paths. Although the value paid the developer for these facilities has been criticized by many, the lawsuit had nothing to do with this type of bonds used, the method used to value the facilities and controlling interest held by the developer over the non-resident central district.

In addition, the lawsuit also involved the use of tee times for lifestyle previews. In settling the lawsuit, the developer was limited as to how many tee times could be used on courses north of Rt. 466. It is because of this settlement that tee times south of Rt. 466 are in short supply as he just increased the number available for lifestyle previews on these courses.

As far as the article being "shocking", all I see her doing is summarizing the opinion of the IRS documents and providing a link to them for all village residents to read and form their own opinion of the dealings of the developer.
Read them through and let me know what you think of her article then. Thankyou for the clarification.

[RCT]

Hi again,

I don't want to bore you folks -- just thought I'd try to clarify a couple things. First, I don't see Villages residents as feeble minded or stupid. Most of the folks I've met up there are retired professionals with excellent minds. I particularly enjoy the League of Women Voters ladies who have asked me to speak several times. They're sharp.

That said, if I were looking for a retirement home, I'm not sure I'd do a ton of behind-the-scenes investigation to figure out some murky financing structure that doesn't on the surface seem to affect me. Unfortunately, it actually does in this case.

Several of your posters got it right -- there are two types of community development districts in The Villages, and they issue two types of bonds. The bond that is "attached" to your house, the one that you're told about and appears on your tax bill, is issued by what are usually referred to as the "numbered districts." Those bonds buy concrete properties, such as sewer plants, and only the residents of those districts are obligated to repay those bonds.

The Village Center Community Development District is a different critter, and I've never heard anyone say that this was explained at the time of purchase. But perhaps it is. I'd love to hear if someone was told about it.

The Village Center CDD has the authority and power to issue bonds and to levy property taxes, though it has never done the latter yet to date. It also has the power to make everyone in the Villages repay the bonds, not just property owners inside the district, which, as I'm sure most of you know, are all commercial. The board is controlled by the developer, who acknowledges this openly in all the bond documents and in replies to the IRS, which are public record. The district is set up so that Morse always will control it until he choses to relinquish that control.

The Village Center CDD has the power to issue a different type of bond -- a recreational revenue bond -- which buys not only concrete things like swimming pools and golf cart paths, but also, "blue sky" items, such as the right to collect amenity fees.

One of the posters mentioned that people pay for these items, regardless of where they live, and I should get my act together before coming down on this method of payment.

To a degree, that is correct. Of course, any developer must charge for recreational things like pools and clubhouses and golf courses. I believe, however, that Villagers are paying twice and perhaps three times for the same items.

Think about it: When a developer builds a subdivision with clubhouses and pools and so forth, he typically includes those items in the cost of the house.

In this case, the developer has sold those goodie-type items to you through a purchase by the Village Center district, so those things ought to be deducted from the price of the house, right? In addition, he's sold you the infrastructure, such as sewer and water plants, through the numbered districts. Those items, too, ought to be deducted from the purchase price of the house, then.

Were they? Did you get a really sweet deal on your house? Did you pay far less for your house than people in other retirement communities pay? I think not. Ask yourself...when I bought a house, what did I buy? Theoretically, you bought only the actual lot and structure -- you're paying for everything elese separately, right?

If that's the case, you should have gotten a pretty cheap house. I don't think you did. The truth is that the cost of the amenties and the infrastructure was included in your house price. So, you're paying for them twice. Then, you're paying for them a third time because of the interest being paid on what are unnecessary bonds.

If that's OK with you, then God bless. Have fun. Ignore these columns. I disagree with your poster who doesn't think that Villages residents will be dragged into this IRS investigation. YOU are the district. YOU are its only source of income. It's not some disembodied entity. It's a taxing authority that issued bonds on YOUR behalf.

The fellow whose opinion is that nothng is going to happen may wish to do additional research. He will find that in other situations around the country where tax free bonds have been deemed taxable, the IRS typically requires that all or part of the bonds be redeemed or 'called'. To do that, the district would have to pay off the loan. And where would this money come from? It could come only from you, the property owner. I flatly asked the Village Center district manager if the district it had the financial capability to call the bonds (without bankrupty) and district officials did not answer. (tomorrow's column)

If the IRS can make stick its contention that the district and the developer are essentially one entity, then I think that opens the door to collect from the developer, too.

The notion that columnists who write for the Sentinel or any other newspaper do it to sell papers is a tired old claim without credibility that has long since lost any basis in reality. That's a diversion from the real issue, and if that were true, nothing in any paper would be believable. I don't mind when people disagree with my column -- and there's plenty of room to do so in this situation in particular -- but let's do it from a position of knowledge and respect.

I have done considerable research to try to present reasonable scenarios of how this might play out. There are more possible ways than I can detail, and I do not claim to be a bond expert. I don't think anyone can say what will happen yet. It's too early. But I think that there's at least a box to be drawn within which folks can see the possibilities, and that's what I've attempted to do with Wednesday's column.

Thank you for allowing me space to respond and to provide more information. I appreciate everyone reading the columns, too. And I look forward to hearing more from all of you.

Lauren Thankyou for your response, and you have brought up some valid points. However, your comment about have we paid too much for our homes, depends on many factors. One, where you might have moved from. I moved from Boca Raton, Fl, and even in this bad housing market, yes, for what we have here, we paid CONSIDERABLY less than a comparable down there, REGARDLESS of all the expenses on top of the price of the home. Also, remember that part of the, what you consider higher price, is the lifestyle, aside from the amenity fee.
Also, in regard to your comment about columnists that write for papers do it to sell papers is a tired old claim, that is poppycock. Papers make money basically from the advertising. If you didn't get feedback from your writing, and all the other writers, whatever their specialty might be, be it sports, politics, whatever, do you really think you'd still have a job? Do you think, if people weren't buying your paper because there were parts of the writing that they were interested in, that the revenue would be the same from those advertisers? I think not.
That said, doesn't mean I don't respect your job, just because I happen to disagree on some points. thanks again for your efforts in educating us in these matters.

[katezbox]

As a not-yet-retired CPA and soon-to-be Villager, I feel I need to weigh in on this.

First of all, bonds are a standard method that developers large and small use to finance part of their costs. For example, did you know that a water (or gas or other) utility will charge the developer up front for the cost of bringing that service into a new neighborhood? In the case of water, this is fairly expensive as it includes the cost of the water main plus pump station(s) to maintain pressure for everyday and emergency (think Fire!) use. It also includes hydrants and service lines into each residence. If a new buyer had to pay for this as part of purchase, a lot fewer homes :owould be sold anywhere.

Secondly, as Steve states, the tax exempt status of bonds is never determined by a sole IRS agent. The Morse family (love 'em or hate 'em) has their legal team to put forth the argument as to why these bonds should be tax exempt.

Thirdly, the level of amenities in TV is far greater than in the average "retirement community." With any community that has an amenity fee assessed there is always a risk that it will increase - regardless of how the cost of the amenities are financed. Keep in mind that the purpose of the bond is financing.

Lastly, all reporters/analysts have an agenda. Lauren, part of your job is to sell newspapers for the Sentinel. That's OK. But, journalism is not only what you say, but how you say it. It is not so easy to convey passion for a topic without a degree of sensationalism.

As readers we need to examine all sources of information.

Thanks for listening to my soap box.

Kate

[shuffleboard]

How is that possible? There must be some paperwork that mentioned that you had a bond to pay.
Unfortunately 1/2 of your monthly ammenity fee goes to pay off the bond(s).

[shermark]

correct me if I'm wrong iaudit, but what do tee times in the lifestyle preview have anything to do with what Lauren just wrote ??

[shuffleboard]

Your missing the point... These bonds are mostly for the pure profit for the developer.

For Example, The Savannah performing center cost the developer 7 million to build. He sold it to the CDD (his appointed individuals) for 25 million based on an income stream asset valuation, over the next 30 years. The CDD issued bonds for 25 million which the residents are paying off with ammenity fees. The difference of 18 million went into the profit column of the developer. That's what has the IRS concerned about and why they are questioning the tax free status of the bond.

[Cassie325]

Does anyone have a real description or explanation of the recreational bonds from the CDD's? I have looked and can't find anything. I would think they are the ones to go to for answers. At least their explanation of them.

Again, I think a lot of answers would be found at the Thursday morning orientation classes at Sumter Landing CDD at Laurel Manor.

I have been to the class and feel it is very informative...but I need to go again to understand even more.

[katezbox]

Your missing the point... These bonds are mostly for the pure profit for the developer.

For Example, The Savannah performing center cost the developer 7 million to build. He sold it to the CDD (his appointed individuals) for 25 million based on an income stream asset valuation, over the next 30 years. The CDD issued bonds for 25 million which the residents are paying off with ammenity fees. The difference of 18 million went into the profit column of the developer. That's what has the IRS concerned about and why they are questioning the tax free status of the bond.

To a point....

Why would the developer build the Savannah Center if not for a profit? He sold it for $25M based on the present value of a future earnings stream. Did he make a lot of money? Yes. But the Savannah Center provides entertainment for a price, which presumably the CDD then recovers.

As far as the tax free status of the bonds - let's wait and see. We can speculate until the buffalo return, but ...

Kate

[Russ_Boston]

Did you get a really sweet deal on your house? Did you pay far less for your house than people in other retirement communities pay? I think not.

Laureen, thanks for the detailed info but I do have a problem with the part of the quote I left above. I know that you are not a reporter but a columnist which means you can state your opinion but what the heck does that statement above have to do with the bonds or taxable/nontaxable portion of same?

Who ever said that people in TV felt they paid less for their house than people in other retirement communities? If you read the board, like I have for two years, then you'd realize that the vast majority of TV owners think just the opposite. But they don't mind the extra cost for the lifestyle that is provided for them to enjoy. And this lifestyle does have a cost.

Other than the taxable issue which will be ruled on there are no surprises in your column that I can see. Do you really feel that you are doing some sort of great community service by exposing something?

The taxable issue will need to be addressed when the ruling is final and all TV residents will be billed in some fashion if the ruling goes against them. But TV will sell out the remaining 15K-20K homes over the next 5 years or so and 100K people will be enjoying a great life. Albeit paying a little bit more than their Stonecrest etc. neighbors.

[jflynn1]

Great article. Thanks for keeping us informed.
:pepper2:

[Bryan]

The bonds on our homes I think most of us understand - basically recover costs of the infrastructure where we live. A lot of past complaints over those bonds concerned how well they were (or were not) explained by sales representatives - not about the validity of the bonds.

This current hoopla is about bond debt that we, as residents, have no say in. We can't agree or disagree to the debt - we just get stuck with it because we live here. If the residents of TV generally thought the sale of such stuff as The Savannah Center or golf courses was made to the CDD's at a "fair market value", they would probably be a lot less upset. Too many feel we are being taken to the cleaners and saddles with enormous debt without any say ourselves in the process. Some would say "taxation without representation" while others might say "The fix is in".

Bottom line, whether you agree or disagree with the debt, way too many of us feel we did not get value for our money NOR did we have any say in whether it was even a good idea to make the purchase or not. The tax exempt status of all the (unearned?) profit for the Developer is what the IRS case is all about, but only a prepherial issue to most residents. Our voice in even incurring this debt in the first place is our real issue - and the current IRS case will do nothing to address that issue.

[Russ_Boston]

The tax exempt status of all the (unearned?) profit for the Developer is what the IRS case is all about, but only a prepherial issue to most residents.

Ok I see - If the IRS rules and says that they are not tax exempt then the devolper (who reaped the profit) is liable for the taxation not the homeowners. Of course this could impact future turnover of the centers since the cost may have to be increased to cover taxation.

[JimJoe]

http://www.orlandosentinel.com/news/local/lake/orl-lk-lauren-ritchie-irs-bonds-030409,0,4865936.column

[starflyte1]

I understand the bonds. What I do not understand is how the home owners would be liable for the tax when it is the developer who sold the bonds and made the profit and is making the interest income.

[Muncle]

When my copy of the Orlando Slantenal arrived early this AM, I hurried to read Ritchie's follow-up story on the dreaded bond issue. I had gotten the impression that Sunday's article had promised some detail, some actual facts. Ah well, I've been disappointed before.

Basically all today's screed seems to be is a rehash of Sunday's with a bit more infatuation with our hero, the evil fighting IRS agent, Dominick Servadio. The gist of the matter is that rugged, macho Dom does not like the CDD concept, nor does his boss in the the IRS bond division (that last part actually was new info). Dom evidently believes:

*The district doesn't qualify under IRS rules as a valid issuer of tax-free bonds.

*The transactions didn't benefit the general public -- a requirement of tax-free bonds -- but instead, only the developer.

*The Village Center Community Development District issued $53 million more than the properties it bought were worth and handed the cash to Morse, who declared it as a gain on the sale on the corporation's 2003 tax return. Issuing bonds for more than 5 percent more than what's needed throws the bonds into the taxable realm under IRS arbitrage rules, the agent contended.

*The appraisal firms that set the value of the properties were tools of the district who did what they were told. They were not independent appraisers, as the IRS requires.

Ritchie never seems to get around to explaining why Dom has these views. That might have been a good time to explain Florida Statute 190 and the CDD concept, but I guess Ritchie couldn't be bothered with the research. I think there's going to be a big argument over whether CDDs are government entities entitled to issue such bonds. Next, Dom & Ritchie state flatly that the transactions do not benefit the general public -- I guess that's us. Don't know about you, but I benefit greatly from the golf courses, rec centers, sewer plants, etc. The last two items also appear to be matters on semantics, something the lawyers will love.

Again, Ritchie throws around that $18,000 per household herring without really putting any meat into it. It is apparently one of the possible 3,472 outcomes of doom Ritchie sees for TV and the hated Morse family.

Ritchie dismisses with total disdain any response from TV and it's legal representatives. She makes a point of further glorifying Dom because he chose to ignore a letter requesting a meeting and ascribes panic to TV because they want to get the matter settled quickly because the open case would be detrimental. And of course gets another cheap shot at the Morse demon.

As I and others have said, expect this battle to continue for quite a while. CDDs are very big in Florida and other states and the outcome of this case may well affect many. Meanwhile, I look forward to the continuing saga of Ritchie and Dom. She seems to have no problem getting access to him and the correspondence he receives from the subjects of his investigation. In the interim, maybe she can investigate the dog park on 466A or the lack of indoor pools. And don't be surprised if she picks up a freelance gig, say something like a monthly column in the POA bulletin.




`

[Russ_Boston]

And don't be surprised if she picks up a freelance gig, say something like a monthly column in the POA bulletin.

Now you've opened up the floodgates Uncle Muncle. Priceless!

[iaudit]

Bryan wrote:

"The tax exempt status of all the (unearned?) profit for the Developer is what the IRS case is all about, but only a prepherial issue to most residents."

I do not believe this is correct. It was the central district that issued the tax exempt bonds, not the developer. He claimed a gain on his income tax return and paid taxes on that gain. The central district is on the hook if the tax exempt status is changed for the bonds. They may have to call the bonds and settle with the bondholders because of the lower interest rates the bondholders received and the taxes that they will have to pay. They will then have to issue new bonds at taxable rates, which are normally higher, however, during this economic climate that may not be the case.

Any financial penalties or expenses related to this issue will have to be paid by the central district. As I understand it, the central district has two ways to raise funds: payments received for amenity fees (which can only be raised based on CPI) and levying property taxes (which they have not done before but have the authority to do).

As some have mentioned, this may take awhile to play out but in the end, any financial penalties will probably be paid by the village residents in one form or another.

[iaudit]

When my copy of the Orlando Slantenal arrived early this AM, I hurried to read Ritchie's follow-up story on the dreaded bond issue. I had gotten the impression that Sunday's article had promised some detail, some actual facts. Ah well, I've been disappointed before.

Basically all today's screed seems to be is a rehash of Sunday's with a bit more infatuation with our hero, the evil fighting IRS agent, Dominick Servadio. The gist of the matter is that rugged, macho Dom does not like the CDD concept, nor does his boss in the the IRS bond division (that last part actually was new info). Dom evidently believes:

*The district doesn't qualify under IRS rules as a valid issuer of tax-free bonds.

*The transactions didn't benefit the general public -- a requirement of tax-free bonds -- but instead, only the developer.

*The Village Center Community Development District issued $53 million more than the properties it bought were worth and handed the cash to Morse, who declared it as a gain on the sale on the corporation's 2003 tax return. Issuing bonds for more than 5 percent more than what's needed throws the bonds into the taxable realm under IRS arbitrage rules, the agent contended.

*The appraisal firms that set the value of the properties were tools of the district who did what they were told. They were not independent appraisers, as the IRS requires.

Ritchie never seems to get around to explaining why Dom has these views. That might have been a good time to explain Florida Statute 190 and the CDD concept, but I guess Ritchie couldn't be bothered with the research. I think there's going to be a big argument over whether CDDs are government entities entitled to issue such bonds. Next, Dom & Ritchie state flatly that the transactions do not benefit the general public -- I guess that's us. Don't know about you, but I benefit greatly from the golf courses, rec centers, sewer plants, etc. The last two items also appear to be matters on semantics, something the lawyers will love.

Again, Ritchie throws around that $18,000 per household herring without really putting any meat into it. It is apparently one of the possible 3,472 outcomes of doom Ritchie sees for TV and the hated Morse family.

Ritchie dismisses with total disdain any response from TV and it's legal representatives. She makes a point of further glorifying Dom because he chose to ignore a letter requesting a meeting and ascribes panic to TV because they want to get the matter settled quickly because the open case would be detrimental. And of course gets another cheap shot at the Morse demon.

As I and others have said, expect this battle to continue for quite a while. CDDs are very big in Florida and other states and the outcome of this case may well affect many. Meanwhile, I look forward to the continuing saga of Ritchie and Dom. She seems to have no problem getting access to him and the correspondence he receives from the subjects of his investigation. In the interim, maybe she can investigate the dog park on 466A or the lack of indoor pools. And don't be surprised if she picks up a freelance gig, say something like a monthly column in the POA bulletin.




`


Why don't you try reading the IRS reports:

http://www.orlandosentinel.com/media/acrobat/2009-03/45365631.pdf

You will find that Dominick didn't pick this info out of thin air, but has all the references related to his analysis and conclusions. It is over 100 pages long and Ritchie has done a good job of SUMMARIZING the key points. If you really want to understand it, read it and then respond.

[Canabarrybarb]

Iaudit, I believe that you have summarized the issue correctly.

While it may take some time for this to play out, the issue may further lower our house values in the near term as this issue gets more exposure in the press and gets better understood by the buying public. The prospect of a new local tax would certainly impact some buying decisions. Let's hope that it gets resolved quickly.

[KayakerNC]

Iaudit, I believe that you have summarized the issue correctly.
While it may take some time for this to play out, the issue may further lower our house values in the near term as this issue gets more exposure in the press and gets better understood by the buying public. The prospect of a new local tax would certainly impact some buying decisions. Let's hope that it gets resolved quickly.
:agree:
Shooting the messenger :throwtomatoes:may not be the best response to understanding what potentially could be a serious problem.

[JohnN]

I'm not the sharpest branch in the tree.

$18,000 / household times 50K households, $900,000,000 - near a billion?

[KCinBAMA]

The Village Center CDD has the authority and power to issue bonds and to levy property taxes, though it has never done the latter yet to date. It also has the power to make everyone in the Villages repay the bonds, not just property owners inside the district, which, as I'm sure most of you know, are all commercial. The board is controlled by the developer, who acknowledges this openly in all the bond documents and in replies to the IRS, which are public record. The district is set up so that Morse always will control it until he choses to relinquish that control.


And yes, there is an annual common-area fee similar to what a homeowner's association (Orlando is full of them!) levies on all within a development for maintenance and upkeep of the common areas.
The CDD concept is not all that bad, in that when it works, it works very well.

That might have been a good time to explain Florida Statute 190 and the CDD concept,...
CDDs are very big in Florida …


Apparently CDDs are big in Florida. Are they usually drawn without any residents in them? Or, is this something that is unique to The Villages?

[ohiogolf]

Lauren:

thanks for writing this follow-up article. I found it to be comprehensive and well written. Thanks.

[SNOK]

What I find interesting is the apparent IRS contention that the CDD paid more for the properties for which the bonds were issued than the FMV. If that is upheld through the tax court process, then it seems to me that the CDD (representing the residents) may have a claim against the developer for the excessive price, since there is surely a duty to assure that tax free bonds are legally issued. If the the bonds were not legally issued (by being in excess of the FMV), I suspect the developer would have some liability. I'm sure this avenue will be explored before the residents get stuck with any additional liability, if the tax free status is revoked should the IRS prevail. I don't think the developer could illegally profit at the expense of the CDD (residents), if the developer cannot sustain the FMV of the properties for which the bonds were issued. Sounds like a lot of legal fees in someone's future.

[Yoda]

Is this "all moves to tv on hold time?

hmmmm

[djl8412]

When my copy of the Orlando Slantenal arrived early this AM, I hurried to read Ritchie's follow-up story on the dreaded bond issue. I had gotten the impression that Sunday's article had promised some detail, some actual facts. Ah well, I've been disappointed before.

Basically all today's screed seems to be is a rehash of Sunday's with a bit more infatuation with our hero, the evil fighting IRS agent, Dominick Servadio. The gist of the matter is that rugged, macho Dom does not like the CDD concept, nor does his boss in the the IRS bond division (that last part actually was new info). Dom evidently believes:

*The district doesn't qualify under IRS rules as a valid issuer of tax-free bonds.

*The transactions didn't benefit the general public -- a requirement of tax-free bonds -- but instead, only the developer.

*The Village Center Community Development District issued $53 million more than the properties it bought were worth and handed the cash to Morse, who declared it as a gain on the sale on the corporation's 2003 tax return. Issuing bonds for more than 5 percent more than what's needed throws the bonds into the taxable realm under IRS arbitrage rules, the agent contended.

