Bond payments from the Developer's Point of view

[CoachKandSportsguy]

So, how does the bond payment work from the Developer's point of view? And how does the developer price our bond interest rate relative to the public bond floated to be sure that the 99% of the cash is available to pay off the bond in 30 years, when the bond holders get their principal back? took all of about an hour with a cup of coffee this morning. .

So I created a developer's point of view cash flow model for developing a 100 unit development, with a $3.0 Million bond with a 4 percent interest rate (The model has yellow input cells to change any development size, bond size and interest rate)

Because the bond is floated and interest is paid to bond holders before the units start paying the bond assessment fee, there is a cash flow timing issue, which the model clearly shows.

Developer Bond Model inputs:
Developer total bond float
Developer bond floated interest rate
Developer bond length of time
Developer interest rate for interest earned on bond escrow, which is the segregated account holding cash and earning interest to pay interest annually and the principal in 30 years.

Resident Bond Model Inputs:
Developer total bond float
Developer bond length of time
Resident bond interest rate
Resident prepayment assumption

So to have 99% of the bond interest and principal payment available in 30 years, due to the timing mismatch of receiving payments with about a 2 year delay from floating the bond to receiving residents bond payments, the resident bond rate is higher than the developer bond rate. as well as having as near zero escrow cash balance after the resident 30 years of payments

The image below shows the 30 years of model cash flow from the Developer and Resident point of view, with the resident view in total payments. . Note that the developer can't spend all the bond in the first year to maintain enough escrow balance to pay the bond interest prior to getting resident payments. . And most likely the developer will spend it all in the first 3-4 years as the development has issues etc. This model assumes that NO payments come from the developer's income from sold lots and houses, which I can add which can accelerate the developer's use of the bond, but that would be the entire P&L of the investment project, which has too many unknowns or assumptions to create for me to simply model in an hour plus. .

[Marathon Man]

Whatever Dude.

[mtdjed]

So, how does the bond payment work from the Developer's point of view? And how does the developer price our bond interest rate relative to the public bond floated to be sure that the 99% of the cash is available to pay off the bond in 30 years, when the bond holders get their principal back? took all of about an hour with a cup of coffee this morning. .

So I created a developer's point of view cash flow model for developing a 100 unit development, with a $3.0 Million bond with a 4 percent interest rate (The model has yellow input cells to change any development size, bond size and interest rate)

Because the bond is floated and interest is paid to bond holders before the units start paying the bond assessment fee, there is a cash flow timing issue, which the model clearly shows.

Developer Bond Model inputs:
Developer total bond float
Developer bond floated interest rate
Developer bond length of time
Developer interest rate for interest earned on bond escrow, which is the segregated account holding cash and earning interest to pay interest annually and the principal in 30 years.

Resident Bond Model Inputs:
Developer total bond float
Developer bond length of time
Resident bond interest rate
Resident prepayment assumption

So to have 99% of the bond interest and principal payment available in 30 years, due to the timing mismatch of receiving payments with about a 2 year delay from floating the bond to receiving residents bond payments, the resident bond rate is higher than the developer bond rate. as well as having as near zero escrow cash balance after the resident 30 years of payments

The image below shows the 30 years of model cash flow from the Developer and Resident point of view, with the resident view in total payments. . Note that the developer can't spend all the bond in the first year to maintain enough escrow balance to pay the bond interest prior to getting resident payments. . And most likely the developer will spend it all in the first 3-4 years as the development has issues etc. This model assumes that NO payments come from the developer's income from sold lots and houses, which I can add which can accelerate the developer's use of the bond, but that would be the entire P&L of the investment project, which has too many unknowns or assumptions to create for me to simply model in an hour plus. .

Well, I understand the reason for the bond. I just paid it and don't worry about it.

[tophcfa]

Whatever Dude.

Sortsguy is just going through “recently retired syndrome”. It happens to many folks in his shoes. Having created financial models for many years, it’s a process to break away from what he has had to do for a living. Give it time, it took me a very short while to recalibrate my new priorities. The most important spreadsheet I keep now tracks my daily lap swimming, rounds of golf, and bike rides. Not that the statistics are overly important, it simply quantifies baselines to set newer and higher goals to achieve. I’m confident Sportsguy will get there soon : )

[Topspinmo]

It’s money maker, they don’t want you to pay it off.:Screen_of_Death:

[justjim]

OP, our Son has a MBA in finance. A few years ago ,after a couple visits to The Villages, I remember him saying that The Villages business model is the best he has seen. “They have taken the Community Development legislation (CDD) and used it to its potential”, he said. Good for them.

[BrianL99]

OP, our Son has a MBA in finance. A few years ago ,after a couple visits to The Villages, I remember him saying that The Villages business model is the best he has seen. “They have taken the Community Development legislation (CDD) and used it to its potential”, he said. Good for them.

They've gone above and beyond the intentions of the CDD legislation and expanded its potential, far beyond what was envisioned by the creators of the CDD framework.

https://www.**************.com/2020/08/16/lawsuit-pulls-back-the-curtain-at-properties-of-the-villages/ ("Taylor, who later defected to KD Premier Realty, said in training she learned it was “heavily” discouraged to encourage people to pay off the bond.

“I could see a reason for The Villages to not want me telling them that because the interest rate, to the best of my understanding, is paid back to The Villages. Which is the train of thought, looking back on it now, why they would have encouraged us, as sales representatives, to tell people not to pay the bonds off,” she testified in the deposition.")

IRS Decision on Florida Community Development Districts: Commercial Is Out; Residential May Be In | The National Law Review (https://www.natlawreview.com/article/irs-decision-florida-community-development-districts-commercial-out-residential-may-)

IRS relentless in probe of Villages bond transactions (http://www.ccfj.net/CDDIRSprobeVillages.html)

IRS decision on Villages' tax-exempt bonds worries residents (http://www.ccfj.net/CDDVillIRSimpact.html)

Villages Settles Lawsuit | POA of The Villages (https://www.poa4us.org/villages-settles-lawsuit/)

[4$ALE]

Someone may want to search "Gary Moyer"

[biker1]

I suspect one of the reasons why The Villages sales agents tend to suggest that you not pay off your bond is because it may increase the probability that you will buy another house. Perhaps with the bond paid off, you are more likely to stay put??

In our own case, we paid off the bond - about $22K. The thinking was that we would probably be in the house for at least 10 years. During this time, we will have paid about $14K in non-deductible interest and fees and about $3K in principal. There is definitely a cost to the lost opportunity if the money was invested but the returns have uncertainty. For those who didn't pay if off, it was refinanced recently and the annual payment appears to have dropped about 13%.

It’s money maker, they don’t want you to pay it off.:Screen_of_Death:

[JMintzer]

I just checked my Bond balance...

Just over $18K @ 3.82%. 21 years left... Cheap money...

[BrianL99]

It’s money maker, they don’t want you to pay it off.:Screen_of_Death:

https://www.**************.com/2020/...-the-villages/ ("Taylor, who later defected to KD Premier Realty, said in training she learned it was “heavily” discouraged to encourage people to pay off the bond.

“I could see a reason for The Villages to not want me telling them that because the interest rate, to the best of my understanding, is paid back to The Villages. Which is the train of thought, looking back on it now, why they would have encouraged us, as sales representatives, to tell people not to pay the bonds off,” she testified in the deposition.")

[MrChip72]

I just checked my Bond balance...

Just over $18K @ 3.82%. 21 years left... Cheap money...

Mine's even lower. Closer to 3% with 28 years left. It would be silly for me to pay it off when even my worst investments are making much more than that after tax.

[Altavia]

https://www.**************.com/2020/...-the-villages/ ("Taylor, who later defected to KD Premier Realty, said in training she learned it was “heavily” discouraged to encourage people to pay off the bond.

“I could see a reason for The Villages to not want me telling them that because the interest rate, to the best of my understanding, is paid back to The Villages. Which is the train of thought, looking back on it now, why they would have encouraged us, as sales representatives, to tell people not to pay the bonds off,” she testified in the deposition.")

Or it could be they should not be providing financial advise at all.

And the remainder of your understanding is incorrect.

[Altavia]

I suspect one of the reasons why The Villages sales agents tend to suggest that you not pay off your bond is because it may increase the probability that you will buy another house. Perhaps with the bond paid off, you are more likely to stay put??

In our own case, we paid off the bond - about $22K. The thinking was that we would probably be in the house for at least 10 years. During this time, we will have paid about $14K in non-deductible interest and fees and about $3K in principal. There is definitely a cost to the lost opportunity if the money was invested but the returns have uncertainty. For those who didn't pay if off, it was refinanced recently and the annual payment appears to have dropped about 13%.

Banks love people who think like that.

$22k would have grown to $40K if invested at 6% for 10yrs.

Plus it is unlikely you will recover that $22K at time of sale, much less the $40 it would have grown to safely invested.