*The appraisal firms that set the value of the properties were tools of the district who did what they were told. They were not independent appraisers, as the IRS requires.

Ritchie never seems to get around to explaining why Dom has these views. That might have been a good time to explain Florida Statute 190 and the CDD concept, but I guess Ritchie couldn't be bothered with the research. I think there's going to be a big argument over whether CDDs are government entities entitled to issue such bonds. Next, Dom & Ritchie state flatly that the transactions do not benefit the general public -- I guess that's us. Don't know about you, but I benefit greatly from the golf courses, rec centers, sewer plants, etc. The last two items also appear to be matters on semantics, something the lawyers will love.

Again, Ritchie throws around that $18,000 per household herring without really putting any meat into it. It is apparently one of the possible 3,472 outcomes of doom Ritchie sees for TV and the hated Morse family.

Ritchie dismisses with total disdain any response from TV and it's legal representatives. She makes a point of further glorifying Dom because he chose to ignore a letter requesting a meeting and ascribes panic to TV because they want to get the matter settled quickly because the open case would be detrimental. And of course gets another cheap shot at the Morse demon.

As I and others have said, expect this battle to continue for quite a while. CDDs are very big in Florida and other states and the outcome of this case may well affect many. Meanwhile, I look forward to the continuing saga of Ritchie and Dom. She seems to have no problem getting access to him and the correspondence he receives from the subjects of his investigation. In the interim, maybe she can investigate the dog park on 466A or the lack of indoor pools. And don't be surprised if she picks up a freelance gig, say something like a monthly column in the POA bulletin.




`

You are very angry, aren't you? So are many of Villages residents but for different reasons. Many of us find it difficult to understand all these layers of bonds and amentiy fees. If Mr. Servadio is citing IRS statutory criteria, how does that translate into your verdict that he and his IRS boss just don't like the CDD concept. Mr. Servadio may just be mopping up a mess that should have been peeled apart years ago. After all, that's his job which we are paying him to do as taxpayers. Perhaps Ms. Ritchie is "dismissing" responses from TV lawyers or Janet Tutt because all they have seemed to be saying is "all the IRS had to do is sit down with us and we could have explained it all." That type of response tells me that the explaining should have been done ages ago but wasn't and now the IRS has presented them with the dinner check.

I am not a Philadelphia lawyer and have not disected the Florida 190 statute. It may do us a lot of good if you could educate us on it in a manner we lay people can understand.

P.S. : I do like life in The Villages and don't arbitrarily hate Mr. Morse, but he is not exempt from his fair share of taxation and if he has been less than up front with the handling of these monies, he needs to pay. Unfortunately, we may also pay.:undecided:

[shermark]

This could have huge consequences. My wife and I love TV and the whole lifestyle package,great friends and great fun. But since this bond issue has come to light, we have no choice but to wait and see whether we buy there or not. On top of the many fees that are paid for by the residents, I can't see ourselves being saddled with another fee to bail out Mr. Morse. Correct me if I am wrong but from what I have read, it's incredible that the Villagers are not allowed to have any representation on any governing board concerning the financial dealings in TV. The media is going to pick up on this and soon this bond problem will be well known among the retirees around the country. I can see a slowing down of new homes being built and more and more re-sales. I certainly hope none of this happens. You Villagers invested in a tremendous lifestyle that can't be found anywhere else and you have all held up your end of the bargain by paying the bills and fees on time and then enjoying life to the fullest with what your money bought. I hope this does not unravel. But what will be the next expense by Mr. Morse. Pay toilets in the shops and restaurants ?

[golfnut]

barf

[Alex]

Thanks to Lauren for two well researched articles.

[Muncle]

You are very angry, aren't you? So are many of Villages residents but for different reasons. Many of us find it difficult to understand all these layers of bonds and amentiy fees. If Mr. Servadio is citing IRS statutory criteria, how does that translate into your verdict that he and his IRS boss just don't like the CDD concept. Mr. Servadio may just be mopping up a mess that should have been peeled apart years ago. After all, that's his job which we are paying him to do as taxpayers. Perhaps Ms. Ritchie is "dismissing" responses from TV lawyers or Janet Tutt because all they have seemed to be saying is "all the IRS had to do is sit down with us and we could have explained it all." That type of response tells me that the explaining should have been done ages ago but wasn't and now the IRS has presented them with the dinner check.

I am not a Philadelphia lawyer and have not disected the Florida 190 statute. It may do us a lot of good if you could educate us on it in a manner we lay people can understand.

P.S. : I do like life in The Villages and don't arbitrarily hate Mr. Morse, but he is not exempt from his fair share of taxation and if he has been less than up front with the handling of these monies, he needs to pay. Unfortunately, we may also pay.:undecided:

Why don't you try reading the IRS reports:

http://www.orlandosentinel.com/media/acrobat/2009-03/45365631.pdf

You will find that Dominick didn't pick this info out of thin air, but has all the references related to his analysis and conclusions. It is over 100 pages long and Ritchie has done a good job of SUMMARIZING the key points. If you really want to understand it, read it and then respond.


First things first. Yeah, I'm angry. I get really upset at people who bemoan the fact that they do not understand the concepts of bonds and amenity fees, seemingly wallow in that ignorance rather than try to learn, and then scream bloody murder about half truths written by an admittedly biased opinion columnist. If indeed you want to learn about these things, I suggest you first attend a CDD orientation offered every Thursday. You'll likely come out with more questions than answers. Read up a bit on the many web sites and return to the Thursday sessions with more direct questions. The knowledge is refreshing and it's a lot more satisfying than living in ignorance.

Now, to the auditor or whatever --- The thread and my comments were more about Ritchie and her hatchet job of a column than the actual IRS report. In theory, Ritchie's column should have been a stand-alone with no need to reference the report, much less read it in detail. But instead, what we got was her Chris Matthews imitation with a tingle running down her leg as she read or referred to Dom's conclusions.

However, I did read the IRS report. I've seen scores of similar gov't reports and written quite a few. Dom did a great job of cutting and pasting, citing and incorporating an abundance of other cases, relevant or not. Hey, he did fill over 100 pages (with big font!),, so it must be good. I am not a lawyer or an accountant, nor do I even play one on television, but it seemed to me that Dom makes a lot of leaps in logic that don't necessarily follow. It appears that many of Dom's opinions are assumed as fact. That's why this is far from the done deal that Ritchie so snarkily implies. Once TV legal and financial people review the report and have a chance to rebut it, we'll see how many of Dom's "facts" stand.




`

[OutsiderWithInterest]

.

[OutsiderWithInterest]

.

[Bryan]

Since our court systems move at somewhere around the speed of smell, it will be many (many, many?) years before this is all settled.

If the "officials" of the various CDD's let themselves be taken to the cleaners so badly on the sale of these facilities and if the appraised value was "fixed" as alleged, doesn't that imply some malfeasance on their part and can't they be sued and held personally liable? I would hope one of our watchdog organizations such as the POA would be looking into that and getting positioned to launch suits and publicity galore.:crap2:

[SteveZ]

Since our court systems move at somewhere around the speed of smell, it will be many (many, many?) years before this is all settled.

If the "officials" of the various CDD's let themselves be taken to the cleaners so badly on the sale of these facilities and if the appraised value was "fixed" as alleged, doesn't that imply some malfeasance on their part and can't they be sued and held personally liable? I would hope one of our watchdog organizations such as the POA would be looking into that and getting positioned to launch suits and publicity galore.:crap2:

Key to the entire story are the appraisals of the properties, and the insinuation that they are way out of line.

If we are to look at properties in 2009 at 2009 values, the numbers obviously are going to be different than 2002-2003 time frames. In the 2002-2003 time, many properties doubled and tripled in value compared to their 1997 valuations. That happened to me with house(s) I had back then, and do I still remember the sticker-shock of that house in DC I bought in 2004 (compared to it's 1998-build price, according to the state assessors books). The previous owner made a killing on the DC house, and I just sold it at a significant loss - but, those things happen.

If there was anything crooked happening back then, it will come out, but that's a mighty big IF. Reputations are now tarnished based on the "my opinion" and negative slanting, and should everything prove to be up-and-up (which is what usually is the case), what do you think then odds are of Ms. Ritchie and The Sentinel publishing a three-day, same-size column retraction?

Sensationalism, snide insinuations, fear-mongering - all adds up to unbridled gossiping. Makes the supermarket tabloids look pretty good in comparison.

[RStoller]

I agree with Bryan. The real issue to property owners should be the degree of collusion between the CDD directors and the developer in setting exorbitant values on the amenities.

My wife and I are coming to TV in May with the thought of purchasing. Even before this story broke, I was concerned about this arrangement with no homeowner representation on the CDD's. Now I am even more nervous.

Is there any homeowner association in TV that can speak with a united voice to the developer. It seems that this would be a great time to open a dialogue and push for homeowner representation on the CDD's.

[collie1228]

It's very interesting to read the differing contributions to this thread. There is the opinion that the Sentinel and its employees have a vendetta against The Villages, and will go to any length to sell newspapers, even to the point of dissing the Morse family. They have tasked their evil columnist to study the IRS report and share her biased opinion (wow, isn’t that a novel concept, a newspaper employing a columnist who writes biased opinions – and by the way, what other kinds of opinions are there?). On the other end of the spectrum are people (TV wannabes like me) who have never really fully understood the financial foundation of The Villages, and are now learning that maybe there could be a problem in paradise – and maybe they should be extra careful before spending their hard-earned retirement nest egg in support of Mr. Morse’s possible tax problem with the IRS. And then there are those in the middle who have already purchased property in TV, who need as much information as they can get so they can sleep at night. It seems to me that the people in the first category would like this all to just go away with the wave of a magic wand, and blame it all on the Sentinel, especially their biased columnist. In other words, shoot the messenger.

What does Lauren Ritchie know anyway? Well I’ll tell you what she knows – which I now know too, as I’ve now read the IRS report (caveat – the parts of the report that put me to sleep were only skimmed). There is an unanswered IRS report that concludes that Mr. Morse booked a $53 Million gain on sales in his corporation’s 2003 tax return, which was the direct result of selling property to the Villages Community Development District, who in turn issued tax exempt bonds. And the IRS now says that the gain did not meet the legal requirements for a tax exempt bond issue, which casts doubt on all of the Community Development District’s previous tax exempt bond issues. You should know all that too, but you probably wouldn’t have known if the biased Sentinel columnist hadn’t brought it up. Admittedly, the IRS can be wrong, and have been proven wrong many times in the past; that’s why there is a federal tax court. I sincerely hope they are wrong in this case too, but I am impressed with the detail and logic in the IRS Report, and will be equally interested in reading the Community Development District’s response, which according to the IRS Report, would have been due on February 22.

“Sentinel” - a person employed to keep watch for some anticipated event.

[golfnut]

:agree: with Muncle, I was, hold that thought, have to get ready for my 11:00 tee time, wait, maybe I should cancel that tee time (and the function I was attending tonight at Laurel Manor) and sit here and worry about what is going to happen here, that's what Lauren wants us to do...........right...........GN

[Whalen]

It's very interesting to read the differing contributions to this thread. There is the opinion that the Sentinel and its employees have a vendetta against The Villages, and will go to any length to sell newspapers, even to the point of dissing the Morse family. They have tasked their evil columnist to study the IRS report and share her biased opinion (wow, isn’t that a novel concept, a newspaper employing a columnist who writes biased opinions – and by the way, what other kinds of opinions are there?). On the other end of the spectrum are people (TV wannabes like me) who have never really fully understood the financial foundation of The Villages, and are now learning that maybe there could be a problem in paradise – and maybe they should be extra careful before spending their hard-earned retirement nest egg in support of Mr. Morse’s possible tax problem with the IRS. And then there are those in the middle who have already purchased property in TV, who need as much information as they can get so they can sleep at night. It seems to me that the people in the first category would like this all to just go away with the wave of a magic wand, and blame it all on the Sentinel, especially their biased columnist. In other words, shoot the messenger.

What does Lauren Ritchie know anyway? Well I’ll tell you what she knows – which I now know too, as I’ve now read the IRS report (caveat – the parts of the report that put me to sleep were only skimmed). There is an unanswered IRS report that concludes that Mr. Morse booked a $53 Million gain on sales in his corporation’s 2003 tax return, which was the direct result of selling property to the Villages Community Development District, who in turn issued tax exempt bonds. And the IRS now says that the gain did not meet the legal requirements for a tax exempt bond issue, which casts doubt on all of the Community Development District’s previous tax exempt bond issues. You should know all that too, but you probably wouldn’t have known if the biased Sentinel columnist hadn’t brought it up. Admittedly, the IRS can be wrong, and have been proven wrong many times in the past; that’s why there is a federal tax court. I sincerely hope they are wrong in this case too, but I am impressed with the detail and logic in the IRS Report, and will be equally interested in reading the Community Development District’s response, which according to the IRS Report, would have been due on February 22.

“Sentinel” - a person employed to keep watch for some anticipated event.

Thank you.
Some of this is actually starting to make sense and I can also see possible financicial troubles in paradise, with or without the IRS ruling.
At the end of the day do your home work and make your decision to purchase, or not, an informed one.
And always caveat emptor.

[jtdraig]

jibi's Avatar jibi's Avatar


When is my next tee time?:beer3:

[iaudit]

I am not a lawyer or an accountant, nor do I even play one on television, but it seemed to me that Dom makes a lot of leaps in logic that don't necessarily follow. It appears that many of Dom's opinions are assumed as fact.



`

Could you share with us some of these leaps of logic????

[Muncle]

Could you share with us some of these leaps of logic????


No, I won't bother. This is a preliminary report seeking comment from TV, a strawman as it were. I trust the legal and financial reps of TV will be doing a much more efficient and effective job than I could possibly do in enumerating the report's inadequacies.

But I reiterate, the subject of this thread is Ms Ritchie's column, and a concurrent reading of the IRS report should not be a requisite in order to glean "facts" from Ritchie's screed.





`

[iaudit]

Muncie, you talk about her not backing up statements with facts by Ms. Ritchie and you do the same thing. I recall a number of posts where you have made inaccurate statements on other threads and you still try to come off sounding as all knowing. If you can not debate an item with civility, why don't you just stay out of it.

[shermark]

Unbelievable that some of you are directing your anger at Lauren Ritchie. Your anger ought to be directed at Gary Morse for this debacle. I find it impossible to believe that he was totally unaware of the IRS rules regarding tax exempt bonds. If he is retaining this California law firm who are experts in tax exempt bond laws, they either gave him lousy advice or they counselled him correctly and he chose to ignore the rules. Then your anger should also be directed at the fact that the property appraisers must be an independant group, but did that happen? No it did not. Do you think maybe they appraised your property too high. These appraisers were hand picked by Gary Morse. That's another law broken. And you should be really ticked off to the fact that you have absolutely no say so in this. You Villagers are the ones who are footing the bill for all these amenities and half of that pays off these bonds and you have no representation ?? In todays political climate, the way to handle controversy is to attack the messenger and not the real issues. Attacking Lauren Ritchie and the IRS agent is a waste of your time and blood pressure. If I were you, I would get together with the POA and some savvy attorneys who live in TV and I would start showing up at Gary Morses office and demand some answers. You are talking about your hard earned money here and the expenses you have paid to live there. If this is not resolved in your favor, I can see some residents on fixed incomes having to move because they can no longer afford to live there. I would hope this case is not dragged out in court and that it is resolved quickly. Some of you want this to play out over months and months. Do you want to wake up every morning over a long period of time not knowing what is going to happen with this mess ? Uncertainty can be very stressful. So stop ignoring the real issues here and going after Ms. Ritchie. Direct your anger at Gary Morse. He is the one who is going to have to answer for this situation he has gotten you into. After all, he's running the boat.

[Bogie Shooter]

Unbelievable that some of you are directing your anger at Lauren Ritchie. Your anger ought to be directed at Gary Morse for this debacle. I find it impossible to believe that he was totally unaware of the IRS rules regarding tax exempt bonds. If he is retaining this California law firm who are experts in tax exempt bond laws, they either gave him lousy advice or they counselled him correctly and he chose to ignore the rules. Then your anger should also be directed at the fact that the property appraisers must be an independant group, but did that happen? No it did not. Do you think maybe they appraised your property too high. These appraisers were hand picked by Gary Morse. That's another law broken. And you should be really ticked off to the fact that you have absolutely no say so in this. You Villagers are the ones who are footing the bill for all these amenities and half of that pays off these bonds and you have no representation ?? In todays political climate, the way to handle controversy is to attack the messenger and not the real issues. Attacking Lauren Ritchie and the IRS agent is a waste of your time and blood pressure. If I were you, I would get together with the POA and some savvy attorneys who live in TV and I would start showing up at Gary Morses office and demand some answers. You are talking about your hard earned money here and the expenses you have paid to live there. If this is not resolved in your favor, I can see some residents on fixed incomes having to move because they can no longer afford to live there. I would hope this case is not dragged out in court and that it is resolved quickly. Some of you want this to play out over months and months. Do you want to wake up every morning over a long period of time not knowing what is going to happen with this mess ? Uncertainty can be very stressful. So stop ignoring the real issues here and going after Ms. Ritchie. Direct your anger at Gary Morse. He is the one who is going to have to answer for this situation he has gotten you into. After all, he's running the boat.

You say "You villagers" & "if I were you"
I take it you are not a Villager.....where is your dog in this fight?

[Russ_Boston]

If you can not debate an item with civility, why don't you just stay out of it.

I don't see where Muncle wasn't civil. He took a crack at the POA but other than that? He may not agree with your position but it was not in an uncivil manner in my opinion. Being uncivil would be something like the user who PM'ed me today and called me a jerk. How juvenile is that? There's no need for that. Everyone can discuss their points and we can debate them and in the end everyone wins since we are then more informed.

[graciegirl]

I don't see where Muncle wasn't civil. He took a crack at the POA but other than that? He may not agree with your position but it was not in an uncivil manner in my opinion. Being uncivil would be something like the user who PM'ed me today and called me a jerk. How juvenile is that? There's no need for that. Everyone can discuss their points and we can debate them and in the end everyone wins since we are then more informed.

I respect your opinions Russ and also Muncles. I know that you both have a dog in this fight. Reading Ritchies article struck terror to my heart simply because I don't understand the background information.

I don't deify the developers, but I don't think they are greedy either.

[iaudit]

I don't see where Muncle wasn't civil. He took a crack at the POA but other than that? He may not agree with your position but it was not in an uncivil manner in my opinion. Being uncivil would be something like the user who PM'ed me today and called me a jerk. How juvenile is that? There's no need for that. Everyone can discuss their points and we can debate them and in the end everyone wins since we are then more informed.

....people who bemoan the fact that they do not understand the concepts of bonds and amenity fees

...seemingly wallow in that ignorance rather than try to learn

...scream bloody murder about half truths written by an admittedly biased opinion columnist

...living in ignorance.

...to the auditor or whatever

...Ritchie and her hatchet job of a column

... got was her Chris Matthews imitation with a tingle running down her leg as she read or referred to Dom's conclusions

... Ritchie so snarkily implies

... maybe she can investigate the dog park on 466A or the lack of indoor pools. And don't be surprised if she picks up a freelance gig, say something like a monthly column in the POA bulletin.



These are from his previous posts, do you consider this civil discourse??

[UpNorth]

We've been renting a house in The Villages during the month of December for several years now. We think the Villages is a great place, maybe too good to be true. When we first took our lifestyle preview (back in the days when there was a waiting list for housing) we were tempted to buy. My wife, being more skeptical than me, would ask questions to the real estate agent. Who exactly is "The Villages"? Where is the "government"? Who has a say around here? Needless to say, the answers given were both misleading and confusing. Consequently, we never bought, but always look forward to renting a couple of months in this adult wonderland. It is great. However, we feel that the system that helped to develop The Villages is bogus, and that all the residents may soon find themselves left with a rude surprise. In light of what is going on now, I certainly will continue to rent and not buy.

[Russ_Boston]

Ok, a few of those Muncleisms were a little, let's just say, slanted. Maybe I've just learned to read them with a smile on my face. But most of them were aimed at the writer and not members of this board.

But those are his opinions and as my signature says "I (he) might be wrong!".

I know that I will keep a close eye on what happens with this tax issues as it may effect future home prices etc.

[djl8412]

It's very interesting to read the differing contributions to this thread. There is the opinion that the Sentinel and its employees have a vendetta against The Villages, and will go to any length to sell newspapers, even to the point of dissing the Morse family. They have tasked their evil columnist to study the IRS report and share her biased opinion (wow, isn’t that a novel concept, a newspaper employing a columnist who writes biased opinions – and by the way, what other kinds of opinions are there?). On the other end of the spectrum are people (TV wannabes like me) who have never really fully understood the financial foundation of The Villages, and are now learning that maybe there could be a problem in paradise – and maybe they should be extra careful before spending their hard-earned retirement nest egg in support of Mr. Morse’s possible tax problem with the IRS. And then there are those in the middle who have already purchased property in TV, who need as much information as they can get so they can sleep at night. It seems to me that the people in the first category would like this all to just go away with the wave of a magic wand, and blame it all on the Sentinel, especially their biased columnist. In other words, shoot the messenger.

What does Lauren Ritchie know anyway? Well I’ll tell you what she knows – which I now know too, as I’ve now read the IRS report (caveat – the parts of the report that put me to sleep were only skimmed). There is an unanswered IRS report that concludes that Mr. Morse booked a $53 Million gain on sales in his corporation’s 2003 tax return, which was the direct result of selling property to the Villages Community Development District, who in turn issued tax exempt bonds. And the IRS now says that the gain did not meet the legal requirements for a tax exempt bond issue, which casts doubt on all of the Community Development District’s previous tax exempt bond issues. You should know all that too, but you probably wouldn’t have known if the biased Sentinel columnist hadn’t brought it up. Admittedly, the IRS can be wrong, and have been proven wrong many times in the past; that’s why there is a federal tax court. I sincerely hope they are wrong in this case too, but I am impressed with the detail and logic in the IRS Report, and will be equally interested in reading the Community Development District’s response, which according to the IRS Report, would have been due on February 22.