[biker1]

The lost opportunity cost might be real, albeit the future returns were unknown at the time, but you ignored the fact that over 10 years we will have paid $17K anyway in annual bond payments.That money would be gone with virtually nothing to show for it. The bond is amortized like a 30-year mortgage so most of the interest is in the early years. That interest, plus the $100 annual service fee, is not tax deductible, unless you are a tax cheater. So, at the end of 10 years I paid $22K instead of $17K and there is really no telling how much of the $22K we will recover when we sell. The annual carrying cost on the house is now $1400 (lower than the initial $1700 before the refinance of the bond last year, the initial interest rate was just shy of 6%, IIRC) less than if the bond was still in place. An astute buyer will recognize this and it may support a higher sales price. Neither you nor I know.

I could have left the money invested and used the returns to pay the annual bond payment but this would have required an annual return in excess of 8%, depending on tax bracket. Safe returns in that neighborhood didn't exist 10 years ago. If those returns were available and were used to pay the annual bond payment then the original $22K would not be growing (i.e. it is not $40K). Since those safe returns weren't available 10 years ago, the $22K I paid upfront to eliminate the bond would have been spent down to some unknown level, with a bond payment still in place after 10 years. Let's assume I could have gotten an after tax return of 5% on the original $22K. This would have resulted in a shortfall of about $600 per year. So at the end of 10 years my $22K would have been down to $16K, and I am still paying the bond and the returns on the "balance" still won't cover the bond payment so the "$16K after 10 years" will continue to go down.

Banks love people who think like that.

$22k would have grown to $40K if invested at 6% for 10yrs.

Plus it is unlikely you will recover that $22K at time of sale, much less the $40 it would have grown to safely invested.

[NotGolfer]

Yet the OP bought a place here! I don't get people who come and settle in THEN complain about this and that. My opinion is..."some" people have WAYYYYYYY too much time on their hands.

[spinner1001]

So, how does the bond payment work from the Developer's point of view? And how does the developer price our bond interest rate relative to the public bond floated to be sure that the 99% of the cash is available to pay off the bond in 30 years, when the bond holders get their principal back? took all of about an hour with a cup of coffee this morning. .

So I created a developer's point of view cash flow model for developing a 100 unit development, with a $3.0 Million bond with a 4 percent interest rate (The model has yellow input cells to change any development size, bond size and interest rate)

Because the bond is floated and interest is paid to bond holders before the units start paying the bond assessment fee, there is a cash flow timing issue, which the model clearly shows.

Developer Bond Model inputs:
Developer total bond float
Developer bond floated interest rate
Developer bond length of time
Developer interest rate for interest earned on bond escrow, which is the segregated account holding cash and earning interest to pay interest annually and the principal in 30 years.

Resident Bond Model Inputs:
Developer total bond float
Developer bond length of time
Resident bond interest rate
Resident prepayment assumption

So to have 99% of the bond interest and principal payment available in 30 years, due to the timing mismatch of receiving payments with about a 2 year delay from floating the bond to receiving residents bond payments, the resident bond rate is higher than the developer bond rate. as well as having as near zero escrow cash balance after the resident 30 years of payments

The image below shows the 30 years of model cash flow from the Developer and Resident point of view, with the resident view in total payments. . Note that the developer can't spend all the bond in the first year to maintain enough escrow balance to pay the bond interest prior to getting resident payments. . And most likely the developer will spend it all in the first 3-4 years as the development has issues etc. This model assumes that NO payments come from the developer's income from sold lots and houses, which I can add which can accelerate the developer's use of the bond, but that would be the entire P&L of the investment project, which has too many unknowns or assumptions to create for me to simply model in an hour plus. .

@retiredFinanceGuy

As you know, every successful large corporation has a finance group trying to optimize the company’s cash flows. I believe that you trying to figure out parts of how The Villages developer finances itself. Since this developer is an unlisted company, you might look at the public SEC filings of listed companies with operations and financing similar to The Villages developer to learn more about what you are trying to model. PulteGroup (NYSE: PHM) might be a start. Start with a listed firm’s cash flows from financing activities in the financial statements and the footnotes.

Separate topic — On one of your other posts of about two months ago, did you ever figure out the arithmetic of the bond amortization payments charged to us property owners?

[spinner1001]

Yet the OP bought a place here! I don't get people who come and settle in THEN complain about this and that. My opinion is..."some" people have WAYYYYYYY too much time on their hands.

It seems many posters on TOTV.

[BlueStarAirlines]

So, how does the bond payment work from the Developer's point of view? And how does the developer price our bond interest rate relative to the public bond floated to be sure that the 99% of the cash is available to pay off the bond in 30 years, when the bond holders get their principal back? took all of about an hour with a cup of coffee this morning. .

So I created a developer's point of view cash flow model for developing a 100 unit development, with a $3.0 Million bond with a 4 percent interest rate (The model has yellow input cells to change any development size, bond size and interest rate)

Because the bond is floated and interest is paid to bond holders before the units start paying the bond assessment fee, there is a cash flow timing issue, which the model clearly shows.
So to have 99% of the bond interest and principal payment available in 30 years, due to the timing mismatch of receiving payments with about a 2 year delay from floating the bond to receiving residents bond payments, the resident bond rate is higher than the developer bond rate. as well as having as near zero escrow cash balance after the resident 30 years of payments

The image below shows the 30 years of model cash flow from the Developer and Resident point of view, with the resident view in total payments. . Note that the developer can't spend all the bond in the first year to maintain enough escrow balance to pay the bond interest prior to getting resident payments. . And most likely the developer will spend it all in the first 3-4 years as the development has issues etc. This model assumes that NO payments come from the developer's income from sold lots and houses, which I can add which can accelerate the developer's use of the bond, but that would be the entire P&L of the investment project, which has too many unknowns or assumptions to create for me to simply model in an hour plus. .


I'm not retired yet, but I hope when I do I can have a clean break from the way I used to spend my waking hours......

[Goldwingnut]

So, how does the bond payment work from the Developer's point of view? And how does the developer price our bond interest rate relative to the public bond floated to be sure that the 99% of the cash is available to pay off the bond in 30 years, when the bond holders get their principal back? took all of about an hour with a cup of coffee this morning. .

So I created a developer's point of view cash flow model for developing a 100 unit development, with a $3.0 Million bond with a 4 percent interest rate (The model has yellow input cells to change any development size, bond size and interest rate)

Because the bond is floated and interest is paid to bond holders before the units start paying the bond assessment fee, there is a cash flow timing issue, which the model clearly shows.

Developer Bond Model inputs:
Developer total bond float
Developer bond floated interest rate
Developer bond length of time
Developer interest rate for interest earned on bond escrow, which is the segregated account holding cash and earning interest to pay interest annually and the principal in 30 years.

Resident Bond Model Inputs:
Developer total bond float
Developer bond length of time
Resident bond interest rate
Resident prepayment assumption

So to have 99% of the bond interest and principal payment available in 30 years, due to the timing mismatch of receiving payments with about a 2 year delay from floating the bond to receiving residents bond payments, the resident bond rate is higher than the developer bond rate. as well as having as near zero escrow cash balance after the resident 30 years of payments

The image below shows the 30 years of model cash flow from the Developer and Resident point of view, with the resident view in total payments. . Note that the developer can't spend all the bond in the first year to maintain enough escrow balance to pay the bond interest prior to getting resident payments. . And most likely the developer will spend it all in the first 3-4 years as the development has issues etc. This model assumes that NO payments come from the developer's income from sold lots and houses, which I can add which can accelerate the developer's use of the bond, but that would be the entire P&L of the investment project, which has too many unknowns or assumptions to create for me to simply model in an hour plus. .

As I read your post it appears to have a major flaw in it, the assumption that the developer is holding this bond. If that's your assumption, you're completely incorrect in your posting.

The CDD's sell the bond through a 3rd party company (major banking institution or investment firm) on the open market. The developer bills the CDD for the infrastructure costs as the infrastructure is built and is paid from the bond proceeds the CDD received from the bond sale.

The developer doesn't hold the bond, manage it, or have any involvement with it. For the developer, the bond is all about cash flow, getting paid for costs incurred. They don't have their money tied up in roads, water lines, and sewer pipes. This allows them to invest it in things like rec centers, golf courses, and pools. The CDD issued bonds is one of the key factors in the developer being successful, by improving cash flow. Because of the improved cash flow the amenities are built with the communities, so when you buy your home or lot you will hear "that IS the 3rd tee for the ... executive golf course" instead of "over there they will build the ... golf course".

The bonds are not loan, they are investment vehicles, so they simply can't be refinance whenever they want and the interest rate is not based on the same factors as a mortgage. What the bond market is demanding is what the rate will be when they are issued. Depending on the terms of the bond they can be reissued to take advantage of the changes in the bond market, for the CDD bonds this is typically 10 years. The investors invest in these bonds with an expected fixed rate of return. The CDD bonds from The Villages area highly rated and rarely last more than a few hours on the market before they are sold out.