“Sentinel” - a person employed to keep watch for some anticipated event.

:coolsmiley:
Collie:

You are the voice of objectivity! If only others would come close to your logic instead of sinking to name-calling and demonizing those who search for answers instead of smoke and mirrors! We ALL need to be concerned about these financial issues.
:coolsmiley:

[golfnut]

POA had an article in their newsletter this month and though I don't hold them out as an authority, they are not concerned at this point due to the fact that it is way too early to make any judgements and I agree, GO MUNCLE (or muncie as some people refer to him)...............GN :blahblahblah:

[SteveZ]

I admit to being biased.

If the Ritchie column was intended (as it seemed to be by the writing style) to give the impression that the developer's actions were underhanded, and to undermine sales and confidence, then from reading some of the posts she accomplished her intention.

I just like it here. If the developer made a decent buck in putting TV together, the developer deserved it more so than the professional athletes reaping dozens of millions and crying about how they are under-appreciated. To me, the amenities fee - for all I get out of it - is a bargain, and if the folks who provide the services make a profit at it, then I know they will be there in the future. If they were just breaking even or losing money, they'd be gone in a flash and we'd have nothing.

If Ms. Ritchie thinks TV is a rip-off, then she's more than welcome elsewhere - Like MetroWest, Baldwin Park, Avalon Park or other spots in the Orlando area where the developer(s) bailed at first opportunity.

I looked at a lot of places before picking TV, and had the luxury of watching it develop over a couple decades. I'm still satisfied with my choice, and all of the fear-mongering from The Sentinel doesn't change things. I want a solvent developer and subsequent management group - making decent profits - because as long as there are profits, the services will be there.

If you don't want to live in TV because you fear the place, that's your choice. But, I'm off to Market Night at Lake Sumter Landing tonight, and if you're not there, too, my condolences.

[cabo35]

After trying to be informed and objective on the IRS/Bond issue, the most recent volley from Ms. Ritchie convinces me she is mean spirited and biased negatively toward anything related to the Villages. Further, I believe she attempting to stoke the flames of discontent to hurt Villagers and the success of the Morse family.

Lauren Ritchie said, "And it is time for homeowners to worry less about their tee time and marvelous activities and more about their future property values and financial liability." How cavalierly arrogant is that?

Copyright © 2009, Orlando Sentinel

http://andrewblechman.blogspot.com/2009/03/irs-to-villages-developer-you-bilked_05.html

I have witnessed first hand the envy of certain "locals" , wannabes, and an eclectic assortment of non-Villagers. Motivated by jealousy and insecurity, they are out to deliberately bring the glowing success of TV down to their own level of boring, mediocre existence. Ritchie's comment certainly is designed to distress and hurt Villagers not help them. She is unabashedly and shamelessly fanning the embers of her "big story" at the expense of causing distress to many Village residents.

There has been a dearth of balance and an irritating abundance of bias in her assessment as she herself has acknowledged. Now if she would only take on something important like improving our tee times........ Call me crazy but at this stage of my life, I prefer fat, dumb and happy to tilting with other people's windmills...but, that's just me. I do respect the concerns of my fellow Villagers who wish to be more engaged.

Be of good cheer Villagers, Lauren's calculated Henny-Penny rants are like ships that pass in the night.......and this to shall pass.

P.S. - did anyone else get the impression a certain recent poster in this thread is a planted shill for Lauren and/or the Sentinel?

GO MUNCLE!!!!! Great post Steve!!!!

[djl8412]

Cabo:

Who are Villagers that are "hurt?" What axe does Ms. Ritchie have to grind in her "Henny-Penny" rants and what would be her reward? What is the award for the IRS investigators performing their jobs? As I stated previously, we also love life in TV, but loving life here does not make us immune to potential misdeeds of others in power and money. If you're fine with your situation, that's great. We all need to step back more often from the continuous bad news we get everyday, but if we step back too far and not question power, we're in trouble. Saying nothing is silent approval. There is one thing that still hangs over all of us here.......Lauren Ritchie and the IRS just might be right.

[collie1228]

I just have to make one more observation, then I'll move into the background for awhile, as this subject seems to be getting toxic. I don't know if Mr. Morse made legal errors in this case or not - I'm sure someday the federal tax court will decide that, unless he cuts a deal. Assuming the IRS Agent is telling the truth, and I have no reason to doubt him, in 2003 Mr. Morse sold facilities (“land, buildings and fixed assets”) to the Community Development District. Per "the Developer's records”, he obtained payment from the Community Development District totaling $59,909,918, which was the purchase price for property with a total book value of $6,866,215, with the remainder ($53 Million) labeled as "Discounted Value of Amenities - Intangible Asset". Bottom line, the Development District, which the IRS states is under Mr. Morse’s control, now owns the rights to your future monthly amenity fees and Mr. Morse put $53 Million in the bank. Anytime your actual cost is $7 Million and your “gain” is $53 Million, that’s a great deal, even if you are a Wall Street Master of the Universe. I strongly believe in a capitalist democracy, but I doubt that our founding fathers ever thought anyone could become so enriched by doing so little. And keep in mind that this is only one of many deals made between the Developer and the development districts. That’s all I have to say. If you wish to defend Mr. Morse, be my guest. He’s laughing all the way to the bank, I’m sure. Or maybe he’s laughing all the way to the yacht dealership.

[golfnut]

Ritchie's existence currently is not about grinding axe's it's about selling papers. However, at this point I have to get something off my chest, in an earlier post today I said I was going to cancel my tee time and another engagement later this evening, I did neither, I shot a 31 earlier today and plan to gourge myself at dinner in a couple hours. After that I may come home and worry about this issue and then again I may not. I can't dwell on it too long as I am going to Golfest in the morning with friends, have a 1:00 tee time and have to meet with visitors at 4:00 at the Waterfront Inn for dinner...........GN

[golfnut]

collie, I was going to write a rebuttal to your recent comment but at this point I don't have time, heading off to dinner with friends, I'll just say buh bye (laughing all the way to the tee box)........GN

[shermark]

Bogie Shotter, my dog in this fight is my mother who is a Villager living on a fixed income and is showing signs of Alzheimers. My sister ( former Marine Officer) is also a Villager who took a bullet in Desert Storm and is now on disability. In spite of this bond situation, I hope to soon be a Villager so I can be close to them and help them anyway I can. And no I am not a shill for Lauren Ritchie and the Sentinel.

[jtdraig]

Lauren Ritchie has long been a foe of developers, at least, she has since I began reading her columns almost four years ago. She particularly dislikes the Villages. If you don't believe me, go back into the Sentinel archives but there are certainly much more important things to do than that...this issue is like a lot of sensational 2000's yellow journalism.barf It takes an issue that hasn't been resolved and attempts to put it's worse face forward. It's going to take potentially years as some have said and depending on where this shakes out, there will be lawsuits. One can hope not. In the meantime, life is just too short. I'll watch it but I am not going to obsess. :beer3:

[cabo35]

Cabo:

Who are Villagers that are "hurt?" What axe does Ms. Ritchie have to grind in her "Henny-Penny" rants and what would be her reward? What is the award for the IRS investigators performing their jobs? As I stated previously, we also love life in TV, but loving life here does not make us immune to potential misdeeds of others in power and money. If you're fine with your situation, that's great. We all need to step back more often from the continuous bad news we get everyday, but if we step back too far and not question power, we're in trouble. Saying nothing is silent approval. There is one thing that still hangs over all of us here.......Lauren Ritchie and the IRS just might be right.

Hi djl,

To answer you categorically;

Any villager that felt remotely distressed when Ritchie declared that they should worry more about their "future property values and financial liability."..... would be hurt. She has invoked herself as the trier of facts, the jury and the judge before a complaint has even been filed. Border line buyers and by extension future sellers who alter their home ownership decisions based on Ritchie's non-professional biased opinions potentially hurt themselves and others in an already fragile market.

The IRS should do what they are paid to do. This issue has been discussed publicly for a few years. It is interesting to note that the IRS has never filed a complaint. A sharp Florida attorney I know said that the uniqueness of the way the Villages are legally organized, something like Disney World, has left many unanswered questions, limited precedent and a lot of conflicting opinions.

The developer has not been convicted, not even charged with any impropriety so to categorize him by inference with those with "power and money" that commit "misdeeds" is not fair. I check for the American flag at public buildings everyday and the last time I checked "Old Glory" was still flying and that means we still have a presumption of innocence in America. This seems to be an elusive principle for Ms. Ritchie. I prefer to reserve judgement until all the facts are disclosed and the case is decided by a court that does more then speculate on misdeeds as Ms. Ritchie and her fans are so adept at. I should add that I have posted criticisms of the developer at times so I am not in the tank with him.

In straightforward King's English, I said, "I do respect the concerns of my fellow Villagers who wish to be more engaged." If you wish to engage at a more intense level... go for it. I prefer to give the developers their day in court and continue to view the glass as half full. Speaking of which, there's a cool one in the dining room with my name on it right now.

Thanks for taking the time to read the post and have a nice evening.

[SABRMnLgs]

I have spent over an hour skimming through the rantings of many who are either pro or con on two issues. Makes for very interesting reading (I think). But pro or con which issue?
Some are concerned with the issue. Others seem more concerned with the messenger of the issue. Not yet a resident, I am very neutral at this point. But to you folks who think tee-times and lunchs are so important, realize this. At some point, you are the people who may end up paying the piper.
And I would bet the two bucks in my wallet, you would be the first to go into apoplectic shock if you got a bill to solve this thing.
Agaim, I state, I am neutral. I have no feelings one way or the other. But a journalist does not fish for stories. They are assigned to her by her heirarchy at the newspaper. She must do her research, and then report her findings.
Now because some Villagers don't like her or the facts she presents (which is proofread by her editors by the way) she is labled.
I was in journalism for a number of years (albeit part-time and very free-lance) but the facts hold true.
You are most certainly welcome to voice your opinion on the facts, but because you don't agree with those facts, leave the name calling of the people who write about it, outside the door. It is so juvenile and tainted.
As Joe Friday used to say, "The facts, Ma'am. All we want are the facts".

[bimmertl]

It's laughable that this article is an attempt "to sell newspapers". I'm sure the sales of the paper just skyrocketed when they wrote an article about an IRS audit of a retirement community 60 miles North of Orlando. No doubt the paper boxes all over were emptied in minutes.

But then, in a blatant attempt to sell even more papers, the actual author of the article, posted a link to the article on a widely read Villages website. This meant hundreds, if not more people actually interested in the article, didn't even have to buy a paper.

What a genius way to sell newspapers!

And let's not forget, that is was just about one year ago that it was announced Morse and his minions agreed to pay around $50 million to settle a lawsuit alleging the developer was not in compliance with his contractual obligations to residents of TV. Of course there was no admittance of wrongdoing, but strangley, there was a "confidentially agreement" as part of the settlement. Most agreements of this type keep the specifics of the settlement amounts confidential. So no doubt Morse et al had some concerns regarding what could be revealed if litigation proceded, or God forbid, Morse was actually deposed.

http://www.sptimes.com/2008/03/10/State/The_Villages_develope.shtml

[SteveZ]

What I don't understand is all the concern about how much profit the developer has made with TV.

TV has been a work-in-process for a couple decades. The developer - the "family" - has invested heavily in money, time and effort into TV. They've absorbed a lot of risk and worked like the dickens for many years to make this thing called TV happened.

If the "family" has made millions from TV - good for them. If they wanted to bleed the "golden goose" dry, TV would have "gone public" a long time ago instead of remaining a closed corporation. As smart businesspeople, they seem to have recognized the very-long-term profitability of the TV venture.

Whether a columnist from the Orange County fishwrap believes I have spent my money wisely or not is of no matter. I have piece of mind here, a lot of personal security, and much fun - a lot more than when I lived in Metro Orlando.

It's a beautiful day in The Villages......

[bimmertl]

Exchange the words "developer" with the words "Bernie Madoff".

[RCT]

What I don't understand is all the concern about how much profit the developer has made with TV.

TV has been a work-in-process for a couple decades. The developer - the "family" - has invested heavily in money, time and effort into TV. They've absorbed a lot of risk and worked like the dickens for many years to make this thing called TV happened.

If the "family" has made millions from TV - good for them. If they wanted to bleed the "golden goose" dry, TV would have "gone public" a long time ago instead of remaining a closed corporation. As smart businesspeople, they seem to have recognized the very-long-term profitability of the TV venture.

Whether a columnist from the Orange County fishwrap believes I have spent my money wisely or not is of no matter. I have piece of mind here, a lot of personal security, and much fun - a lot more than when I lived in Metro Orlando.

It's a beautiful day in The Villages......Couldn't agree with you more.:agree:

[Muncle]

What I don't understand is all the concern about how much profit the developer has made with TV.


It's a beautiful day in The Villages......

Steve, this is a common malady around here. I've been referring to it as Financial ***** Envy. It seems to fit.


oh, whatsyourname with your lists of my recent transgressions, I'll get back to you later on that. I don't know who you are or who you think you are, but you might want to chill on telling people to stay out of discussions. The administrators can delete my posts or even bar me from TOTV. You, sir or madam, can do neither of these things. In fact, about all you can do is





`

[chacam]

Wow, 105 posts on this topic. I'll bet Ms Ritchie is very amused as I am at some of the replies and at what her writing has started.

[junglejim]

Let's face it; we are in Florida one of the epicenters of the real estate bubble burst. I heard yesterday that Florida now leads the nation in foreclosures. That being said looks like so far the values here in the Villages have only dropped around 10%. Every recent home purchaser in the state paid more than their home was worth. Look at Orlando. Their shining place to be - Baldwin Park quote from David Welch (in the Orlando Sentinel) "We contracted [to build] at $650,000, before the real blow-up in prices, and I think it peaked at about $1.1million. It did get crazy," Welch said. As a sign of the times, Welch is negotiating the "short sale" of his home in Baldwin Park that's expected to go for about $270,000. We went to Orlando and stayed at another of their hot spots on Lake Eola Park. This park is a cesspool of winos, drug addicts and all sorts of homeless bums. You won't see that in the Villages. Wonder if the Orlando taxpayers are happy with that use of their tax dollars? I do hope the Family stays with us. They do have the vision. How many of you have seen community groups or even civic groups able to reach an agreement without a lot of finger pointing and ill feelings. I am not sure we should be in charge of what goes on in our districts. I think most of us would rather not be involved in the politics and who wants that responsibility at this stage in life?

[Cassie325]

Couldn't agree with you more.


:agree: ME TOO!!!!





P.S.

STEVE and MUNCLE..... :beer3: :eclipsee_gold_cup: :bowdown:

[djl8412]

Hi djl,

To answer you categorically;

Any villager that felt remotely distressed when Ritchie declared that they should worry more about their "future property values and financial liability."..... would be hurt. She has invoked herself as the trier of facts, the jury and the judge before a complaint has even been filed. Border line buyers and by extension future sellers who alter their home ownership decisions based on Ritchie's non-professional biased opinions potentially hurt themselves and others in an already fragile market.

The IRS should do what they are paid to do. This issue has been discussed publicly for a few years. It is interesting to note that the IRS has never filed a complaint. A sharp Florida attorney I know said that the uniqueness of the way the Villages are legally organized, something like Disney World, has left many unanswered questions, limited precedent and a lot of conflicting opinions.

The developer has not been convicted, not even charged with any impropriety so to categorize him by inference with those with "power and money" that commit "misdeeds" is not fair. I check for the American flag at public buildings everyday and the last time I checked "Old Glory" was still flying and that means we still have a presumption of innocence in America. This seems to be an elusive principle for Ms. Ritchie. I prefer to reserve judgement until all the facts are disclosed and the case is decided by a court that does more then speculate on misdeeds as Ms. Ritchie and her fans are so adept at. I should add that I have posted criticisms of the developer at times so I am not in the tank with him.

In straightforward King's English, I said, "I do respect the concerns of my fellow Villagers who wish to be more engaged." If you wish to engage at a more intense level... go for it. I prefer to give the developers their day in court and continue to view the glass as half full. Speaking of which, there's a cool one in the dining room with my name on it right now.

Thanks for taking the time to read the post and have a nice evening.

Hi, again:
At the risk of inflaming you more, I just wanted to point out a couple of things you stated above:

I inquired on what Villagers have been hurt, not who could be[I] hurt.

You vision the American flag flying in front of public buildings which means the presumption of innocene until proven guilty. On the paragraph just before that statement you seem a bit contradictory with statements of "She (Ms. Ritchie) has invoked herself as the trier of facts, the jury and the judge
before a complaint has even been filed" and accuse Ms. Ritchie of being unprofessional and biased. Also, I did not allege Mr. Morse of misdeeds but summarized those in power and money who may "potentially" commit misdeeds. Sounds like jury and judgement calls there. And, just to be safe, I don't recall any of the posters on this topic accusing anyone of being in the tank with the devoloper.

On the issue of the IRS filing a complaint: They first must search facts and compare them to existing statutes to determine if violations have occurred. I don't know what you mean by them "filing a complaint" unless you relate that to filing an affidavit to federal court alleging illegal conduct. In that case, you are correct and the court process will go on, as it is supposed to.

Hope you made the cool half full glass an empty one. Now I've got a pillow that's full of goose down with my name on it. I think the next thing I'll focus on is my cruise with Princess Lines March 7-14.

TTFN

[JimJoe]

I am interested in learning as much as possible about this issue. I want to hear all accurate relevant information on the topic from the parties involved. I think everyone would like that. Villagers love their homeland. Please, no more name calling among ourselves or about the persons involved. Thank you.

[UpNorth]

The IRS is looking for money (what else is new?). I don't think anyone thinks that the developer will reach into his deep pockets to come up with the cash. After all, when a sink hole appeared on the Lopez golf course years ago, who did he expect to pay? If it wasn't for the empty land yet-to-be-developed for more big bucks, it wouldn't surprise me to see him throw the residents under the bus and disappear. Don't kid yourself... it's been done before.

[Russ_Boston]

UpNorth - Highly, highly unlikely. Even after build out there is still tremendous business potential. After all you are talking about a town with 100,000 people. The developer will still own almost all the internal retail space with their associated leases. There will also be great potential in rental income and management. Plus much, much more. Perhaps they may move on to other opportunities but someone will want take over with all that money out there to be made.

You say it has happened before but maybe you are referring to retirement communities who get the people to buy the homes prior to the infrastructure (pools, centers etc.) being built and then abandon the homeowners. TV is just the opposite. They build the complete infrastructure and then build and sell the homes. I don't see TV's fate as bleak.

[dfrey]

Bryan wrote:

"The tax exempt status of all the (unearned?) profit for the Developer is what the IRS case is all about, but only a prepherial issue to most residents."

I do not believe this is correct. It was the central district that issued the tax exempt bonds, not the developer. He claimed a gain on his income tax return and paid taxes on that gain. The central district is on the hook if the tax exempt status is changed for the bonds. They may have to call the bonds and settle with the bondholders because of the lower interest rates the bondholders received and the taxes that they will have to pay. They will then have to issue new bonds at taxable rates, which are normally higher, however, during this economic climate that may not be the case.

Any financial penalties or expenses related to this issue will have to be paid by the central district. As I understand it, the central district has two ways to raise funds: payments received for amenity fees (which can only be raised based on CPI) and levying property taxes (which they have not done before but have the authority to do).

As some have mentioned, this may take awhile to play out but in the end, any financial penalties will probably be paid by the village residents in one form or another.

Exactly Right.

[Bogie Shooter]

The POA Bulletin hit my driveway today. Usually I would be dissing many of the things written on its pages....I do have a couple of objections...but for another day.
They do comment about the IRS bond issue. To quote a portion...."Again, it is just too early to give a definitive answer, much less even speculate on the outcome. We feel that if there is any potential adverse effect for us, the developer will exercise the same good judgment and concern for the residents that he exhibited in the lawsuit settlement in early 2008 and do what he can to protect this community and its residents. We are hopeful that, if the worst case scenario occurs, the develper will do the right thing for the residents. And we encourage residents to support the efforts of the developer and the VCCCD to resolve any issues." (note: my underlining)
A new position of the POA, no wild speculation or finger pointing and asking residents to support the developer.
A welcome change at least on this issue from the POA!

[squeek]

Has anyone thought about this (or am I late to the party?).

The developer sells bonds to finance infrastructure. Assume the actual cost of the infrastructure is several million dollars less than the bond issue total (which seems to be the case in the recent Sentinel article).

The obligation to repay the bond holders is transferred to the property owners through the amenity fee assessment.

What happens with the excess millions not used? Maybe this is part of the IRS's concern as well as the tax-exempt status. In any event, I am interested in learning where the flow of excess funds finally end.

Village Homeowner

[collie1228]

Village Homeowner, I've read the IRS report and there is no mention of the "excess" as a tax issue. The excess, as reported earlier, seems to have been properly reported on the Developer's (Mr. Morse's) corporate taxes. The issue, as I understand the report, is the bond issuer's authority to issue the bonds under a tax exempt status. If it is found that the development district improperly issued the bonds as tax exempt, there will be a new tax liability. Who pays that new liability? I have a feeling it will be the residents of the development district. I suppose the Developer could ste in and and do the right thing, but who really believes that a businessman would ever give up a legal gain of many millions, unless he was forced to do it. But I could be wrong. If this was decided against the development district in the end, I'm pretty sure that our Uncle Sam is going to get his share, and he probably doesn't care much who he gets it from.