The CDDs hold in reserve a portion of the monies received for the bond payment from the Tax Collector's office. Some of this comes from those that pay off the bond early. This money is invested and creates additional income to offset the bond cost. Remember, these are investment bonds and the bond holders aren't really interested in receiving their principal back until the maturity date, they are interested in getting the annual interest payments on their investment.

The developer is out of the picture when you are paying your bond payment with the annual county tax bill. The make no money from the bond and interest beyond the initial payment for the development work.

If you decide to pay off your bond that is a personal financial decision only you can make based on your own circumstances. For me, I made the decision that if I was in the same house for 6 or more years, at that point I would pay it off as I was likely not to move again and I would eliminate long term debt, less than 6 years it didn't make sense to me as I wouldn't recover the costs.

The bond isn't an additional profit center for the developer, you are going to pay for the costs of the infrastructure either in a bond or rolled into the total cost of the home. For the developer the bond is helpful as it recovers the costs quicker than having to wait several years to sell out the entire community.

Buying a home with the bond paid off or not has pluses and minuses for both the buyer and the seller. It can affect the selling price if the seller is trying to recover an early payoff. If recovery isn't a factor in the cost, then it can be attractive to the buyer as they don't have the remaining bond payment in their property tax bill.

The bond isn't used for operation and maintenance cost, that comes out of the annual CDD maintenance assessment for each home. It is strictly for the construction cost. It can't be increased to cover some other costs. It's basically a one and done deal for the CDDs and the home owners.

There are some exceptions to the developer's involvement in the bonds that should be pointed out. About 18 months ago CDD 10 reissued their Phase 2 bonds (they were 10 years old and eligible for reissue), the bond market was more volatile than it had been in recent years so rates were higher than were seen during the reissue of the CDD 10 Phase 1 bonds. The CDD received an offer to buyout the bonds from a local bank at a rate less than what the market rate for the bonds offered, this was a very good deal for the residents holding these bonds. CDD 10 accepted the offer and entered into the agreement with the bank and the residents paying the CDD 10 Phase 2 bonds saw a significant decrease in their annual bond payment. The bank is Citizens First Bank, they have to follow all the state and federal banking regulations just like every other bank must. They operate as a separate business unit not associated with the development, building, and sell of the homes. The bank considered it a good investment of their assets and shows a lot of faith in the long term viability of The Villages as a community and a developement. It was both a strange and scary situation entering into this transaction, as the Chairman of CDD 10 board at the time, I had to sign for the $57 million note with the bank while surrounded by a team of bankers and lawyers. I'm a follower of Dave Ramey's money management principles in my own finances and signing for debt made me a little twitchy, even though I knew that this would be saving the residents several million dollars in interest.

The bond can be difficult for some to understand, I spent almost 8 years on the CDD 10 board and have come to understand the importance, value, and workings of the bonds here in The Villages.

[Bogie Shooter]

Well done, Don!

[edtherock]

Nice job putting this together. Good information and for those who don’t care why post anything at all? Sad to see some of the rude comments in here. Some people are just trolls looking to be negative. —- Buying the villages bonds is a safe way to make money also. They are some of the most highly rated bonds on the open market. Our 20 year old house we recently bought had the bond paid off!( thank you previous owners).

[Altavia]

Thanks Don, very much appreciate you sharing your knowledge and taking the time to explain what bonds are and how they work.

[jrref]

You can't guarantee interest rate income over many years to come. And the longer you wait to pay off the bond the more interest you pay.

I paid mine off and don't worry about it and reduced my long term debt. When I sell my house the $20K will be recoverable in my $1M home.

A paid off bond is just another selling point for your home that you will need if you want to get top dollar when the time comes.

And thanks Don for the accurate explanation!

[Jhrath7@gmail.com]

So, how does the bond payment work from the Developer's point of view? And how does the developer price our bond interest rate relative to the public bond floated to be sure that the 99% of the cash is available to pay off the bond in 30 years, when the bond holders get their principal back? took all of about an hour with a cup of coffee this morning. .

So I created a developer's point of view cash flow model for developing a 100 unit development, with a $3.0 Million bond with a 4 percent interest rate (The model has yellow input cells to change any development size, bond size and interest rate)

Because the bond is floated and interest is paid to bond holders before the units start paying the bond assessment fee, there is a cash flow timing issue, which the model clearly shows.

Developer Bond Model inputs:
Developer total bond float
Developer bond floated interest rate
Developer bond length of time
Developer interest rate for interest earned on bond escrow, which is the segregated account holding cash and earning interest to pay interest annually and the principal in 30 years.

Resident Bond Model Inputs:
Developer total bond float
Developer bond length of time
Resident bond interest rate
Resident prepayment assumption

So to have 99% of the bond interest and principal payment available in 30 years, due to the timing mismatch of receiving payments with about a 2 year delay from floating the bond to receiving residents bond payments, the resident bond rate is higher than the developer bond rate. as well as having as near zero escrow cash balance after the resident 30 years of payments

The image below shows the 30 years of model cash flow from the Developer and Resident point of view, with the resident view in total payments. . Note that the developer can't spend all the bond in the first year to maintain enough escrow balance to pay the bond interest prior to getting resident payments. . And most likely the developer will spend it all in the first 3-4 years as the development has issues etc. This model assumes that NO payments come from the developer's income from sold lots and houses, which I can add which can accelerate the developer's use of the bond, but that would be the entire P&L of the investment project, which has too many unknowns or assumptions to create for me to simply model in an hour plus. .
In English so we the math idiots can understand!

[tophcfa]

Yet the OP bought a place here! I don't get people who come and settle in THEN complain about this and that. My opinion is..."some" people have WAYYYYYYY too much time on their hands.

Hmmmm, re-read his post. He is not complaining, he is trying to figure out the bond from the developers point of view. Your point about too much time on his hands could be argued, but everyone has differing opinions of how free time is best spent.

[Tobys Dad]

I just checked my Bond balance...

Just over $18K @ 3.82%. 21 years left... Cheap money...
Where did you go to check bond balance? Thank you in advance.

[BrianL99]

The bonds are not loan, they are investment vehicles,


The bond isn't an additional profit center for the developer, you are going to pay for the costs of the infrastructure either in a bond or rolled into the total cost of the home. For the developer the bond is helpful as it recovers the costs quicker than having to wait several years to sell out the entire community.

.


Thank you for your input, Don.

As is obvious from the original post and your post, CDD Bonds are an extremely complicated subject and until you've had personal involvement in the (wing) nuts & bolts, it's hard to appreciate how it all works. I disagree that they're not a "loan", but that's simply semantics.

I think the most informative part of your post for those who don't understand the concept, is the sentence above in italics. Buyers have to pay for the infrastructure, one way or the other. If this wasn't a CDD Community, every home would have initially been priced at least 10% higher, to recoup the Developer's infrastructure costs.

You're far more of an expert than I on CDD Bonds, but if you jump into this again, you might want to remind folks that the Interest Rate spread is regulated by the state and not just a number the Developer picks out of the sky.

How are CDD Bonds going to be affected by the current interest rate situation? Interest rates this high, are something we haven't seen in many years. Bond prices move inversely to interest rates, as you know. How will this effect the Developer's plans to the South and resultant bond prices?

[4$ALE]

Where did you go to check bond balance? Thank you in advance.

Residential Bond Assessment Information (https://www.districtgov.org/departments/finance/bond_info.aspx) :)

[jayteadunn]

@CoachKandSportsguy one thing we learned is if you have the intention of paying off the bond and avoiding the interest you will over pay if you build. After buying land we received the amortization schedule. It showed $35,233.55 if it was paid off saving $22,722.04 in fees and interest. At closing they made us pay $1,933.04 toward the bond that the developer paid. This is the first payment on the bond with the most interest and the fee. So if you are building a home and the bill comes due prior to closing and you were preferring to pay the bond off you will end up paying the first year interest and fee. It would have been nice if they had a system to ask the person building if they intended to pay off the bond but its probably baked into the cake to get that first interest payment and fee.

[JMintzer]

Where did you go to check bond balance? Thank you in advance.

Here: Bond Amortization Schedules (https://www.districtgov.org/departments/Finance/amortization.aspx)

Click on your County/District, and then on your unit #...

[Goldwingnut]

Thank you for your input, Don.

As is obvious from the original post and your post, CDD Bonds are an extremely complicated subject and until you've had personal involvement in the (wing) nuts & bolts, it's hard to appreciate how it all works. I disagree that they're not a "loan", but that's simply semantics.

I think the most informative part of your post for those who don't understand the concept, is the sentence above in italics. Buyers have to pay for the infrastructure, one way or the other. If this wasn't a CDD Community, every home would have initially been priced at least 10% higher, to recoup the Developer's infrastructure costs.

You're far more of an expert than I on CDD Bonds, but if you jump into this again, you might want to remind folks that the Interest Rate spread is regulated by the state and not just a number the Developer picks out of the sky.