[Autoshow]

Lauren, Steve, V7, anyone help please:

Is this the bond that we know about when we purchase the home or is this something that is yet to come down the pike?

If it is the former then what the heck is Lauren talking about. Every new homeowner knows about the bond that can be paid off over the 30 years or just paid up front like any other home debt.

What am I missing?

Thanks for the help.

This has everything to do with the devloper,he issued tax free bonds and the
IRS said he cannot do that,now the IRS wants the tax on that money and it is very possible it could be passed on to every home owner.

i know we all talk about about the bonds ,but this is something more serious.
So anybody with any comments about it should read the article in the Orlando Sun,there is also a small article in the POA,worth reading,and as usual there is nothing about it in The Daily Sun.

[Bogie Shooter]

So anybody with any comments about it should read the article in the Orlando Sun,..........
What is the Orlando Sun?

[Sidney Lanier]

The notion that columnists who write for the Sentinel or any other newspaper do it to sell papers is a tired old claim without credibility that has long since lost any basis in reality.

Show me ANY business that does not spend in the hopes of earning back more than what is spent. If this columnist really believes her comment in this quote, then there's a bridge in Brooklyn that I'd like to sell her....


(And this has nothing to do with the content of her columns and this thread.)

[Muncle]

The POA Bulletin hit my driveway today. Usually I would be dissing many of the things written on its pages....I do have a couple of objections...but for another day.
They do comment about the IRS bond issue. To quote a portion...."Again, it is just too early to give a definitive answer, much less even speculate on the outcome. We feel that if there is any potential adverse effect for us, the developer will exercise the same good judgment and concern for the residents that he exhibited in the lawsuit settlement in early 2008 and do what he can to protect this community and its residents. We are hopeful that, if the worst case scenario occurs, the developer will do the right thing for the residents. And we encourage residents to support the efforts of the developer and the VCCCD to resolve any issues." (note: my underlining)
A new position of the POA, no wild speculation or finger pointing and asking residents to support the developer.
A welcome change at least on this issue from the POA!


Considering my general antipathy toward the POA, this has been a very difficult post to write. In fact, during my first attempt, my computer froze up and I lost everything. So, I try again.

Congratulations to the POA and its officers for putting out such a reasonable and timely notice in their bulletin. :eclipsee_gold_cup: What you have done this day is a real service to your members and residents in general. :mademyday:





`

[Boomer]

Considering my general antipathy toward the POA, this has been a very difficult post to write. In fact, during my first attempt, my computer froze up and I lost everything. So, I try again.

Congratulations to the POA and its officers for putting out such a reasonable and timely notice in their bulletin. :eclipsee_gold_cup: What you have done this day is a real service to your members and residents in general. :mademyday:
`

I have been reading this thread as somebody from the outside looking in. Still learning. And I have to tell you, Munc, that when I saw this post from you about the POA, I read it 3 times. I thought I was missing something between the lines.

I know this had to be a tough one for you. :icon_wink: You're a big man, Munc.

And now a question of protocol, copyright, or whatever: Does the POA bulletin appear on line, and if so, would it be appropriate to post this issue here?

Boomer

[dillywho]

Has anyone thought about this (or am I late to the party?).

The developer sells bonds to finance infrastructure. Assume the actual cost of the infrastructure is several million dollars less than the bond issue total (which seems to be the case in the recent Sentinel article).

The obligation to repay the bond holders is transferred to the property owners through the amenity fee assessment.

What happens with the excess millions not used? Maybe this is part of the IRS's concern as well as the tax-exempt status. In any event, I am interested in learning where the flow of excess funds finally end.

Village Homeowner

I thought the bond repayment was tied to taxes and not the amenity fees. Does anyone know which way it is for sure? I know mine always shows up on my tax bill since we didn't pay it up front.

[starflyte1]

dillywho, there are two different types of bonds. The one you mention and came with your home when it was built and THE other: the developer sells amenities to the CDD and that payoff of bond is in your amenity fee.

Boomer, The POA has a very good web site with all of their past bulletins archived. It is POA4us.org (http://POA4us.org). I found that web site many years ago and have learned a lot reading it. The POA made me very aware of what we were buying when we just bought in December, and decided regardless of what was going on with the sale of amenities to the CDDS, it would still be a nice place for us to live.
We just lowered the price we were going to pay for a home in case it comes back to us.

[JimJoe]

I thought the bond repayment was tied to taxes and not the amenity fees. Does anyone know which way it is for sure? I know mine always shows up on my tax bill since we didn't pay it up front.

I thought:
1. What most people call "the bond" (such ast 20,000 on a new house) is to pay for the initial cost of infrastructure and it is based on the length of the frontage of your property on the street so a villa is cheaper than a ranch; The total cost of infrastructure divided by all taxable frontage gives the cost per foot, then times the width of your lot equals your bond. The bond is higher for the newer villages because the cost of construction ( or improved or additional infrastructure) is higher.
2. The annual cost of maintenance called the cdd bond is to maintain part of that infrastructure, that amount varies from cdd district on an annual basis; Does anyone know how repairs for the street or the utilities in front of your house are paid for. Is there a special assessment to your personal property tax bill?
3. The amenities fees is your monthly bill to pay for the cost of maintaining pools, golf courses etc (and now I believe also to pay off a separate bond that is sold for the purchase of the land and the pool or golf course(for example) (Is this the tax free bonds referred to in the IRS preliminary ruling? ). Is that right? I sure wish this was clearer.

[dillywho]

dillywho, there are two different types of bonds. The one you mention and came with your home when it was built and THE other: the developer sells amenities to the CDD and that payoff of bond is in your amenity fee.

Boomer, The POA has a very good web site with all of their past bulletins archived. It is POA4us.org. I found that web site many years ago and have learned a lot reading it. The POA made me very aware of what we were buying when we just bought in December, and decided regardless of what was going on with the sale of amenities to the CDDS, it would still be a nice place for us to live.
We just lowered the price we were going to pay for a home in case it comes back to us.

Thanks for the clarification. That makes it easier to follow what is going on.

[downeaster]

This thread has 125 posts and 7,569 views. It is obviously of great interest to Villagers and Wannabes.
Lauren Ritchie clarified her position by immediately posting here.
Does anyone think the VCDD and/or Developer will clarify their position?
Do we not deserve some response so we may know what to expect from them?
I can't help but think they monitor this forum. What better place to keep their finger on the pulse.
The Villages Daily Sun will not touch this subject without a green light from their owner.
If we hear from the HOA it will probably be in the defense of the VCDD/Owner position.
The POA has made an intelligent statement but you can bet they will have more to say as time goes on. They have their finger on the pulse.

[Bogie Shooter]

This thread has 125 posts and 7,569 views. It is obviously of great interest to Villagers and Wannabes.
Lauren Ritchie clarified her position by immediately posting here.
Does anyone think the VCDD and/or Developer will clarify their position?
Do we not deserve some response so we may know what to expect from them?
I can't help but think they monitor this forum. What better place to keep their finger on the pulse.
The Villages Daily Sun will not touch this subject without a green light from their owner.
If we hear from the HOA it will probably be in the defense of the VCDD/Owner position.
The POA has made an intelligent statement but you can bet they will have more to say as time goes on. They have their finger on the pulse.

What is it you want them to say at this point in time? Would you want a brief outline of what their response will be to the IRS? Come on, get real.

[JimJoe]

What is it you want them to say at this point in time? Would you want a brief outline of what their response will be to the IRS? Come on, get real.

Yes I would like that. Is that top secret information? Don't you think the people who pay the bills have a right to know? We are REALly interested.

[Cassie325]

Yes I would like that. Is that top secret information? Don't you think the people who pay the bills have a right to know? We are REALly interested.

I would imagine they are relying on their attorney's to work this out with the IRS. This is a legal issue and I wouldn't think anyone would comment until the facts are all available.

There are always two sides to everything. I think we should wait to see what the IRS's final decision is before getting so angry.

I also can't imagine the District charging anymore money to make up for any "mistake" they may have made.

The District and the Developer have been doing this for a long time. They have the residents interest at hand and heart....because it is the residents they pay the bills! The last thing they want to do is upset the residents!!


JMO

[downeaster]

Come on, get real.

This type of response to a post is uncalled for.

[Phoebeis]

Well, I'm confused. If you buy a pre-owned home and it is stated that the bond is paid, do you have another bond on top of that??????? Phoebeis

[starflyte1]

Pheobeis, Yes there is another type bond that is paying for amenities such as golf courses, bought by the CDD from the developer.

[thunderbolt]

I agree Downeaster,,Bogie Shooter are you the poster child for sarcasm and meanness on this forum?? What are you so grumpy about? Don't you know this is Floridas Friendliest Hometown or at least I thought it was.

[katezbox]

Please forgive my not "quoting" here - but there seems to be a lot of confusion on what a bond is and isn't and who gets taxed in relation to them - leading to some confusion and even a touch of panic.

Issuance of bonds is one way a business can raise capital. Investors buy bonds (each is usually priced at $1000) with a given interest rate. The issuer pays the interest rate to the bond holder over a time period (usually 10 - 30 years). To the bondholder, this interest is income that can be spent or invested.

Some bond interest is taxable; some interest is not. What makes a bond tax exempt is usually that it is being issued by a municipality or by an organization that is acting in a way that directly benefits the American people. For example, a water utility can issue tax exempt bonds to expand water service - even if that utility is a for-profit organization. This allows sellers of bonds that meet that criteria to raise money at a lower cost than a public company.

Why would someone buy a bond with a lower rate? That's where the tax-exempt portion comes in. If as a taxpayer you are paying 20% in income taxes, you might be better off with a 4% tax-exempt bond than a taxable bond at 4.9% (where after taxes you would only earn 3.92%). Also, tax exempt bonds are frequently viewed as having lower risk since so many are issued by government entities.

It is not the developer or Villagers who would pay tax if these amenity bonds are found to not be tax-exempt. It is the holders of those bonds. Where our risk as Villagers is if the sale of these bonds was deemed to be fraudulent and the bonds recalled.

I have participated in the issuance of bonds and can tell you that developers can't simply "decide" that they will be tax exempt. The IRS usually must issue a determination of their opinion.

In this case, the developer financed the building of amenities within the Villages with these bonds. He also made a profit selling those amenities to the CDD. I do ROI analysis for a living. This is NOT Bernie Madoff. Developers would never develop if there was no profit in it.

Steve from NY - you are right on. :agree: I'll see ya' at the Square :2excited:in April. I will monitor this situation as an investor in my Villages home - but like Russ_Boston and Muncie also state - one article is not getting the full picture.:bowdown:

With apologies for my soapbox (and finance class)

Kate

[rshoffer]

Please forgive my not "quoting" here - but there seems to be a lot of confusion on what a bond is and isn't and who gets taxed in relation to them - leading to some confusion and even a touch of panic.

Issuance of bonds is one way a business can raise capital. Investors buy bonds (each is usually priced at $1000) with a given interest rate. The issuer pays the interest rate to the bond holder over a time period (usually 10 - 30 years). To the bondholder, this interest is income that can be spent or invested.

Some bond interest is taxable; some interest is not. What makes a bond tax exempt is usually that it is being issued by a municipality or by an organization that is acting in a way that directly benefits the American people. For example, a water utility can issue tax exempt bonds to expand water service - even if that utility is a for-profit organization. This allows sellers of bonds that meet that criteria to raise money at a lower cost than a public company.

Why would someone buy a bond with a lower rate? That's where the tax-exempt portion comes in. If as a taxpayer you are paying 20% in income taxes, you might be better off with a 4% tax-exempt bond than a taxable bond at 4.9% (where after taxes you would only earn 3.92%). Also, tax exempt bonds are frequently viewed as having lower risk since so many are issued by government entities.

It is not the developer or Villagers who would pay tax if these amenity bonds are found to not be tax-exempt. It is the holders of those bonds. Where our risk as Villagers is if the sale of these bonds was deemed to be fraudulent and the bonds recalled.

I have participated in the issuance of bonds and can tell you that developers can't simply "decide" that they will be tax exempt. The IRS usually must issue a determination of their opinion.

In this case, the developer financed the building of amenities within the Villages with these bonds. He also made a profit selling those amenities to the CDD. I do ROI analysis for a living. This is NOT Bernie Madoff. Developers would never develop if there was no profit in it.

Steve from NY - you are right on. :agree: I'll see ya' at the Square :2excited:in April. I will monitor this situation as an investor in my Villages home - but like Russ_Boston and Muncie also state - one article is not getting the full picture.:bowdown:

With apologies for my soapbox (and finance class)

KateClear, understandable and informative. If the bonds were recalled... what happens then? Thank you.

[katezbox]

Clear, understandable and informative. If the bonds were recalled... what happens then? Thank you.

Here is where the speculation kicks in...

The CDD would need to sell new bonds to replace those being called. The interest rate would presumably be higher (no longer tax free, most likely considered riskier) which would cost us more money in the form of higher amenities fees. Whether or not the CDD would have any recourse against the developer remains to be seen.

This is a complex bond issue that may take a significant time to resolve.

[SNOK]

Kate's explanation is right on point. The outstanding question is what happens if the tax exemption is revoked by the IRS? The bond holders will loose the tax exemption and the bond offering documents most likely have provisions setting out what happens to the interest rate, if the tax exemption is revoked. If the interest rate adjusts to compensate the bond holders for a lost tax exemption, there will be a higher cost to someone to fund the cost of the higher interest rates. While it could be possible that the residents would bear some or all of the cost if the district erred, I suspect the developer who benefited from the ability to sell tax exempt bonds will have some of the liability. Also, if the IRS initially approved the tax exempt status, it would have been based on information submitted by the developer and the district. I would think that, in order for the IRS to revoke the status, it would have to contend that the informaiton used to approve it initially was in error. Since that information would have been provided, at least in part by the developer, I suspect the developer would be in line to bear a significant part of any resulting increased cost.

[batman911]

I do not believe loss of tax free bond designation is the main issue. The large (near $50M) profit the CDD paid the developer is of more concern to me. Who does the CDD represent? Is there a copy of the charter on line? The CDD should take bids for building amenities and issue the bonds through a broker (or contract it out). That would be $50M that could be spent (or saved) for maintenance and development of additional amenities.

[downeaster]

With apologies for my soapbox (and finance class)

Kate

No apologies necessary, Kate, and it certainly was not in the "soapbox" league. Major league would better describe it.

And, by all means, keep the posts coming.

[katezbox]

The outstanding question is what happens if the tax exemption is revoked by the IRS? The bond holders will loose the tax exemption and the bond offering documents most likely have provisions setting out what happens to the interest rate, if the tax exemption is revoked. If the interest rate adjusts to compensate the bond holders for a lost tax exemption, there will be a higher cost to someone to fund the cost of the higher interest rates. While it could be possible that the residents would bear some or all of the cost if the district erred, I suspect the developer who benefited from the ability to sell tax exempt bonds will have some of the liability. Also, if the IRS initially approved the tax exempt status, it would have been based on information submitted by the developer and the district. I would think that, in order for the IRS to revoke the status, it would have to contend that the informaiton used to approve it initially was in error. Since that information would have been provided, at least in part by the developer, I suspect the developer would be in line to bear a significant part of any resulting increased cost.

Well said!

[katezbox]

I do not believe loss of tax free bond designation is the main issue. The large (near $50M) profit the CDD paid the developer is of more concern to me. Who does the CDD represent? Is there a copy of the charter on line? The CDD should take bids for building amenities and issue the bonds through a broker (or contract it out). That would be $50M that could be spent (or saved) for maintenance and development of additional amenities.

Hi Batman,

I hear you - but the $50M is not pure profit to the developer. It is an amount to represent the net present value of the earnings stream that the facilities would generate. If you were to sell a business, you would not sell it based on assets less liabilities. The increased amount that you would want would include the hard work you have put into the business that will generate future earnings.

k

[JimJoe]

Hi Batman,

I hear you - but the $50M is not pure profit to the developer. It is an amount to represent the net present value of the earnings stream that the facilities would generate. If you were to sell a business, you would not sell it based on assets less liabilities. The increased amount that you would want would include the hard work you have put into the business that will generate future earnings.

k

What is the difference between "pure" profit and profit?
Did the IRS preliminary ruling think it was a fair price?
What revenue stream do facilities in the villages generate?

[katezbox]

What is the difference between "pure" profit and profit?
Did the IRS preliminary ruling think it was a fair price?
What revenue stream do facilities in the villages generate?

Hi JimJoe,

By "pure" profit I meant profit from just the construction and sale of a facility and it's appreciation. I maybe did not use the best of terms. (Too sad at having left TV yesterday and having to go back to work :undecided:).

A facility like the Savannah Center will generate money that Villagers pay to attend events there. If the developer retained that property he would earn the profits from the revenues (less expenses) that it generates. By selling it, he knows it has a value beyond the brick and mortar in the profit stream it will bring.

[iaudit]

Hi Batman,

I hear you - but the $50M is not pure profit to the developer. It is an amount to represent the net present value of the earnings stream that the facilities would generate. If you were to sell a business, you would not sell it based on assets less liabilities. The increased amount that you would want would include the hard work you have put into the business that will generate future earnings.

k

Kate

The trouble is, the developer is not selling a business. He is selling assets that represents amenities that the residents are entitled to use. There is no arms length transaction here between a willing buyer and a willing seller. In fact, who else would be willing to buy the recreational facilities besides the central district.

In addition, if you read the IRS report, they did not take into account the effect of the bond payments on the future earnings stream. I believe the report also indicates that he was double counting the future earnings streams because he was using the same amenity fees from previous assets sales to determine the cash flow for the current sale.

[JimJoe]

Hi JimJoe,

By "pure" profit I meant profit from just the construction and sale of a facility and it's appreciation. I maybe did not use the best of terms. (Too sad at having left TV yesterday and having to go back to work :undecided:).

A facility like the Savannah Center will generate money that Villagers pay to attend events there. If the developer retained that property he would earn the profits from the revenues (less expenses) that it generates. By selling it, he knows it has a value beyond the brick and mortar in the profit stream it will bring.

Kate, I don't understand. . You chose the Savannah Center to discuss future revenue earnings.. Do you really think it is that profitable? Even if true.. explain what the revenue earnings are for golf courses, pools, tennis courts, softball courts, etc that can only be used by residents and their guests, renters, and lifestyle previewers, at no cost beyond the amenities fee. Was a "profit" including future earnings made on those too? Isn't the main problem the IRS has that this "profit" is being for a non public purpose and therefore should not be tax free? Wasn't the increased value to the surrounding land the "profit"? Do you count the amenities fee as future revenue earnings? I don't think villagers think those fees were intended to be for profit nor do they think that they were marketed that way. If the district bought the land and paid for "future earnings profits", who is getting those profits now after it was purchased? And where is that money going? How can a seller claim the price of property upon which a village amenity was built reflects their hard work that would generate future earnings when at the time they were built the amenity apparently could never have any future earnings because only the villagers and the invited would use them forever at no cost beyond the cost of maintaining them with the amenities fee? I thought the golf courses, pools, tennis courts etc will be here for the villagers as long as the amenity fees are paid and they will not be sold and run for profit in the future? Doesn't the advertisement say "play golf free the rest of your life"? If I am right , there would be no future earnings. The amenities fee should only reflect the cost of acquisition and maintenance. If I am wrong, I am more confused than ever.

On your first post you talked about the cost to villagers if the IRS preliminary ruling stands. You did not address the question who pays the cost if bond holders are charged interest and penalties by the IRS for the years the bonds are denied tax exempt status. Those bonds go back several years. Who pays that and how much can interest and penalties be on those bonds if they are denied tax free status? If they did get IRS approval why are they reviewing it now?
I appreciate your expertise and hope you can clear those up for me. Thanks.

[STEVEN THOMPSON]

It is important to read ,Laurens complete article, click on the
link she has provided,it may effect current and all future residents
as myselph.
I have been looking into these bonds as an investment an have found
the bond in question--VILLAGE CTR CMTY DIST FLA RECREATION REV BDS.
NOW TRDING AT AN UNUSUAL DISCOUNT AT $80.455 YEILD TO MATURITY
6.65 %.(AT TD WATERHOUSE )--cusip # 92706ncq4
I was wondering why such a discount,now i think i know..

Please read her entire article, sounds like future development and future
fees and house prices could be effected.
I will not try to explain it, for she has done a excellent job in doing that.
I have visited the villages 4 X and think it is a great place and will try to
sell my house in South Florida to move their so this article is very important
to me as well as you, all depends on the IRS ruling.

Please read her complete article before responding. Steve

[Russ_Boston]

STEVEN - Does your move really depend on that ruling? I wonder, even if the ruling went against the developer, what the $ impact PER HOUSEHOLD in TV would be? Has anyone made a guess at what this might be?

With almost 50K households in TV at buildout even a very large number in back taxes tacked on would not be that much - would it? Especially if it is paid back over x number of years. I'm not trying to dismiss the rightness or wrongness of the issues but rather what is the $ impact on me if i buy a home in TV and worse comes to worse.

Just wondering if anyone has done the math.

(I apologize if the math is already in this thread but it's long!)

[chelsea24]

Just a comment, not getting into this debate.

When we first bought here, my husband questioned the bond and all other costs very carefully. He's very sharp with money. Did he like it? No! He was not thrilled with what he saw and although we paid amenities in Illinois, he was really taken back by the bond, plus amenities fee.

However, I challenge Ms. Ritchie to show me any retirement community with anywhere near what The Villages has to offer. She won't find one. We looked, not only at the cost, but obviously, what we were getting for our money.

You can have steak or you can have hamburger. We chose steak. We do not feel we were taken on our house in any way, shape or form. We love it here and it is well worth the price of our home and the amenities and all of the beautiful surroundings.

Long story short -- we think living in The Villages is worth every penny! ;)

[katezbox]

Kate, I don't understand. . You chose the Savannah Center to discuss future revenue earnings.. Do you really think it is that profitable? Even if true.. explain what the revenue earnings are for golf courses, pools, tennis courts, softball courts, etc that can only be used by residents and their guests, renters, and lifestyle previewers, at no cost beyond the amenities fee. Was a "profit" including future earnings made on those too? Isn't the main problem the IRS has that this "profit" is being for a non public purpose and therefore should not be tax free? Wasn't the increased value to the surrounding land the "profit"? Do you count the amenities fee as future revenue earnings? I don't think villagers think those fees were intended to be for profit nor do they think that they were marketed that way. If the district bought the land and paid for "future earnings profits", who is getting those profits now after it was purchased? And where is that money going? How can a seller claim the price of property upon which a village amenity was built reflects their hard work that would generate future earnings when at the time they were built the amenity apparently could never have any future earnings because only the villagers and the invited would use them forever at no cost beyond the cost of maintaining them with the amenities fee? I thought the golf courses, pools, tennis courts etc will be here for the villagers as long as the amenity fees are paid and they will not be sold and run for profit in the future? Doesn't the advertisement say "play golf free the rest of your life"? If I am right , there would be no future earnings. The amenities fee should only reflect the cost of acquisition and maintenance. If I am wrong, I am more confused than ever.

On your first post you talked about the cost to villagers if the IRS preliminary ruling stands. You did not address the question who pays the cost if bond holders are charged interest and penalties by the IRS for the years the bonds are denied tax exempt status. Those bonds go back several years. Who pays that and how much can interest and penalties be on those bonds if they are denied tax free status? If they did get IRS approval why are they reviewing it now?
I appreciate your expertise and hope you can clear those up for me. Thanks.

Hi,

You have a lots of really good questions that I can't answer - but hopefully which we will get answers to as this develops. There are a lot of parts of this transaction that could impact the status of the bonds, how they affect the bondholders, the developer, the CDD and us as Villagers.

I don't know if the transactions were "arms length," if any original IRS
determinations will be overturned, how the value of income from all these properties should be valued (put 10 accountants in a room and get 10 answers), was it double counted, etc etc.

My remarks were just to clear up some comments that seemed to not understand what a bond represented and others that villified the developer for making a profit. Ms. Ritchie writes an article we should all read - but which we need to interpret along with all of our knowledge and not take as fact. We should not shoot the messenger, but we should question her motives and those of her IRS source. Like Chelsea, I believe "what we get" for what we pay in TV is worth it.

Right now I think we can all learn as much as we can or put our head in the sands or start playing the blame game. I think your questions and those of a few previous posters agree that #1 is our best choice.

[spk7951]

Hi,

You have a lots of really good questions that I can't answer - but hopefully which we will get answers to as this develops. There are a lot of parts of this transaction that could impact the status of the bonds, how they affect the bondholders, the developer, the CDD and us as Villagers.

I don't know if the transactions were "arms length," if any original IRS
determinations will be overturned, how the value of income from all these properties should be valued (put 10 accountants in a room and get 10 answers), was it double counted, etc etc.

My remarks were just to clear up some comments that seemed to not understand what a bond represented and others that villified the developer for making a profit. Ms. Ritchie writes an article we should all read - but which we need to interpret along with all of our knowledge and not take as fact. We should not shoot the messenger, but we should question her motives and those of her IRS source. Like Chelsea, I believe "what we get" for what we pay in TV is worth it.

Right now I think we can all learn as much as we can or put our head in the sands or start playing the blame game. I think your questions and those of a few previous posters agree that #1 is our best choice.

Katez,
Maybe you can help me understand one thing. If the developer claimed a gain of $53M then I would assume, hate to use that word, he paid a tax on that gain. If so would not forcing the bonds to be taxable be a sort of double taxation?

[katezbox]

Katez,
Maybe you can help me understand one thing. If the developer claimed a gain of $53M then I would assume, hate to use that word, he paid a tax on that gain. If so would not forcing the bonds to be taxable be a sort of double taxation?

Welllllll,

Now you would be confusing our tax law with logic. :shrug:

In this case though, it is hard to tell what the developer paid taxes on given the complexity of the code. If he paid tax on his gain and the bondholders pay tax on their income, I don't see it as doubly taxing necessarily because one tax is on an investment gain and the other is on income from a security. Just don't get me started on estate taxes and tax on dividends though... we'll leave that for the political forum.

k

[Muncle]

Katez,
Maybe you can help me understand one thing. If the developer claimed a gain of $53M then I would assume, hate to use that word, he paid a tax on that gain. If so would not forcing the bonds to be taxable be a sort of double taxation?

Either I'm getting it wrong or some folks have the situation a bit confused. The way I understand it, party A (developer) built/created at his expense and sold a series of items to party B (the Village Center Development District or the Sumter Landing Community Development District). In order to get funding for this purchase, party B now issues bonds on the bond market. Party A is now out of the deal entirely, whether he made a profit or not, whether he declared the sale and paid taxes or not.

A point that I think some people get confused on here is that these bonds issued by party B have nothing to do with the individual residents and have no connection to the bond associated with individual residences. i.e., the phantom $12, $15, $17, $20K that seems to be added to your purchase price.

The new bonds were issued for the sole purpose of funding the initial purchase party B made from party A. The point of contention now is whether party B has the authority to issue tax-free bonds and whether these bonds in particular qualify to be tax-free. From this point on, it is lawyerville.

Am I totally off base?







`

[spk7951]

Either I'm getting it wrong or some folks have the situation a bit confused. The way I understand it, party A (developer) built/created at his expense and sold a series of items to party B (the Village Center Development District or the Sumter Landing Community Development District). In order to get funding for this purchase, party B now issues bonds on the bond market. Party A is now out of the deal entirely, whether he made a profit or not, whether he declared the sale and paid taxes or not.

A point that I think some people get confused on here is that these bonds issued by party B have nothing to do with the individual residents and have no connection to the bond associated with individual residences. i.e., the phantom $12, $15, $17, $20K that seems to be added to your purchase price.

The new bonds were issued for the sole purpose of funding the initial purchase party B made from party A. The point of contention now is whether party B has the authority to issue tax-free bonds and whether these bonds in particular qualify to be tax-free. From this point on, it is lawyerville.

Am I totally off base?







`

I do not believe you are off base. The only point I would add is the party A created at his expense and then sold at a profit to party B.
My thoughts were that if party A paid taxes would that then help decide if the bonds would be tax free or not. But as was noted that would be logic and we are talking about the IRS.

[JimJoe]

A point that I think some people get confused on here is that these bonds issued by party B have nothing to do with the individual residents]and have no connection to the bond associated with individual residences. i.e., the phantom $12, $15, $17, $20K that seems to be added to your purchase price.
Am I totally off base?
`

I agree that these bonds are totally separate and in addition to the bond on the house ($12, $15, $17, $20K), but I believe the bonds issued by the association party B do have something to do with the residents. They are issued to pay for the amenity and the maintenance of it, the residents pay for the them, and all residents of the villages could have to pay if they are determined to be not tax free. The payment will be either in the form of higher amenity fees, or a tax on their property. The annual CDD assessment is also separate and for repairs of the infrastructure and is assessed by each district.
If I am wrong someone please correct me.

[Schoonie]

Bottom line,this is all about cost and life style. We just returned last night to our other house in Virginia. It is 44 degrees and heavy rain. I paid much more for a house here than in the Villages. The ongoing expense is also much more than the Villages. The lifestyle here is not bad it is just different.

My wife and I looked at communities all over the country before our purchase in the Villages. In our opinion nothing else compared to the quality, lifestyle, services, recreation etc. Even with the Bonds and fees we would purchase again without hesitation in the Villages.

[JimJoe]

Even with the Bonds and fees we would purchase again without hesitation in the Villages.

This definitely seems to be the consensus. The Villages is a fantastic place to live. I do however think there needs to be oversight on this issue. Current residents and also prospective buyers have a right to know what the current costs are, what they are for, and a reasonable forecast for the future.

[Russ_Boston]

I do however think there needs to be oversight on his issue. Current residents and also prospective buyers have a right to know what the current costs are, what they are for, and a reasonable forecast for the future.

If I'm not mistaken there are oversight committees comprised of residents who are on the board of the turned over VCDD's. Isn't that true?

http://www.districtgov.org/images/WhatsNew/2008VCCDDElectionResults.pdf

[JimJoe]

If I'm not mistaken there are oversight committees comprised of residents who are on the board of the turned over VCDD's. Isn't that true?

http://www.districtgov.org/images/WhatsNew/2008VCCDDElectionResults.pdf

I'd sure like to hear from them on this issue. This would be a perfect place for them to give feedback to their constituents.

[iaudit]

If I'm not mistaken there are oversight committees comprised of residents who are on the board of the turned over VCDD's. Isn't that true?

http://www.districtgov.org/images/WhatsNew/2008VCCDDElectionResults.pdf

The numbered CDD's, over about a ten year period, transition from developer picked supervisors to homeowner picked supervisors. However, the central CDD's (the one's that issued the recreation bonds) are entirely pick by the developer and will not change as long as he owns the business areas that comprise these central CDD's.

[JimJoe]

The numbered CDD's, over about a ten year period, transition from developer picked supervisors to homeowner picked supervisors. However, the central CDD's (the one's that issued the recreation bonds) are entirely pick by the developer and will not change as long as he owns the business areas that comprise these central CDD's.

I read somewhere the central CDDs are picked by the owners but there are only 17 owners in that district AND they get to make the decisions about the recreation bonds (the ones the IRS preliminary ruling was about) (paid for by the amenity fees). Can anyone confirm that?

And I still think the members of the numbered CDDs probably know alot about this issue and could enlighten all of us.

[The Great Fumar]

Whether a columnist from the Orange County fishwrap believes I have spent my money wisely or not is of no matter.
It's a beautiful day in The Villages......

I agree with Steve and the operative word here is COLUMNIST..She is not a REPORTER and can say pretty much what she pleases.....and is about one step above a supermarket tabloid.....barf

[collie1228]

The main reason why the founding fathers insisted on freedom of the press was to make sure the people had a watchdog over their government. Since "the government" in this case is the development district (although I doubt Madison or Jefferson ever conceived of such a strange contrivance), I think that Ms. Ritchie, as a member of the press, is doing us all a service by bringing this whole IRS situation into the light of day. I, for one, would probably never have known about the IRS allegations, if she hadn't written her column, so I am thankful to her for that. We can all dispute the facts of the case, which is what we should be doing. But I haven't seen any disputed facts here yet - only some pretty good questions and some mud slinging. "Sunlight is the best disinfectant,” a well-known quote from U.S. Supreme Court Justice Louis Brandeis, and is just as true today as when he said it. Shooting the messenger doesn't help anything.

[Muncle]

I read somewhere the central CDDs are picked by the owners but there are only 17 owners in that district AND they get to make the decisions about the recreation bonds (the ones the IRS preliminary ruling was about) (paid for by the amenity fees). Can anyone confirm that?

And I still think the members of the numbered CDDs probably know alot about this issue and could enlighten all of us.


Then attend your CDD meetings. They are open to the public. There was a column in last Thursday Rec section almost begging residents to attend the various budget workshops and meetings.

http://www.thevillagesdailysun.com/content/current/sections/recnews.pdf

Click on the above and go to the second page.

I'm sorry if it appears that I'm dumping on you, JimJoe, because that's certainly not my intent. It's just that there are so many sources of good information in the community that people just ignore. There's the CDD website, the weekly column cited above (sometimes informative and useful, sometimes a complete waste of paper stock), the 751-6700 number for general questions, direct email access to all members of the district staff -- http://www.districtgov.org/slcdd/staff.asp --, and of course, the CDD orientation classes held every Thursday. And there's such things as the VHA Newcomers Orientation at which they attempt to introduce new folks to a variety of services and functions in TV.

Now for the flip side. The developer and the district could do a much better job of getting information out there and explaining the intricacies of our government, both structure and in practice. This is a tough one, but the developer should produce a document for all prospective buyers that explains CDDs, bonds, numbered districts vs. VCDD/SLCDD, and similar issues. I say it is tough because obviously this could well dampen the enthusiasm of a prospect. In order to be readable, such a paper must be pretty succinct and many of these are not issues that can be explained in a paragraph or two. An easy example is your residence bond. It would hinder sales if the prospect thought this was just a $20K add-on for which he was getting nothing. The document would have to explain A) how this is authorized under Chapter 190 of the Florida Statutes, B) in what manner they money was used, C) how the amount was apportioned so that his bond was $20K while the villa down the street was only $13K, D) how the bond can be paid, and of course, E) that all new home buyers pay this cost but that it's normally buried in the cost of the house. And this bond would likely be the simplest to explain.

The CDD Orientations. I wish they could make them mandatory, tied to closing maybe. But they really are woefully inadequate as is. Firstly, most attendees don't know enough to ask pertinent questions (and there's always that guy -- normally a male -- who is either fixated on a single issue, like cart paths up north, and keeps asking questions/making statements about it so the lecturer can't get on to other issues) and get lost if the discussion gets into any detail. I suggest that the district develop two separate classes. The first would remain an orientation aimed at new residents, that paints the CDD program with a very broad brush. No nitty gritty. Then the should offer periodic sessions aimed at folks who've lived here a while, folks who thought they understood but now have more questions than answers. These would not be at 10AM at the district office but would be at various times at the different rec centers. And they should tailor their presentation to fit the prospective audience. There would bee minimal interest and few questions about trains at an evening session at Canal Street, but when the session was held at the Chathum Rec Center, the presenter better know a lot about trains and be able to discuss the noise.

They say TV is a community of rumors. If you haven't heard a good one by 10:00 AM, you are obligated to start one. But there are rumors and then there are rumors. The story that there is going to be a massive mosque built in what's left of the buffalo land as LSL is absurd and no one takes it seriously. But the tax-free bonds issue is another matter entirely. Thanks to Ritchie's hatchet job, many, many of TV residents know there may be something, but no one really knows the facts. To my knowledge, no one in authority has commented. I can understand that in a way, because one does not want to give legitimacy to a XXXX such as Ritchie. Regardless, the rumors persist I know there are likely legal and tactical reasons why they cannot bare all, but the developer and he distract owe it to us (not legally or even morally but logically) to provide what comments they can.

And there's a lot of other little things they could do, but I'm tired of typing.





`

[JimJoe]

Then attend your CDD meetings. They are open to the public. There was a column in last Thursday Rec section almost begging residents to attend the various budget workshops and meetings.

http://www.thevillagesdailysun.com/content/current/sections/recnews.pdf

Click on the above and go to the second page.

I'm sorry if it appears that I'm dumping on you, JimJoe, because that's certainly not my intent. It's just that there are so many sources of good information in the community that people just ignore. There's the CDD website, the weekly column cited above (sometimes informative and useful, sometimes a complete waste of paper stock), the 751-6700 number for general questions, direct email access to all members of the district staff -- http://www.districtgov.org/slcdd/staff.asp --, and of course, the CDD orientation classes held every Thursday. And there's such things as the VHA Newcomers Orientation at which they attempt to introduce new folks to a variety of services and functions in TV.

Now for the flip side. The developer and the district could do a much better job of getting information out there and explaining the intricacies of our government, both structure and in practice. This is a tough one, but the developer should produce a document for all prospective buyers that explains CDDs, bonds, numbered districts vs. VCDD/SLCDD, and similar issues. I say it is tough because obviously this could well dampen the enthusiasm of a prospect. In order to be readable, such a paper must be pretty succinct and many of these are not issues that can be explained in a paragraph or two. An easy example is your residence bond. It would hinder sales if the prospect thought this was just a $20K add-on for which he was getting nothing. The document would have to explain A) how this is authorized under Chapter 190 of the Florida Statutes, B) in what manner they money was used, C) how the amount was apportioned so that his bond was $20K while the villa down the street was only $13K, D) how the bond can be paid, and of course, E) that all new home buyers pay this cost but that it's normally buried in the cost of the house. And this bond would likely be the simplest to explain.

The CDD Orientations. I wish they could make them mandatory, tied to closing maybe. But they really are woefully inadequate as is. Firstly, most attendees don't know enough to ask pertinent questions (and there's always that guy -- normally a male -- who is either fixated on a single issue, like cart paths up north, and keeps asking questions/making statements about it so the lecturer can't get on to other issues) and get lost if the discussion gets into any detail. I suggest that the district develop two separate classes. The first would remain an orientation aimed at new residents, that paints the CDD program with a very broad brush. No nitty gritty. Then the should offer periodic sessions aimed at folks who've lived here a while, folks who thought they understood but now have more questions than answers. These would not be at 10AM at the district office but would be at various times at the different rec centers. And they should tailor their presentation to fit the prospective audience. There would bee minimal interest and few questions about trains at an evening session at Canal Street, but when the session was held at the Chathum Rec Center, the presenter better know a lot about trains and be able to discuss the noise.

They say TV is a community of rumors. If you haven't heard a good one by 10:00 AM, you are obligated to start one. But there are rumors and then there are rumors. The story that there is going to be a massive mosque built in what's left of the buffalo land as LSL is absurd and no one takes it seriously. But the tax-free bonds issue is another matter entirely. Thanks to Ritchie's hatchet job, many, many of TV residents know there may be something, but no one really knows the facts. To my knowledge, no one in authority has commented. I can understand that in a way, because one does not want to give legitimacy to a hack such as Ritchie. Regardless, the rumors persist I know there are likely legal and tactical reasons why they cannot bare all, but the developer and he distract owe it to us (not legally or even morally but logically) to provide what comments they can.

And there's a lot of other little things they could do, but I'm tired of typing.

`

WOW.. Do you feel better now? I have tried very hard to obtain information on these subjects from more than just the sources you cite so please don't scold me for asking questions. The problem is no one apparently has been able to clearly explain all of this.. and I think it should be clear both to the current residents and potential buyers. Don't you agree all of this should be clear to all of us? If not, why not? The Villages is a FANTASTIC place to live!! Is there a problem in us knowing the financials involved in it?

Was your answer a yes or a no? Can you confirm that the central CDD is controlled by a few owners and it makes the decisions about the recreational bonds for everyone (amenity fees)? When I read that I didn't make much sense to me but this IRS issue makes me wonder. That was my question.

No one disputes the need for infrastructure that is paid for with "the bond" (20k or so on a new house). It is either inside the cost of a new house (like up north) or paid for separately in the Bond (as done here). Either way it should be and will be paid for by the homeowner. But for example what happens when a repair or replacement needs to be made on that infrastructure? Will that be paid for by special assessment against the property (some places up north), by property taxes (most places up north), or by the annual Development District Assessment?

Don't Forget, The Villages is Florida's friendliest hometown!!

[Muncle]

WOW.. Do you feel better now? I have tried very hard to obtain information on these subjects from more than just the sources you cite so please don't scold me for asking questions. The problem is no one apparently has been able to clearly explain all of this.. and I think it should be clear both to the current residents and potential buyers. Don't you agree all of this should be clear to all of us? If not, why not? The Villages is a FANTASTIC place to live!! Is there a problem in us knowing the financials involved in it?

Was your answer a yes or a no? Can you confirm that the central CDD is controlled by a few owners and it makes the decisions about the recreational bonds for everyone (amenity fees)? When I read that I didn't make much sense to me but this IRS issue makes me wonder. That was my question.

No one disputes the need for infrastructure that is paid for with "the bond" (20k or so on a new house). It is either inside the cost of a new house (like up north) or paid for separately in the Bond (as done here). Either way it should be and will be paid for by the homeowner. But for example what happens when a repair or replacement needs to be made on that infrastructure? Will that be paid for by special assessment against the property (some places up north), by property taxes (most places up north), or by the annual Development District Assessment?

Don't Forget, The Villages is Florida's friendliest hometown!!

I know my post was long -- as noted in the last line. Did you bother to read it before responding. If not, I'll try to clarify.

I scolded no one (this time) for asking questions. You said "And I still think the members of the numbered CDDs probably know alot about this issue and could enlighten all of us." That is why I brought up the board meetings. Some may not realize the meeting were open and easily available to them. I don't expect to see a post on TOTV that starts, "Hi, I'm Joe Schmoo and I'm a member of the board of CDD 65. Here's the real, true, secret, classified, and totally not confusing answers to all your questions."

As to whether "no one is able to explain" all the issues involved, I doubt that. The problem is that no one from the developer or the district has come up with a procedure to do so. The whole purpose of my long msg was to cite some of their shortcomings and suggest some opportunities to improve their communications. "Don't you agree all of this should be clear to all of us? If not, why not?" As I said, didn't you read the post?

No, I did not answer your question about the spending of amenity fees, primarily because I don't fully understand it myself and also because it is an evolving process. North of 466, there's an elected Amenity Authority that control, in some manner, spending of amenity fees. There will be one in the south and likely there will eventually be one south of 466A.

The reason I used the residence bond as an example is that it's easiest to explain. I agree that almost no one disputes the need for infrastructure, but many people are confused about the bond, as witnessed by the many posts on the subject from Day 1. And the questions you asked about what happens with follow-up costs --- great questions that could be readily addressed if the district had phase 2 orientation sessions as I suggested, or possibly in the detailed documents prepared by the developer as I suggested or, as I didn't suggest yet, in a real life regular Q&A process either in the newspaper or weekly on the WVLG noontime talk show. But they have none of those.

And no, I don't feel better now.





`

[JimJoe]

Dear Muncle:

You said: And no, I don't feel better now.
I will take you out for a beer sometime and you will feel better then.

[superbat]

Amen

[Captfrog]

If you really want to understand this controversy, check out Ms Ritchie's concise and informative column at:

Lauren Ritchie Column (http://www.orlandosentinel.com/news/local/lake/orl-lkritchie-column-villages-0429042909apr29,0,4758757.column)

Or simply go to the Orlando Sentinel's website, search for Lauren Ritchie, and read today's offering.