How are CDD Bonds going to be affected by the current interest rate situation? Interest rates this high, are something we haven't seen in many years. Bond prices move inversely to interest rates, as you know. How will this effect the Developer's plans to the South and resultant bond prices?

The developer isn’t involved in the bond nor it’s interest rate, and actually from the investor’s stand point it’s the return rate on their investment, as the bond is technically not a loan but an investment vehicle the return rate is a more accurate term. The CDD contracts with an investment firm (Chase, Citi, BoA, etc.) to market the bond and they do a market assessment to determine a marketable return rate. The firm is paid a fee (usually a percentage of the total bond amount) for their efforts.

The amount of the bond is negotiated between the CDD and the developer as to the expected reasonable cost of the infrastructure development. Once determined, the fees and additional costs are added to the total amount of the bond. The funds from the bond sales are held by the CDD and used to pay the developer’s invoices for infrastructure development.

An interesting aside on the bond issue is what happens if the development costs are less than estimated or worse yet, higher than estimated.

If the costs come in less than expected, the residuals that are held in the bond reserves fund managed by the CDD issuing the bond is kept by the CDD upon maturity. These funds would normally be transferred to the Repair and Replacement (R&R) fund of the CDD or less likely, be used to reduce the annual maintenance assessment of the CDD homeowners.

If the development costs run over, then what happens? This is exactly what has happened in CDD10. The last I remember (I stepped down from the CDD10 board to accept the position of County Commissioner) from 2 years ago, the developer had invoice about $1.5 million more than the amount of the bonds in CDD10. These additional invoicings sit unpaid and will remain unpaid until the bond maturity date. As I said in the previous post, there is a reserve fund that hold a portion of the initial payments of the homeowners and the funds from early bond payoffs made by some homeowners. These funds are conservatively invested and have a modest rate of return. At maturity this reserve is liquidated to pay the final payment, if there is anything leftover the developer would receive payment of the held invoices up to the original amount of the invoice or until the funds are exhausted. If there is no residual or insufficient to pay the remaining pending invoices then the developer received nothing more and writes off the unpaid invoices.

The bond rate doesn’t play a significant role in the sale of homes, the 15 and 30 year fixed rate mortgage rate however does have an indirect impact. The impact is less an impact to the individual buying the new home and more an impact to that same individual who may be selling their current home and looking for a buyer who is impacted by that rate. A significant portion (30-50% is the estimate I’ve heard thrown around) of the homes purchased in The Villages are “cash” purchases and don’t have a mortgage.

[BrianL99]

The amount of the bond is negotiated between the CDD and the developer as to the expected reasonable cost of the infrastructure development. Once determined, the fees and additional costs are added to the total amount of the bond. The funds from the bond sales are held by the CDD and used to pay the developer’s invoices for infrastructure development.




If I understand CDD's correctly, the CDD is controlled by a Board of Supervisors, who are designated by the Developer at the time of the CDD's creation?

These hand-picked "Supervisors" are then responsible for determining the validity of the Developer's invoices and advancing payment from the Bond Funds? (I assume the CDD advances money to the Developer to pay his bills, based on an agreed to construction schedule, no different than a bank would do on a construction loan?)

I must be missing something. The entire premise seems illogical.

[Goldwingnut]

If I understand CDD's correctly, the CDD is controlled by a Board of Supervisors, who are designated by the Developer at the time of the CDD's creation?

These hand-picked "Supervisors" are then responsible for determining the validity of the Developer's invoices and advancing payment from the Bond Funds? (I assume the CDD advances money to the Developer to pay his bills, based on an agreed to construction schedule, no different than a bank would do on a construction loan?)

I must be missing something. The entire premise seems illogical.

Your slanted remarks clearly show much about yourself, why do you bother to live here, if you do at all.

Yes, the landowners elect the Supervisors for the first 5 years as required by Florida Statue Chapter 190. Then it transfers to the qualified electorate. How foolish would it be if they put someone from the POA or other such hypocritical groups on one of the boards, they are trying to build a development and a community. It’s critical that the initial Supervisors are philosophically aligned with the goals of the Community Development District (read the words - Community Development).

Does this mean that they must somehow be corrupt or negligent in their responsibilities as you try to allude to? Hardly so.

The State of Florida has a great many laws and regulations regarding development, spending of public funds, oversight, and contract rights and enforcement, and a great many others that exist to ensure the public trust is not violated including the Florida Open Meetings laws (commonly referred to as the Florida Sunshine Laws). They can’t just write checks and doll out money at will.