[graciegirl]

Captain Frog. Nice to meet you. ;) I see that you are new. Sit down, sit a spell.

Muncle. You are right. So right.

[graciegirl]

Hello Villagers,

I'm Lauren Ritchie, the Sentinel columnist who wrote the 3/1 column about the Villages and the IRS. I've been reading your notes about how my columns are "slanted."

Yes, they are. They are supposed to be slanted. That's what the Sentinel pays me to do. I am not a news reporter. Those folks are paid to get all sides of the story and lay it before you without comment.

I'm a columnist, which means that I write opinion. I'm paid to research, form an opinion and write it in a way that convinces readers. I DO have an opinion about this IRS investigation and about the way that the developer has used the community development districts to his benefit -- at terrible expense and liability to Villages residents. Do you realize, for example, that the outstanding bond debt on each of your homes is roughly $18,000? I wonder whether you would have bought your place if that had been tacked onto the purchase price up front? And, in addition, that $18K is the face value. Over the life of the bonds, homeowners will pay another $18K-$20K in interest. (Consider that the amortization schedule of the $64 million in bonds the IRS is investigating is about $134.5 million over the life of the bond.)

I have a second column about the IRS investigation that is to be published on Wednesday. If you don't get the paper, you can access the column online at www.orlandosentinel.com/lake and look for my picture with a list of columns by it.

In any event, I hope this helps you understand what I do. Regardless, the real question here is about the validity of the bonds, not what anyone might write about them.

Lauren

I have found this old post, you can see the date. This is from Lauren Ritchie herself.

[pooh]

Bless your heart, Gracie. Thank you.

[Tom Hannon]

I was wondering something about the bond. Can I write off the bond on my income tax? Or just my actual mortgage???

[Russ_Boston]

The bond interest is not tax deductible.

But the normal property tax amount is also deductible + the interest on any mortgage + miscellaneous taxes (car excise tax etc.).

[EdV]

Wow Gracie, I had forgotten all about this thread. I could have saved myself a lot of typing on this subject recently by simply referring to it and the numerous posts by Muncle which were pretty much spot on.

Sadly, on Nov 7, 2009 Muncle lost his battle with lung cancer.

[bkcunningham1]

Good job Gracie. You get the gumshoe award for today.

[Lauren Ritchie]

hello villagers,

i have hopped on your forum to answer some of your questions and explain a little more. i’ll start by explaining how the villages CDDs differ from every other CDD in florida. that is the key to understanding why the IRS is on the villages case and not the case of any other CDD in the state. i noticed that many of you said this stuff is difficult to understand. it is, without question. but i’m going to give it a try. please email me with questions: lritchie@orlandosentinel.com

then i’ll respond to individuals – not the snippy ones. there’s no point in witty little exchanges bashing each other. this issue is too weighty for that sort of levity.

in florida, statutes (state laws) allow for the creation of a form of government called a community development district. the villages’ CDDs were created in the usual way, which is to ask the county commission to allow the district to be established. the commissions in lake, sumter and marion all said yes in this case.

the so-called “numbered districts” function in the same way as every other CDD in florida: they were created to pay for the infrastructure of the community – i.e., roads, sewer plants, water plants, street lights, stuff like that. the developer controlled all the seats on the governing board of the CD. that’s the way the law is set up, and that is perfectly legitimate. the CDDs sold bonds to pay for hard, tangible assets, such as those mentioned above. as the development was sold, more folks who owned lots were entitled to seats on the governing board. eventually, the homeowners controlled the board. the set fee rates so that the community would continue to run and the bonds could be repaid. i don’t personally care for this setup, but it’s not illegal. so, no problem.

however, the village center district and the sumter landing district work differently. those CDDs were created in the same way as the ones mentioned above.

however, no residents actually live in the VCCD and SLCDD districts. it’s mostly commercial property that is either owned or controlled by the developer. if you doubt this, get online and read the bond statements. they clearly state that the property is either owned or controlled by the morse family.

so the VCCD and SLCDD board members are morse employees or associates. they are looking after morse’s interests, not those of the villages’ residents. if you are thinking that they are concerned about the residents/homeowners, you should stop reading right here because i cannot help you.

those board members of the VCCD and SLCDD at various points since 2003 voted to buy both tangible assets, such as swimming pools and gate houses for example, and to buy the right to collect your ammenity fees for 30 years.

that’s a little weird – they bought a right. the right to collect fees is NOT a tangible asset. by that, i mean it is not something you can touch. it’s what is called a “blue sky” or “intangible” purchase because it’s an idea, not a “hard” asset.

so, these two developer-controlled districts bought -- from the developer -- the recreational ammenities and the right to collect the fees for 30 years. in that transaction, the developer essentially cashed in on thirty future years of fees for himself and bought the recreational assets from himself. if the board members had not voted to buy the right to collect fees, the boards would not have had to issue bonds. rather, gary morse and his family would have had to collect their ammentiy fees over a period of 30 years – not in a lump sum.

following me?

every bond must have a stream of money from which it will be repaid. in this case, your ammenity fees are pledged to repay those bonds.

and that’s the catch.

why is this a “catch” you might ask?

the answer is that this is the ultimate form of taxation without representation.

you as a homeowner have no representation on the VCDD or SLCDD – the developer owns or controls the majority of land and seats on the governing board. and despite the purchase with YOUR ammenity money, you do not now and never will own the assets. that’s because the developer controls the governing boards and owns most of the property in the district.

here’s where the IRS comes in.

to be able to issue tax-free bonds, governments have to be real governments, like cities or counties or townships or boroughs. they have to exist for the public good. they cannot exist to make one person rich or to conduct transactions that benefit a single person or persons. purchases have be what’s called “arm’s length” – in other words, “disinterested.” what that means is there can’t be a conflict of interest.

of course, in this case, there is a very big conflict of interest. the developer is essentially buying from himself and issuing tax-free bonds to do it – and you, the homeowner, are paying for it. and wont’ even own the assets when the bonds are paid off.

that annoys the IRS, whose agent says the VCDD and SLCDD bonds should not be tax-free because they don’t meet the tests of being for the interest of the people. in fact, the agent used the word “perverted.” he said the government so “perverted” the intent of how CDDs should function under florida law that the bonds should not be tax free. i totally agree with him, but you may have a different opinion, and that is OK because this is still america.

now, on to the comments, but totv says i must do it in another post. so stand by....

[Lauren Ritchie]

first, someone suggested that i get my information from the book leisureville. while i have corresponded with the author in the past, i have never read leisureville. it is about the culture and lifestyle of the villages. i don’t care a whit about either of those issues. my columns are about the underlying financial structure. my information comes strictly from public documents – documents that YOU can get if you wish.

…to dillywho who asked how i know that the CDD spent $209,000 so far on lawyers. i know this because the CDD is government, and records of governments using YOUR money are public. you can get these same records by doing the exact same thing i did -- email janet.tutt@districtgov.org regarding the question of whether i think the developer should take all the risk to provide great amenities (and they sure are) but charge you nothing….the answer is of course not. but neither do i think he should be charging you twice for the same amenities plus interest.

… to the shadow…yes, you understand this perfectly when you say that the IRS is after the districts, NOT the developer. and who is the districts? it is the developer, but his source of income is YOU, the homeowner.

...man about town asks whether the IRS is disallowing tax exempt status for all CDDs in Florida. the answer is a big NO. that has nothing to do with politics. see the explanation above.

…zcaveman speculates that my bosses assign me articles. um, no, dude. i’m a columnist, not a news reporter. i am not based in orlando, as someone else suggested. i have lived in lake county for 30 years and have worked for the sentinel all that time in a number of capacities.

…saratoga man asks how residents could be liable for any tax problems. even tho the village center district and the sumter landing district are controlled by the developer, all of the money to operate comes from your ammenity fees. last time i checked, roughly half of the $40million or so that the VCDD collects in fees is spent on repaying the bonds. .

…jim joe you say that your understanding is that the two commercial districts get ammenity fees and pay the lawyers with that money. yes. that is precisely how it works.

…willy…you have a perfect understanding.

…bogie shooter…you ask whether the lawyers really were paid from ammentiy fees. oh, yes, indeed. there is NO other source of $$ but YOU.

now, i want to correct a few errors in edvin’s post. see below:

Ritchie: As The Villages was built, its developer Gary Morse created a form of government called community development districts, the same type scrutinized in this column last week.

There are 10 of these ‘numbered’ CDDs that make up the residential homes in The Villages, the first of which was established way back in 1992. And these 10 numbered districts do not have nor do any of the residents have any ownership of any recreational or amenity facilities. There may be a beautiful club house with an olympic sized pool smack dab in the middle of one of these numbered districts, but it is not a part of it. this is not entirely correct. the 10 numbered districts do not, indeed, own the ammenities, whether they are pools or gatehouses. BUT the sad thing is that the villages homeowners ARE paying for these ammenities through fees that to to the village center and sumter landing districts. that’s because those ammenities were purchased from the developer by the district . that’s what the bonds were for.
Ritchie: In the Villages, two main community development districts have sold bonds to buy the infrastructure and recreational facilities — things like lights, roads, sewer and water plants, clubhouses, golf courses, gatehouses and more — from the developer.

The fact is that the developer built all of the executive golf courses, club houses, pools and the myriad recreational facilities with his own money for commercial purposes. And perhaps because it also included facilities for security, emergency, and fire protection, Florida allowed him to place those facilities under the two special CDDs that are the subject here. But you are misguiding your readers by implying that the monies received from these particular bonds were used to pay for the infrastructure of hundreds of miles of roads and sewers that are in the 10 numbered residential CDDs when in fact each of those numbered districts received their own bonds to pay for their infrastructures.
again, not entirely correct. the state of florida did NOT allow the developer to create districts for the reasons that edvin stated. developers are allowed to create districts to govern the area. the bonds that then were issued by the two main districts, especially the early bonds, DO include various infrastructure items. but the bonds the IRS district is most uncomfortable with are called “recreational revenue bonds,” and those include clubhouses, pools, golf courses, etc
Ritchie: That's the way it worked, too, in the other Florida districts that have issued bonds. However, The Villages bond deals differ in two key ways......

First, the seats on the district governing boards in other developments typically are turned over to the residents as buyers purchase lots and move in. Not so in The Villages, where the districts selling the bonds in question are controlled by the developer and deliberately are set up so he can keep them out of the hands of residents for as long as he wants.

Florida Chapter 190 specifies that voting in a CDD is based on land ownership, not residency[/B. And the residents of The Villages do not own any of the land, property or amenities that make up the two special CDDs. So quite simpy, they didn't, don't, and never will own or control those amenities. And furthermore, every one of the seventy five thousand or so residents of TV signed a contract acknowledging this when they purchased their home. Here is the specific paragraph:
<B>
4.1(g) Purchasers of Homesites further agree, by the acceptance of their deeds and the payment of the purchase price therefore, acknowledge that the purchase price was solely for the purchase of their Homesite or Homesites, and that the owners, their heirs, successors and assigns, do not have any right, title or claim or interest in and to the recreational areas, security facilities, dedicated or reserved areas or facilities contained therein or appurtenant thereto, by reason of the purchase of their respective Homesites, it being specifically agreed that, (1) the Developer, its successors and assigns, is the sole and exclusive owner of the areas and facilities, and (2) the Contractual Amenities Fee is a fee for services and is in no way adjusted according to the cost of providing those services.

EDVin is correct in that residents are not charged. i was simply looking for another word for “homeowners.” everything in this scenario is based on the ownership of lots, not who lives there.
</B>
Ritchie: Second, these districts — remember that they're controlled by the developer — are using part of the bond money to buy "blue sky" from the developer. In this case, it is simply the right to collect assessment fees from residents. The developer gets all the fees in his bank account now instead of having to wait for them to dribble in over 30 years. Lucky residents get to repay the bond through fees — with interest — for 30 years to come.

Here’s where you and your cohorts really try to pull the wool over everyone’s eyes because you always neglect to acknowledge that because of the unusual structure and contract on their amenities, the residents of The Villages have what amounts to virtual rent control of all of their wonderful amenities. And here’s the paragraph from the contract that enforces this:
<B>
4.1 (b) The monthly Contractual Amenities Fee set forth herein is based on the cost of living for the month of sale as reflected in the Consumer Price Index, U.S. Average of Items and Food, published by the Bureau of Labor Statistics of the U.S. Department of Labor ("Index"). The month of sale shall be the date of the Contract for Purchase of the Homesite. There shall be an annual adjustment in the monthly Contractual Amenities Fee. The adjustment shall be proportional to the percentage increase or decrease in the Index.

edvin’s idea of rent control is pretty bizarre. HALF of what you pay goes to repay bonds –with interest. if these bonds have to be recalled, the only source of income is YOU, the owner. if you have a set amount you have to pay, then where you think the money will come from? it can come from one place and one only: it will come from that set ammenity fee you pay. if you get less in the way of ammenties because MORE than half is going to settle this mess, then so be it. </B>
Ritchie: What a beautifully magnificent source of unfettered, risk-free cash for the developer. The other districts in Florida buy things they can touch, such as water plants. "Blue-sky" transactions haven't been included in their bond deals.

But as you yourself pointed out, 41% of those ‘other’ communities are in financial trouble. The Villages is not, in spite of what you would like everyone believe.

the problem with edvin’s logic here is simple. first, these communities DO NOT operate like the villages VCDD or SLCDD. they are not comparable. second, the communities that are in trouble are the ones where the developer either went belly up or could not sell enough lots to make the bond payments. neither is the case in the villages. the developer is VERY well capitalized, thanks you YOU, the homeowner.
Ritchie: Community development districts that buy infrastructure from developers are a rip-off to the consumer, never mind The Villages' "blue sky" purchases, which are just a secondary piece of legal thievery.

In subdivisions without districts that issue bonds, buyers pay for the infrastructure in the price of the house. In those with districts, they do, too. But in addition, they pay a second time for that infrastructure — with interest — as they pay off the bonds, which often add an extra $20,000 to the price of a house.
this comes from simple observation. consider this: clearly, the villages has more ammenities than any other community. but consider your 1,500 square foot house or whatever. what price could you buy that same size house for at say, royal harbour, or arlington ridge or some other community? it is roughly the same price, i believe. you aren’t getting a discount. so, some other communities have at least SOME of the same ammenities and those folks are paying the same amount. but YOU are paying another $20K to $25K extra for your ammenities. plus interest on bonds. ouch.
Where is this coming from? I’m afraid you’re losing it dear girl. Sometimes I think ideas drop from your head to your tongue like candy from a gum ball machine.


Ritchie: ……. The district already has spent more than $209,000 of residents' money so far, nearly all on high-powered lawyers on both coasts.

Here again we have a very misleading statement. The two special CDDs have not spent one dime of the resident’s money. They have in fact spent $209,000 (or whatever) of their own money on legal defense. Yes, yes we all know the source of that money, it’s the amenity fees paid by the residents. But the moment those amenity fees are deposited into the account of those two CDDs it’s no longer the residents’ money. However, the annual maintenance fee paid by residents to their respective numbered residential CDD is their money because they have ownership in that CDD and a vote in how that money is spent.

Still having trouble with this? Here’s a simple example. You decide to order cable service and sign up for a two year contract with a sweet deal monthly price. Part way into the contract, the cable company gets into a legal battle over something and spends a ton of legal fees to straighten it out. Whose money is paying for this? Why the cable companys' of course. Can the cable company raise the fee to cover the legal fees? Yes but only after the contract ends and at the risk of losing you as a customer. But the two CDD’s can’t do that with the amenity fee. It’s fixed at the time of the original sale with annual increases limited to the CP Index and the term of the contract is for the life of the residence. So who cares how that money is spent.

this analogy is not appropriate. cable companies are private, for-profit businesses. the CDD is a [B]government, and as such is supposed to act in the best interest of its citizens, the people who are paying taxes. in this case, the “tax” or ammenity fee, is paid by people who are not living in the district, thus the IRS issue. EdVIn asks who cares how the money is spent? the answer is YOU should care. of half your ammentity fee weren’t going to repay bonds that were issued with the sole purpose of making the develper rich, then you would have some seriously cool ammenities.

folks, if you’ve stuck with me for this long, thank you very much for your attention. this is a tough issue and very complicated.

i’d like to make a distinction here. lots of folks seem to think i’m a “village-hater.” that’s just wrong. i don’t care a whit about the lifestyle one way or the other.

what i don’t like is seeing retired people getting ripped off. i consider community development districts in general, and these in particular, a rip-off to buyers. that’s my opinion, and yours can certainly be different. but yours is completely invalid if you don’t undertand how this works. my columns are focused the financial deals and on showing you how these deals have created your community. if you totally understand and are OK with that, so be it. but i have zero interest in debating your lifestyle

i wish you all the best. heck, in a few years, i hope to be enjoying my own retirement.

lauren ritchie

[Challenger]

if tax free bonds were sold, who were the underwriters and who was bond counsel? Liability would seem to lie with those who benefitted from the transaction and those who provided required opinions about taxability.

[Pturner]

Hi Lauren,

First, thank you for posting here and for agreeing to respond to questions. You have taken a lot of heat on this forum for your opinion columns about the bonds.

I have a comment and some questions. The comment concerns the fact that the central CDDs, rather than the developer per se, will collect the amenitiy fees for 30 years. I do understand that TV homeowners will not own the amenities at the end of the 30 years. But it also is true that if the developer were still collecting the fees directly, and had not established the two central CDDs, the homeowners still would not own the amenities after 30 years. Same difference on that particular point.

I also think I understand the IRS agent's reasoning in questioning the tax-exempt status of the central CDDs. Whether the developer and his attorneys found a clever and legal way to establish the two CDDs to issue tax-exempt bonds to finance the future fees, or whether the IRS eventually rules against the developer remains to be seen.

However, if the IRS rules that the central CDDs did not meet the criteria for issuing tax-exempt bonds, wouldn't the developer be responsible for paying the taxes on the bonds, inasmuch as he owns and controls the two CDDs? What is your opinion on this?

I suppose the developer could try to use amenity fees to pay the taxes and refinance the bonds, but then I would think 80,000 + homeowners could justifyably and easily get class-action status to fight such action. Yes, that would be a costly mess, but it also seems so unlikely, don't you think? The developer would never sell another house, here or anywhere. Has anyone ever managed to cheat 80,000 people and stay in business.

If Morse found a legal instrument for financing the future amenity fees, what of it? We TVers wouldn't own the amenities after 30 years with or without the two central CDDs. If the IRS rules against him, he'll owe back taxes, not us. Am I wrong?

I also agree with the previous poster. Obviously, bond counsel approved the sale. Also, what, if anything, do you think would be the repercussion to the bond holders?

[bkcunningham1]

I have a question Ms. Ritchie. What is the date of the most recent news story on the subject in the Sentinel?

I understand the job of a columnist and I hope people on this forum can grasp the difference in your opinion column and a hard news story. Not to say you are fabricating any of your points. But there is a valid difference.

Here's my take on the issue. The only question is whether the Villages Center Community Development District is treated as a political subdivision and has sovereign power for the purposes of section 103 of the Internal Revenue Code. Moreover, the question is do they have the legal right to exercise these powers in the future for certain undeveloped lands owned by the VCCDD.

This involves the VCCDD and $57,250,000 in Recreational Revenue Bonds, Series 2003A and $7,005,000 in Recreational Revenue Bonds, Series 2003B. There is certain criteria in Florida statutue that makes a political subdivision. The VCCDD lays out the determining factors such as taxing power, power to exercise eminent domain, police powers, upkeep and development of infrastructure et al.

The answer now rests with the IRS. If the answer goes against the VCCDD and they run out of appeals, they will pay the monies and penalties; and most likely will not be able to issue more bonds. End of story.

[Russ_Boston]

and most likely will not be able to issue more bonds. End of story.

I think you mean tax free bonds?

They could still issue taxable bonds albeit at a higher base %?

[The Shadow]

And then there was light.:wave:

Well that clears up one thing, I guess now you all know I am not Lauren Ritchie.

Thank you Lauren for going above and beyond with your detailed post and for offering to respond to individual questions via email.

I think a detail has fallen through a crack; the one about the CDD has to have a police department to qualify to issue tax free bonds. When called on that TV said we have a fire department. Da

[Russ_Boston]

Thank you Laureen and The Shadow.

I think the only thing we (TV homeowners) want to know:

Bottom line - If all goes against us re IRS - what is the cost? I still content that even in a total loss by the TV lawyers the cost, when split among all of us, would be relatively minor.

Without getting into another 20 paragraph discussion - please just guesstimate the bottom line.

Thanks.

[chuckinca]

Sounds like amenity fees go up to cover increased bond cost and maybe IRS fines or maybe if fees can't be increased enough then less amenities.


.

[2 Oldcrabs]

I have not purchased a home yet. I thought if a bought in Lake County I would avoid this "Bond" issue. I now know I was wrong. This affects anyone who pays the amenity fee. I read somewhere in TOTV that the cost per home could be $17k-20k. Not sure who came up with the figure. I wonder what this will do to home values if the IRS prevails. I still like the Villages and will take the possible added cost into account. "You can't take it with you and my heirs don't need it". I just need enough to get to the end!

[Taj44]

Lauren, thank you for taking the time to post, and to welcome questions. Certainly above and beyond the call of duty. Many of us in The Villages have welcomed your column and the information you've brought to light.

I do think that in the event of IRS victory, if penalties and costs were passed on to the residents, there would be some sort of class action lawsuit. Of course, considering legal fees, it would be an expensive and messy drawn out process, but c'est la vie. It does sound to me like the Morse's interpretation of CDD's was not in keeping with the original intent of the CDD legislation which could bear on the IRS decision.

[Russ_Boston]

I read somewhere in TOTV that the cost per home could be $17k-20k. Not sure who came up with the figure.

Math: 20K times 50K (# of homes) = 1 BILLION dollars.

Moral: Don't believe everything you read:)

[graciegirl]

Lauren, thank you for taking the time to post, and to welcome questions. Certainly above and beyond the call of duty. Many of us in The Villages have welcomed your column and the information you've brought to light.

I do think that in the event of IRS victory, if penalties and costs were passed on to the residents, there would be some sort of class action lawsuit. Of course, considering legal fees, it would be an expensive and messy drawn out process, but c'est la vie. It does sound to me like the Morse's interpretation of CDD's was not in keeping with the original intent of the CDD legislation which could bear on the IRS decision.

Whoa. Wait a minute. The Morses interpretation of CDDs has given us this remarkable lifestyle.

[Rag Bagger]

Whoa. Wait a minute. The Morse's interpretation of DDS has given us this remarkable lifestyle.

Or maybe lined their pockets.

Illegal is illegal and they/us may have to pay for the infraction. Hope not us and that the IRS comes up with a reasonable deal that fines the offender if there is an offense.

[l2ridehd]

The maximum per home if the worst case happens and home owners are liable I believe is under $400 per home. I have done the math many different ways, added interest expense and legal fees, used the IRS figure for a fine, and tried to determine the worst case. And although I also don't want to pay it, it is minor and works out to around $15 a month per home paid over two years.

[bike42]

if tax free bonds were sold, who were the underwriters and who was bond counsel?

The tax-free bonds are bought by investors, and are available through any stockbroker. They are NOT the same as the bonds on our homes. They are bought mostly by institutions. You can buy them yourself but the minimum increment is $10,000. My broker told me that the last issue (a few weeks ago) was snapped up within an hour, so apparently many qualified institutional investors still regard them as a desirable investment.

In my opinion the Morses will continue to fight the IRS but if they are ever required to settle, they will do so in a way that does not harm TV or its residents. That is what their past actions have shown (think of how they handled the tornado-damaged homes a few years ago.) They have a very long-term investment in TV's commercial properties and will maintain the quality of TV long after the last home is sold.

[Challenger]

My ball park calculations are also in the $400 area. The fact that issues are still " being snapped up" would indicate little concern in the market. Villagers should be aware of the issues but need to keep them in perspective.

I do think that the contraversy will have some effect on home sales . A number of my neighbors here in Maryland have made derogatory statements about the Villages based on this issue. Many believe in the "house of cards theory" for TV.

[Taj44]

Whoa. Wait a minute. The Morses interpretation of CDDs has given us this remarkable lifestyle.

The Morse's interpretation of CDD may have given us a nice lifestyle, but if it is an illegal interpretation, as determined by the courts, it doesn't do us much good. What good is a castle if it is built on quicksand?

It just appears to me that the Morse's tweaked the interpretation of the CDD definitions to benefit themselves financially. Not a problem - this is what business people do. But if it is deemed illegal at some point in the future, I just hope the residents aren't left holding the bag. Bike42 thinks the Morse's will settle up so the residents aren't harmed. I have a feeling that if it involves handing over millions of dollars, the Morse's won't pony up. It was to their advantage when the tornado went thru - they were in the business of selling homes and they wanted things to look good for prospective buyers. When its time to settle up with the IRS, the development will most likely be finished and I'm guessing the Morse's will have sold out and moved on to their next business venture. Call me jaded, but I think whenever large sums of money are involved, not so good things happen.

[EdV]

i wish you all the best. heck, in a few years, i hope to be enjoying my own retirement.

lauren ritchie

May I suggest Royal Harbor or Arlington Ridge, you could save $20k - $25k.

EdV

[English Ivy]

The tax-free bonds are bought by investors, and are available through any stockbroker. They are NOT the same as the bonds on our homes. They are bought mostly by institutions. You can buy them yourself but the minimum increment is $10,000. My broker told me that the last issue (a few weeks ago) was snapped up within an hour, so apparently many qualified institutional investors still regard them as a desirable investment.

The bonds your broker is referring to are not the same bonds the IRS is investigating. I believe they were the bonds to finish the infrastructure for district 8 and maybe starting district 9. Those bonds did not buy any recreational facilities or the right to collect ammenity fees.

If you want more details check it out on www.districtgov.org.

[English Ivy]

May I suggest Royal Harbor or Arlington Ridge, you could save $20k - $25k.

EdV

You don't want her in Stonecrest, Spruce Creek or wherever it is you live?

[cabo35]

Under normal circumstance, I prefer to view the glass as half full. However, the bond controversy inspires more questions to those who are curious by nature.

In a worst case scenario, what happens to the status of the CDD amenities? Is there a window of opportunity for political entities such as Lake County, Sumter County, the City of Lady Lake or Marion County to enter the equation in a way that would open up access to all Villages amenities to their non-Villages residents? Is the current amenity regulatory process designed to restrict access to property owners? Is there any outcome that would provide access rights to incorporated municipal or county entities within the Villages boundaries?

From a few years ago, I have a vague recollection of an access interest to a certain amenity by a local agency....can't remember which one but it may have been from Lake or Marion. I am not certain, but possibly posted in TOTV. I really can't remember the specifics....sorry.

It is not my intention to exacerbate this complex issue. However, unintended consequence has often been a hallmark of government regulation. Perhaps my curiosity is misdirected and without merit. I hope someone with knowledge and insight on this matter will take the time to debunk any suspicions it may generate.

Have another great day in The Villages.

[EdV]

You don't want her in Stonecrest, Spruce Creek or wherever it is you live?

She only mentioned Royal Harbor or Arlington Ridge in her post, as being comparable to TV for less money.

[The Shadow]

The Morse's interpretation of CDD may have given us a nice lifestyle, but if it is an illegal interpretation, as determined by the courts, it doesn't do us much good. What good is a castle if it is built on quicksand?

It just appears to me that the Morse's tweaked the interpretation of the CDD definitions to benefit themselves financially. Not a problem - this is what business people do. But if it is deemed illegal at some point in the future, I just hope the residents aren't left holding the bag. Bike42 thinks the Morse's will settle up so the residents aren't harmed. I have a feeling that if it involves handing over millions of dollars, the Morse's won't pony up. It was to their advantage when the tornado went thru - they were in the business of selling homes and they wanted things to look good for prospective buyers. When its time to settle up with the IRS, the development will most likely be finished and I'm guessing the Morse's will have sold out and moved on to their next business venture. Call me jaded, but I think whenever large sums of money are involved, not so good things happen.
“I have a feeling that if it involves handing over millions of dollars, the Morse's won't pony up.”

I have known a few millionaires in my day none as successful as the Morse’s however. They all had one thing in common; none had large sums of money laying around. Millionaires do not put money in the bank to collect a half percent interest. They tend to reinvest money back into what made them money in the first place. If a business man can make an investment of one million by putting down $100,000 and borrowing $900,000 at 6% interest to make a 200% profit he will.

Two points Morse does not have the money to give to the IRS. His money is invested in what he knows best, and Team Tutt is the IRS target.

Bank accounts are insured to $250,000.

[BobKat1]

She only mentioned Royal Harbor or Arlington Ridge in her post, as being comparable to TV for less money.

Yes, both RH and AR (Stonecrest too) are nice. Lots of choices in Central Fl. Something for everyone.

[Jakel]

If the Morse family has "cashed out", by selling bonds, based on the Amenities revenue stream, and then used State regulations to sell these Bonds as "Tax Free Bonds", and then pocketed the profits from these sales....shouldn't the CCDD's involved be run by elected officials, by the property owners, and not controlled by the developer himself??

[misky]

hello villagers,

i have hopped on your forum to answer some of your questions and explain a little more. i’ll start by explaining how the villages CDDs differ from every other CDD in florida. that is the key to understanding why the IRS is on the villages case and not the case of any other CDD in the state. i noticed that many of you said this stuff is difficult to understand. it is, without question. but i’m going to give it a try. please email me with questions: lritchie@orlandosentinel.com

then i’ll respond to individuals – not the snippy ones. there’s no point in witty little exchanges bashing each other. this issue is too weighty for that sort of levity.

in florida, statutes (state laws) allow for the creation of a form of government called a community development district. the villages’ CDDs were created in the usual way, which is to ask the county commission to allow the district to be established. the commissions in lake, sumter and marion all said yes in this case.

the so-called “numbered districts” function in the same way as every other CDD in florida: they were created to pay for the infrastructure of the community – i.e., roads, sewer plants, water plants, street lights, stuff like that. the developer controlled all the seats on the governing board of the CD. that’s the way the law is set up, and that is perfectly legitimate. the CDDs sold bonds to pay for hard, tangible assets, such as those mentioned above. as the development was sold, more folks who owned lots were entitled to seats on the governing board. eventually, the homeowners controlled the board. the set fee rates so that the community would continue to run and the bonds could be repaid. i don’t personally care for this setup, but it’s not illegal. so, no problem.

however, the village center district and the sumter landing district work differently. those CDDs were created in the same way as the ones mentioned above.

however, no residents actually live in the VCCD and SLCDD districts. it’s mostly commercial property that is either owned or controlled by the developer. if you doubt this, get online and read the bond statements. they clearly state that the property is either owned or controlled by the morse family.

so the VCCD and SLCDD board members are morse employees or associates. they are looking after morse’s interests, not those of the villages’ residents. if you are thinking that they are concerned about the residents/homeowners, you should stop reading right here because i cannot help you.

those board members of the VCCD and SLCDD at various points since 2003 voted to buy both tangible assets, such as swimming pools and gate houses for example, and to buy the right to collect your ammenity fees for 30 years.

that’s a little weird – they bought a right. the right to collect fees is NOT a tangible asset. by that, i mean it is not something you can touch. it’s what is called a “blue sky” or “intangible” purchase because it’s an idea, not a “hard” asset.

so, these two developer-controlled districts bought -- from the developer -- the recreational ammenities and the right to collect the fees for 30 years. in that transaction, the developer essentially cashed in on thirty future years of fees for himself and bought the recreational assets from himself. if the board members had not voted to buy the right to collect fees, the boards would not have had to issue bonds. rather, gary morse and his family would have had to collect their ammentiy fees over a period of 30 years – not in a lump sum.

following me?

every bond must have a stream of money from which it will be repaid. in this case, your ammenity fees are pledged to repay those bonds.

and that’s the catch.

why is this a “catch” you might ask?

the answer is that this is the ultimate form of taxation without representation.

you as a homeowner have no representation on the VCDD or SLCDD – the developer owns or controls the majority of land and seats on the governing board. and despite the purchase with YOUR ammenity money, you do not now and never will own the assets. that’s because the developer controls the governing boards and owns most of the property in the district.

here’s where the IRS comes in.

to be able to issue tax-free bonds, governments have to be real governments, like cities or counties or townships or boroughs. they have to exist for the public good. they cannot exist to make one person rich or to conduct transactions that benefit a single person or persons. purchases have be what’s called “arm’s length” – in other words, “disinterested.” what that means is there can’t be a conflict of interest.

of course, in this case, there is a very big conflict of interest. the developer is essentially buying from himself and issuing tax-free bonds to do it – and you, the homeowner, are paying for it. and wont’ even own the assets when the bonds are paid off.

that annoys the IRS, whose agent says the VCDD and SLCDD bonds should not be tax-free because they don’t meet the tests of being for the interest of the people. in fact, the agent used the word “perverted.” he said the government so “perverted” the intent of how CDDs should function under florida law that the bonds should not be tax free. i totally agree with him, but you may have a different opinion, and that is OK because this is still america.

now, on to the comments, but totv says i must do it in another post. so stand by....


What if Lauren is right? The bottom line to us is minimal. See I2RideHd who estimates $400 (I agree ith that #).

[EdV]

Ritchie’s rebuttals are too erroneous and misleading for me to ignore.

Ritchie: BUT the sad thing is that the villages homeowners ARE paying for these ammenities through fees that to to the village center and sumter landing districts. that’s because those ammenities were purchased from the developer by the district . that’s what the bonds were for.

EdV: First of all it’s amenities, not ammenities. Jeez , you’d think after railing about the amenities fee for the past year she’d know how to spell it. But aside from that, what’s wrong with the idea that homeowners pay for these amenities? Or is she one of those people who thinks everything in TV should be free?

Ritchie: The state of florida did NOT allow the developer to create districts for the reasons that edvin stated. developers are allowed to create districts to govern the area.

EdV: I honestly can’t make heads or tails of her comment here, but for what it’s worth, here’s what’s in the first paragraph of the Chapter 190 CDD law establishing the intent of that law:

(a) There is a need for uniform, focused, and fair procedures in state law to provide a reasonable alternative for the establishment, power, operation, and duration of independent districts to manage and finance basic community development services.
Ritchie: edvin’s idea of rent control is pretty bizarre. HALF of what you pay goes to repay bonds –with interest. if these bonds have to be recalled, the only source of income is YOU, the owner. if you have a set amount you have to pay, then where you think the money will come from? it can come from one place and one only: it will come from that set ammenity fee you pay. if you get less in the way of ammenties because MORE than half is going to settle this mess, then so be it.

EdV: Another crafty yet misleading argument. What she conveniently forgets to mention is the fact that prior to purchasing the golf courses etc. that are in question here, the two CDDs were RENTING those facilities from the developer. So, that rent is now being paid to the bondholders in the form of principle and interest. So before the sale, HALF the amenity fee went to rental of the amenities and now HALF the amenity fees are paid to the bondholders instead. What’s her problem.

Ritchie: this comes from simple observation. consider this: clearly, the villages has more ammenities than any other community. but consider your 1,500 square foot house or whatever. what price could you buy that same size house for at say, royal harbour, or arlington ridge or some other community? it is roughly the same price, i believe. you aren’t getting a discount. so, some other communities have at least SOME of the same ammenities and those folks are paying the same amount. but YOU are paying another $20K to $25K extra for your ammenities. plus interest on bonds. ouch.

EdV: I’ll let you TV folks handle this one.

Ritchie: this analogy is not appropriate. cable companies are private, for-profit businesses. the CDD is a government, and as such is supposed to act in the best interest of its citizens, the people who are paying taxes. in this case, the “tax” or ammenity fee, is paid by people who are not living in the district, thus the IRS issue. EdVIn asks who cares how the money is spent? the answer is YOU should care. of half your ammentity fee weren’t going to repay bonds that were issued with the sole purpose of making the develper rich, then you would have some seriously cool ammenities.

EdV: The cable companies may be privately held, but they are a Utility and highly regulated at the Federal and Local level. The analogy stands. And as for seriously cool amenities, no they’d have the same ones as before the sale, just renting them instead of owning them.

Ritchie: those board members of the VCCD and SLCDD at various points since 2003 voted to buy both tangible assets, such as swimming pools and gate houses for example, and to buy the right to collect your ammenity fees for 30 years. that’s a little weird – they bought a right. the right to collect fees is NOT a tangible asset. by that, i mean it is not something you can touch. it’s what is called a “blue sky” or “intangible” purchase because it’s an idea, not a “hard” asset.

EdV: Wrong again. When the developer established the two special CDDs, it made them the designee for the collection of amenity fees. And each homeowner's contract states that "Each Owner hereby agrees to pay to the Developer, or its designee, a monthly fee or charge ("Contractual Amenities Fee") against each Homesite for these services described herein." So that right was already granted before any amenity was sold to the CDD.

[The Shadow]

What if Lauren is right? The bottom line to us is minimal. See I2RideHd who estimates $400 (I agree ith that #).

Interesting to say the least. “us” is not responsible for the wrong doing of the CDD. “us” will not be asked to pay by the IRS. If “us” said “us” will pay to make this right. Now who is “us”? Who determines who “us” is? Maybe the people who let the dog dump in their backyard will not be so forgiving of the CDD. Will every resident want to pony up when it is the CDDs fault? Will the Home Owners Association go door to door collecting donations?

It is the CDDs fault.

The CDDs will be responsible to pay if found guilty. The CDD can not negotiate a settlement if they do not have the money to pay, if they have the money to pay they over charged for the amenity fees.

If they can not pay, what does the IRS typically do, confiscate assets and auction them off.

[Bogie Shooter]

Interesting to say the least. “us” is not responsible for the wrong doing of the CDD. “us” will not be asked to pay by the IRS. If “us” said “us” will pay to make this right. Now who is “us”? Who determines who “us” is? Maybe the people who let the dog dump in their backyard will not be so forgiving of the CDD. Will every resident want to pony up when it is the CDDs fault? Will the Home Owners Association go door to door collecting donations?

It is the CDDs fault.

The CDDs will be responsible to pay if found guilty. The CDD can not negotiate a settlement if they do not have the money to pay, if they have the money to pay they over charged for the amenity fees.

If they can not pay, what does the IRS typically do, confiscate assets and auction them off.

Oooo, Oooo, more scary stuff!

[aljetmet]

Seems to me that the IRS can not only impose fines, back taxes etc. but can put people in jail that commit tax fraud. Maybe that's why it's taking so long... Now I'm just saying that it was very clever to collect 30 years amenities in advance and then use tax free bonds to further reduce cost or say line the pockets of; well you know who.

[2 Oldcrabs]

Russ has indicated there are appox 50k homes. If you use the figure I had read somewhere (17-20k per home) it comes to 850 million to 1 billion dollars. That does sound high to me also. If you use the $400 per home it comes to 20 million dollars. That seems low to me! I have "red eyes" from reading so much, but I can not seem to find the true amount. Does anyone know what the total cost might be? Ms Ritchie?

[Talk Host]

Wouldn't it be nice if the Villages weighed in on this in some fashion. After all, there are hundreds of people who are clamoring for the straight of it.

[Bogie Shooter]

Wouldn't it be nice if the Villages weighed in on this in some fashion. After all, there are hundreds of people who are clamoring for the straight of it.
Does anyone really have "the straight of it"? Wouldn't it be premature for TV to offer what they might do? TV has shared what has happened and the status of the case with the IRS. Until the IRS makes its next statement.....what is there to tell?

[BobKat1]

Wouldn't it be nice if the Villages weighed in on this in some fashion. After all, there are hundreds of people who are clamoring for the straight of it.

It would be nice if TV would give their postion on the issue.

But from a sales and development standpoint I can see why it would be in their best interests to not discuss or bring it up. A big majority of potential home buyers most likely are not aware of the issue.

[The Shadow]

It would be nice if TV would give their postion on the issue.

But from a sales and development standpoint I can see why it would be in their best interests to not discuss or bring it up. A big majority of potential home buyers most likely are not aware of the issue.
If the developer is not divulging this information to the buyers and the IRS torpedoes the TV destroying the lifestyle will the developer be inviting lawsuits from 30,000 (my number) shafted home buyers.

[BobKat1]

If the developer is not divulging this information to the buyers and the IRS torpedoes the TV destroying the lifestyle will the developer be inviting lawsuits from 30,000 (my number) shafted home buyers.

Good point.

My guess (an uneducated guess only) is that they probably receive legal advice on such issues and go with that.

No doubt some risk(s) involved with such a stategy if that is the case.

[Mikeod]

If the developer is not divulging this information to the buyers and the IRS torpedoes the TV destroying the lifestyle will the developer be inviting lawsuits from 30,000 (my number) shafted home buyers.
The developer has too much at stake in future home sales to have the lifestyle and their reputation destroyed.

[Lauren Ritchie]

If the Morse family has "cashed out", by selling bonds, based on the Amenities revenue stream, and then used State regulations to sell these Bonds as "Tax Free Bonds", and then pocketed the profits from these sales....shouldn't the CCDD's involved be run by elected officials, by the property owners, and not controlled by the developer himself??

hey jake,
that's the precise point that the IRS continues to make in each and every analysis of the situation. you have hit the root of the problem. however, the developer has set up these two big districts so that he will always control them -- until he chooses not to.
lauren

[graciegirl]

The developer has too much at stake in future home sales to have the lifestyle and their reputation destroyed.

You are right. And it really is chump change to the Morse family who have spent so much money on this place. It must be the principle of the thing.


But...I am sure that THE SHADOW will point out that "It isn't the money, it's the principle of the thing" is like saying, "the check's in the mail" or "I have a vasectomy." It is what people say to cover their bottom.

The developer is entitled to make money.

Whether or not it is illegal has not been established.

I am in a bad mood. I had better stop posting before you all discover that Gracie is a despicable person.

[Lauren Ritchie]

Interesting to say the least. “us” is not responsible for the wrong doing of the CDD. “us” will not be asked to pay by the IRS. If “us” said “us” will pay to make this right. Now who is “us”? Who determines who “us” is? Maybe the people who let the dog dump in their backyard will not be so forgiving of the CDD. Will every resident want to pony up when it is the CDDs fault? Will the Home Owners Association go door to door collecting donations?

It is the CDDs fault.

The CDDs will be responsible to pay if found guilty. The CDD can not negotiate a settlement if they do not have the money to pay, if they have the money to pay they over charged for the amenity fees.

If they can not pay, what does the IRS typically do, confiscate assets and auction them off.


yes. shadow, you totally get it. thank you. and you point out an interesting what's "us" question. the district and the developer often get mixed up, and no wonder. they're not separate entities in these two districts.

[Lauren Ritchie]

Ritchie’s rebuttals are too erroneous and misleading for me to ignore.

Ritchie: BUT the sad thing is that the villages homeowners ARE paying for these ammenities through fees that to to the village center and sumter landing districts. that’s because those ammenities were purchased from the developer by the district . that’s what the bonds were for.

EdV: First of all it’s amenities, not ammenities. Jeez , you’d think after railing about the amenities fee for the past year she’d know how to spell it. But aside from that, what’s wrong with the idea that homeowners pay for these amenities? Or is she one of those people who thinks everything in TV should be free?

Ritchie: The state of florida did NOT allow the developer to create districts for the reasons that edvin stated. developers are allowed to create districts to govern the area.

EdV: I honestly can’t make heads or tails of her comment here, but for what it’s worth, here’s what’s in the first paragraph of the Chapter 190 CDD law establishing the intent of that law:

(a) There is a need for uniform, focused, and fair procedures in state law to provide a reasonable alternative for the establishment, power, operation, and duration of independent districts to manage and finance basic community development services.
Ritchie: edvin’s idea of rent control is pretty bizarre. HALF of what you pay goes to repay bonds –with interest. if these bonds have to be recalled, the only source of income is YOU, the owner. if you have a set amount you have to pay, then where you think the money will come from? it can come from one place and one only: it will come from that set ammenity fee you pay. if you get less in the way of ammenties because MORE than half is going to settle this mess, then so be it.

EdV: Another crafty yet misleading argument. What she conveniently forgets to mention is the fact that prior to purchasing the golf courses etc. that are in question here, the two CDDs were RENTING those facilities from the developer. So, that rent is now being paid to the bondholders in the form of principle and interest. So before the sale, HALF the amenity fee went to rental of the amenities and now HALF the amenity fees are paid to the bondholders instead. What’s her problem.

Ritchie: this comes from simple observation. consider this: clearly, the villages has more ammenities than any other community. but consider your 1,500 square foot house or whatever. what price could you buy that same size house for at say, royal harbour, or arlington ridge or some other community? it is roughly the same price, i believe. you aren’t getting a discount. so, some other communities have at least SOME of the same ammenities and those folks are paying the same amount. but YOU are paying another $20K to $25K extra for your ammenities. plus interest on bonds. ouch.

EdV: I’ll let you TV folks handle this one.

Ritchie: this analogy is not appropriate. cable companies are private, for-profit businesses. the CDD is a government, and as such is supposed to act in the best interest of its citizens, the people who are paying taxes. in this case, the “tax” or ammenity fee, is paid by people who are not living in the district, thus the IRS issue. EdVIn asks who cares how the money is spent? the answer is YOU should care. of half your ammentity fee weren’t going to repay bonds that were issued with the sole purpose of making the develper rich, then you would have some seriously cool ammenities.

EdV: The cable companies may be privately held, but they are a Utility and highly regulated at the Federal and Local level. The analogy stands. And as for seriously cool amenities, no they’d have the same ones as before the sale, just renting them instead of owning them.

Ritchie: those board members of the VCCD and SLCDD at various points since 2003 voted to buy both tangible assets, such as swimming pools and gate houses for example, and to buy the right to collect your ammenity fees for 30 years. that’s a little weird – they bought a right. the right to collect fees is NOT a tangible asset. by that, i mean it is not something you can touch. it’s what is called a “blue sky” or “intangible” purchase because it’s an idea, not a “hard” asset.

EdV: Wrong again. When the developer established the two special CDDs, it made them the designee for the collection of amenity fees. And each homeowner's contract states that "Each Owner hereby agrees to pay to the Developer, or its designee, a monthly fee or charge ("Contractual Amenities Fee") against each Homesite for these services described herein." So that right was already granted before any amenity was sold to the CDD.

ed,
are you actually gary morse in disguise writing this? please tell me this is a joke.

what you're saying is that it is equally cheap to: 1. "rent" facilities from the developer on a year-to-year basis and 2.) take out $355 million worth of loans for 30 years of advance amenity fees and pay back the loans with 30 years of interest to buy the same amenities. (thanks for catching my spelling -- that WAS a stupid error)

that's just absurd. that's like saying it's just as cheap to lease one car as it is to take out loans and buy cars that you're going to use over the next 30 years. um, no. that's simply impossible.

i understand your argument in the sense that the homeowner is paying his or $100 or $135 a month, depending on when they bought. your argument is that they'll be paying it no matter whether they "own" or "rent" the facilities.

mine is that you would not be paying $135 a month if you hadn't had to give the developer 30 years worth of advance fees TODAY. and then repay them with interest, which is staggering.

we can argue all day long on the esoteric points, but that's really all that's going on here.
lauren

[Lauren Ritchie]

The bonds your broker is referring to are not the same bonds the IRS is investigating. I believe they were the bonds to finish the infrastructure for district 8 and maybe starting district 9. Those bonds did not buy any recreational facilities or the right to collect ammenity fees.

If you want more details check it out on www.districtgov.org.

English Ivy,
you are correct. these bonds are being sold by CDDs that are operating in the correct way. they should not be confused with the recreational revenue bonds issued by the sumter landing and village center districts. they are completely different, and to my knowledge, there is not the slightest question about them.

lauren

[Lauren Ritchie]

May I suggest Royal Harbor or Arlington Ridge, you could save $20k - $25k.

EdV

ed,

i realize you meant this to be a witty stab, but as you may or may not know, arlington ridge's CDD has raided its reserve fund to avoid default on its bonds. just another fine example of why i think CDDs are a ripoff to the buyer. don't worry, my friend. you won't catch me buying a home in a community with a CDD.

lauren

[Lauren Ritchie]

I have a question Ms. Ritchie. What is the date of the most recent news story on the subject in the Sentinel?

I understand the job of a columnist and I hope people on this forum can grasp the difference in your opinion column and a hard news story. Not to say you are fabricating any of your points. But there is a valid difference.

Here's my take on the issue. The only question is whether the Villages Center Community Development District is treated as a political subdivision and has sovereign power for the purposes of section 103 of the Internal Revenue Code. Moreover, the question is do they have the legal right to exercise these powers in the future for certain undeveloped lands owned by the VCCDD.

This involves the VCCDD and $57,250,000 in Recreational Revenue Bonds, Series 2003A and $7,005,000 in Recreational Revenue Bonds, Series 2003B. There is certain criteria in Florida statutue that makes a political subdivision. The VCCDD lays out the determining factors such as taxing power, power to exercise eminent domain, police powers, upkeep and development of infrastructure et al.

The answer now rests with the IRS. If the answer goes against the VCCDD and they run out of appeals, they will pay the monies and penalties; and most likely will not be able to issue more bonds. End of story.


BK,
you are right that there is a very big difference between a columnist and news reporter. the last news article i recall was when the agent in may 2009 suggested that the district settle the lawsuit by calling the bonds, paying $16 million in tax liability and agreeing never to issue tax-free bonds again. that was more than a year ago.

there is a very long process that these bonds go through during a review in which the IRS maintains that the bonds should have been taxable. from what i can determine they're not even halfway there. in the end, however, i believe you have it right.

lauren

[Lauren Ritchie]

And then there was light.:wave:

Well that clears up one thing, I guess now you all know I am not Lauren Ritchie.

Thank you Lauren for going above and beyond with your detailed post and for offering to respond to individual questions via email.

I think a detail has fallen through a crack; the one about the CDD has to have a police department to qualify to issue tax free bonds. When called on that TV said we have a fire department. Da

hi shadow,

i don't believe the district must have a police department to qualify for tax-free bonds. it is not quite that simple. however, you are correct that it is one of the tests that the IRS applies.

another is the use of eminent domain. the district does have that right but the villages acknowledged that it never has been used. the agent seemed to make a big deal of that in his analysis, but it never hit me as critical. after all, when you build the city, you account for what you need and don't have to use eminent domain to take property for, say, a sewer plant needed because of growth. you have all that in place.

lauren

[Lauren Ritchie]

Thank you Laureen and The Shadow.

I think the only thing we (TV homeowners) want to know:

Bottom line - If all goes against us re IRS - what is the cost? I still content that even in a total loss by the TV lawyers the cost, when split among all of us, would be relatively minor.

Without getting into another 20 paragraph discussion - please just guesstimate the bottom line.

Thanks.

russ,
i wish i could, but i don't have enough expertise to do so, and i explained in a post a while ago that i haven't been able to get anyone who knows enough to lay it out for me.

if the district had to call the roughly $355 million worth of bonds, i'm not sure how that would be accomplished. i do not know whether the district could issue taxable bonds to pay off the tax-free ones. i've speculated about 100 scenarios.

i know that the district's money is your amenity fees, and those are capped. the only other cash it can raise is to levy property taxes on the land ONLY within its district.

that all complicates any "call" situation.

lauren

[Lauren Ritchie]

Lauren, thank you for taking the time to post, and to welcome questions. Certainly above and beyond the call of duty. Many of us in The Villages have welcomed your column and the information you've brought to light.

I do think that in the event of IRS victory, if penalties and costs were passed on to the residents, there would be some sort of class action lawsuit. Of course, considering legal fees, it would be an expensive and messy drawn out process, but c'est la vie. It does sound to me like the Morse's interpretation of CDD's was not in keeping with the original intent of the CDD legislation which could bear on the IRS decision.

dear taj,

it is my pleasure to try to answer questions when i've been the source of raising most of them. i have a clear understanding of the bonds and how they work. but my knowledge is limited when it comes to what happens if the bonds are declared taxable. i agree with you that any final determination that these bonds are not tax-free and must be called would trigger the messy situation you mentioned. i can't even begin to think how it would work.

thanks for you note.
lauren

[Lauren Ritchie]

Whoa. Wait a minute. The Morses interpretation of CDDs has given us this remarkable lifestyle.

gracie,

it is not the morse's interpretation of how CDDs function that has given you the lifestyle. YOU paid for that -- he didn't. in fact, it would be costing you considerably less for the same amenities without the creative interpretation factor. that's the reason i keep writing this story.

but i'm still with you on the excellent lifestyle. :)

lauren

[EdV]

ed,

i realize you meant this to be a witty stab, but as you may or may not know, arlington ridge's CDD has raided its reserve fund to avoid default on its bonds. just another fine example of why i think CDDs are a ripoff to the buyer. don't worry, my friend. you won't catch me buying a home in a community with a CDD.

lauren

On the contrary, I was quite aware of that fact. That’s what made my remark a ‘double witty’.

[spk7951]

In light of all the postings related to the IRS issue I thought I would post this "commentary" made by Janet Tutt in June 2009. Below is the link to her article but the part I find most interesting is:

"Although I can not address all the rumors, the one that is most disturbing floats the possibility that an adverse ruling would somehow result in increased amenity fees or assessments. That is absolutely false. Neither amenity fees, nor resident assessments could be increased
for such a purpose."

http://districtgov.org/images/whatsnew/recnews200906.pdf

[EdV]

ed,
are you actually gary morse in disguise writing this? please tell me this is a joke.

what you're saying is that it is equally cheap to: 1. "rent" facilities from the developer on a year-to-year basis and 2.) take out $355 million worth of loans for 30 years of advance amenity fees and pay back the loans with 30 years of interest to buy the same amenities. (thanks for catching my spelling -- that WAS a stupid error)

that's just absurd. that's like saying it's just as cheap to lease one car as it is to take out loans and buy cars that you're going to use over the next 30 years. um, no. that's simply impossible.

i understand your argument in the sense that the homeowner is paying his or $100 or $135 a month, depending on when they bought. your argument is that they'll be paying it no matter whether they "own" or "rent" the facilities.

mine is that you would not be paying $135 a month if you hadn't had to give the developer 30 years worth of advance fees TODAY. and then repay them with interest, which is staggering.

we can argue all day long on the esoteric points, but that's really all that's going on here.
lauren


Your just all over the board on this issue. Anything to convince everyone that you're right. A few posts back you challenged my analogy of the amenity fee being similar to a contract with your cable company as being “inappropriate” because it’s a private company. But now you're in here making analogies between the amenity fee and a lease on a car from an automobile dealership.

Now even I’m getting dizzy. Time for me to get off your tilt-a-whirl debate. I’ve said my piece, and I’m done with it.

[Russ_Boston]

About two years ago I asked if anyone had a really nice 'head spinning' emoticon. I wish I had one now!

[Challenger]

City "A" buys land and builds a park for the citizens to use. They float bonds to pay for the amenity. The cost of the thirty year bonds must be repaid by the citizens(taxpayers) over the 30 year life of the bonds.

Sounds fair in principle. What did I Miss? Citizens got the use of the park immediately and in perpetuity.

Upon the repayment of the bonds there will still be maintenance costs for the park to be paid by the taxpayers---unless the city finds oil on the park land!

[The Shadow]

About two years ago I asked if anyone had a really nice 'head spinning' emoticon. I wish I had one now!
Just ask.
http://www.emotty.com/images/emoticons/1223.png

http://i105.photobucket.com/albums/m231/theknightshift/chrisknightspinninghead.gif

[JimJoe]

In light of all the postings related to the IRS issue I thought I would post this "commentary" made by Janet Tutt in June 2009. Below is the link to her article but the part I find most interesting is:

"Although I can not address all the rumors, the one that is most disturbing floats the possibility that an adverse ruling would somehow result in increased amenity fees or assessments. That is absolutely false. Neither amenity fees, nor resident assessments could be increased
for such a purpose."

http://districtgov.org/images/whatsnew/recnews200906.pdf

If they can't raise amenities or assessments and I think Janet is correct, then how would they pay it? The only thing I can think of is sell amenities or reduce the maintenance on them. Any ideas on this Lauren or gang?
And one more interesting question. Homeowners agree to pay the amenity fee of about $135 per month right? What amenities are guaranteed in exchange for that monthly fee? Can they be reduced or eliminated as they see fit? If true, that bothers me. Please clarify this for me. Thanks. JJ

[Russ_Boston]

Shadow - I knew you were good for something :)

Just kidding, thanks!


(http://www.emotty.com/images/emoticons/1223.png)

[spk7951]

If they can't raise amenities or assessments and I think Janet is correct, then how would they pay it? The only thing I can think of is sell amenities or reduce the maintenance on them. Any ideas on this Lauren or gang?
And one more interesting question. Homeowners agree to pay the amenity fee of about $135 per month right? What amenities are guaranteed in exchange for that monthly fee? Can they be reduced or eliminated as they see fit? If true, that bothers me. Please clarify this for me. Thanks. JJ

Try reading the question and answer regarding the irs issue on page 6 & 7 of the link below. From my read of it some already have a direction in mind should this negatively impact the homeowners.
http://www.poa4us.org/bulletins_files/Bulletin200912.pdf

[JimJoe]

Try reading the question and answer regarding the irs issue on page 6 & 7 of the link below. From my read of it some already have a direction in mind should this negatively impact the homeowners.
http://www.poa4us.org/bulletins_files/Bulletin200912.pdf

Did you mean the developer will do the right thing and protect the villagers? Why did the villagers sue over amenities a couple of years ago?

[The Shadow]

Did you mean the developer will do the right thing and protect the villagers? Why did the villagers sue over amenities a couple of years ago?

He shoots, he scores. :agree:

[Lou Card]

He shoots, he scores. :agree:

Because, like you Shadow, no matter how great it is, someone will complain.

The Shadow shot but missed the target.
:a040:

[jannd228]

He shoots, he scores. :agree:

I found some links he may be talking about:

http://lakeashtontalk.blogspot.com/2010/01/remember-villages-class-action-lawsuit.html

http://www.sptimes.com/2008/03/10/State/The_Villages_develope.shtml

http://www.ccfj.net/CDDVillages$40milllawsuit.html

they all seem to report the same thing

there are some that are watching, maybe you should figure out a way to get more info on what you seem to be discussing with Ms Ritchie

[bike42]

gracie,

it is not the morse's interpretation of how CDDs function that has given you the lifestyle. YOU paid for that -- he didn't. in fact, it would be costing you considerably less for the same amenities without the creative interpretation factor.


"Blue Sky" refers to amenities that are promised by developers but that are never built. The amenities in TV were in place before we paid for anything. The Morses may be making a lot of money now, but they were the ones who risked everything in the early years to build their vision. I'm a retired urban planner and I know there is NO PLACE in the world with a golf-cart-accessible retirement city of this scale and with this quantity/quality of amenities. Without the Morse's creativity the place would not exist, no matter how much we were willing to pay.

We are not a bunch of stupid retirees getting ripped off; we know value when we see it.

[18togo]

After reading the first article, I was much confused. The facts weren't presented clearly, and, as Ms. Ritchie has pointed out, was designed to set a certain tone. Since reading her initial post, I now clearly understand what she was saying and her point of view. I wonder how many readers of the initial article were as confused as I? I think this would have been a much better read, and would have gotten the point across easier and clearer, if the initial post had actually been the newspaper article.

That said, it does make me wonder how this will be handled and what the outcome will be? While I am years away from retiring, I certainly want TV to be around, the way it is now or better, when I have a chance to experience the life for myself.

[spk7951]

Did you mean the developer will do the right thing and protect the villagers? Why did the villagers sue over amenities a couple of years ago?

There are two lines in the POA story that I find especially interesting.
The first is: "If there is a financial impact on Villagers, the POA expects the developer to do the right thing and protect residents."
Second is: "The POA will do whatever it can to help protect residents."
I think it is pretty clear what is being said there.

We were not here during the issue of the amenities lawsuit but I do believe that was a negotiated settlement.

[bkcunningham1]

I wish the elected officials in our federal, state and local governments used my money as efficiently as the VCCDD and the Morse family.

[dillywho]

"Blue Sky" refers to amenities that are promised by developers but that are never built. The amenities in TV were in place before we paid for anything. The Morses may be making a lot of money now, but they were the ones who risked everything in the early years to build their vision. I'm a retired urban planner and I know there is NO PLACE in the world with a golf-cart-accessible retirement city of this scale and with this quantity/quality of amenities. Without the Morse's creativity the place would not exist, no matter how much we were willing to pay.

We are not a bunch of stupid retirees getting ripped off; we know value when we see it.

At last, a voice of reason.:BigApplause:

[JimJoe]

gracie,

it is not the morse's interpretation of how CDDs function that has given you the lifestyle. YOU paid for that -- he didn't. in fact, it would be costing you considerably less for the same amenities without the creative interpretation factor. that's the reason i keep writing this story.

but i'm still with you on the excellent lifestyle. :)

lauren

Lauren: Could the developer TOMORROW sell another 30 years of blue sky to the two commercial districts for $300 million again? Is that what he really did? I do not understand how that is possible. Are you serious?

[pauld315]

As a non-resident, but one who has been certain that TV is where I was going to retire, the one thing that concerns me the most about this is TV's lack of divulging the information to the buyers. I just never got the impression, in my visits, that TV would hold back information like this for the sake of a sale. I am probably naive but I have been involved in the business end of companies for over 30 years.

I know the marketing and sales consequernces that may be involved in their decision but there is also the issue of ethics and openess. Heck, when I sell my house I have to divulge that I am in a flight path to the airport even though it is only used once or twice a year when they have a runway shut down at the airport.

They should lay the information out on the table for perspective buyers, the possible solutions and ramnifications to the issue as they understand it and let the buyers decide if they are willing to take the risk or not. At least give them a heads up so they can research it on their own and make a decision. I doubt if it would affect many, or any sales but at least everyone would be on the same page going into the transaction with both eyes open.

This is coming from somebody who loves TV and the lifestyle and wants to retire there.

[Taj44]

As a non-resident, but one who has been certain that TV is where I was going to retire, the one thing that concerns me the most about this is TV's lack of divulging the information to the buyers. I just never got the impression, in my visits, that TV would hold back information like this for the sake of a sale. I am probably naive but I have been involved in the business end of companies for over 30 years.

I know the marketing and sales consequernces that may be involved in their decision but there is also the issue of ethics and openess. Heck, when I sell my house I have to divulge that I am in a flight path to the airport even though it is only used once or twice a year when they have a runway shut down at the airport.

They should lay the information out on the table for perspective buyers, the possible solutions and ramnifications to the issue as they understand it and let the buyers decide if they are willing to take the risk or not. At least give them a heads up so they can research it on their own and make a decision. I doubt if it would affect many, or any sales but at least everyone would be on the same page going into the transaction with both eyes open.

This is coming from somebody who loves TV and the lifestyle and wants to retire there.

As someone who loves the lifestyle, and does live here, I agree with you. And in my opinion, because all this was not disclosed, should the ruling adversely affect the residents, I suspect it would be grounds for a class action lawsuit. But, who knows how things will turn out. At this point, the residents just have to wait and see.

[graciegirl]

As someone who loves the lifestyle, and does live here, I agree with you. And in my opinion, because all this was not disclosed, should the ruling adversely affect the residents, I suspect it would be grounds for a class action lawsuit. But, who knows how things will turn out. At this point, the residents just have to wait and see.

And we all will continue living our lives as we always have. Some of us have faced adversity when adversity arrives and worked it out. Some of us will always be looking for trouble. If there is nothing I can do about it, I am not wasting a precious moment of my life, when I see all around me evidence that the persons who designed this lovely place and maintain it so perfectly could have made a LOT more money off of it than they have.

I am a hard working, well planned, ready for emergency person who has saved carefully for this happiness. I would do it again in a heartbeat and I trust the Morses.

[Lou Card]

i wish the elected officials in our federal, state and local governments used my money as efficiently as the vccdd and the morse family.

bingo

[dillywho]

I'm with you, Gracie. Most of us have enough to be concerned with without borrowing any. Strangely enough, I don't see this place emptying enmasse. There are plenty (see posts on TOTV) that can't wait to get here. What does that say for it?

I still think she's just picking into something that is really no concern of hers in the first place. Kinda reminds me of the IRS, "I'm from the government and I'm here to help you." She's from the Sentinel and "she's here to help us."

[The Shadow]

I'm with you, Gracie. Most of us have enough to be concerned with without borrowing any. Strangely enough, I don't see this place emptying enmasse. There are plenty (see posts on TOTV) that can't wait to get here. What does that say for it?

I still think she's just picking into something that is really no concern of hers in the first place. Kinda reminds me of the IRS, "I'm from the government and I'm here to help you." She's from the Sentinel and "she's here to help us."

“I still think she's just picking into something that is really no concern of hers in the first place.”

Now that is just precious.

Maybe she thinks that if a CDD cheats the IRS she/me/we/us will have to make up the shortage.