All it would take is a few unsavory actions by a few individuals to cause major problems and send things into a downward spiral. Perhaps if you look into the background of some of the landowner elected officials you will see that they are business owners, management officials, and prominent members of the community that are elected to these positions. None of whom would take actions that would risk their positions and reputations, nor would the developer want them to. Such actions would run the risk of ruining businesses and turning the work here into little more than a house of cards.

But of course an uninformed opinion always assumes the worst.

When I took office as the first resident elected supervisor in CDD10 I had only a smattering of knowledge of what I was getting into and was extremely skeptical of the actions of the board. I spent dozens of hours each month for the first several months studying and understanding the laws that govern the work of the boards and the rules that the district staff must work under. I also spent a lot of time looking into the backgrounds and histories of the Landowner elected members of CDD10, the SLCDD, the VCCDD, and the senior members of the District staff, as well as the ongoing issues with the IRS. I needed to know the type of people I was going to be working with and if I had just jumped into a snake pit. After assessing the quality of the people, I was comfortable with putting my name out in the public eye to be associated with all of them.

I wish I could say the same of all of the elected officials I have met in the last nine years. Fortunately most of these men and women are honorable and honest individuals, most but not all. Some I have met have proven themselves to be liars, dishonest, biased, egotistical, ignorant, uninformed, and self centered, trying to pass themselves off as doing what’s best for the “residents” when in fact much of their efforts have accomplishing just the opposite and to simply get their names recognized in certain online websites and to be elevated to places of “honor” within some organizations.

If you want to try to smear and spread distrust about the actions of individuals, my experience has taught me that these, in your words, hand-picked Supervisors, are in fact the wrong target.

[BrianL99]

Your slanted remarks clearly show much about yourself, why do you bother to live here, if you do at all.



That seems to be a favorite refrain around here, when folks disagree. It might come as a huge shock to you, but some people opt to live in a place that may not be perfect, but it offers some things they find of value. Some folks choose to live Russia, Libya or even Bangladesh, even though life might not be perfect and government may not always have the residents' best interests in mind.

Your slanted remarks clearly show much about yourself, why do you bother to live here, if you do at all.

But of course an uninformed opinion always assumes the worst.

When I took office as the first resident elected supervisor in CDD10 I had only a smattering of knowledge of what I was getting into and was extremely skeptical of the actions of the board.

I see. So it was ok for you to be skeptical, but anyone else who's skeptical, is slanted and uninformed?



I wish I could say the same of all of the elected officials I have met in the last nine years. Fortunately most of these men and women are honorable and honest individuals, most but not all. Some I have met have proven themselves to be liars, dishonest, biased, egotistical, ignorant, uninformed, and self centered, trying to pass themselves off as doing what’s best for the “residents” when in fact much of their efforts have accomplishing just the opposite and to simply get their names recognized in certain online websites and to be elevated to places of “honor” within some organizations.

If you want to try to smear and spread distrust about the actions of individuals, my experience has taught me that these, in your words, hand-picked Supervisors, are in fact the wrong target.

Ahhh ... only the Developer's "hand-picked supervisors" are trustworthy and only you have the right to be skeptical?

The $40,000,000 the Developer stole, that was approved by the trustworthy supervisors, was merely an over-sight?

& the $350,000,000 in tax free bonds, the IRS says were improperly issued, was just an unfortunate blip?

I think I have it straight now. It all makes perfect sense.

Your slanted remarks clearly show much about yourself.

To paraphrase the late, great Johnnie Cochran, "if the glove fits, you can't acquit".

[Rainger99]

In English so we the math idiots can understand!

I agree with this. Where is the Bonds for Dummies version??

[CoachKandSportsguy]

As I read your post it appears to have a major flaw in it, the assumption that the developer is holding this bond. If that's your assumption, you're completely incorrect in your posting.


Nope, not my assumption. The CDD holds the bond liability though. .

The comprehension issue here is that the word investments is used colloquially for two different points of view correctly, without proper attribution to the point of view.

Bonds are a financing vehicle for an investor, a way to raise money for investment purposes. Financing is about raising money for investments with a future payout(s) for the buyers of the financing vehicle in some form. (bonds, equities, mortgages, etc.)

Bonds are an investment to buyers.
Bonds are a financing vehicles/processes for investors to raise money for their investments.
There are multiple financing processes for investors to raise money for their investments

The comprehension issue here is that the word investments is used for two different points of view, depending upon whose view point is active.

Bonds are an asset for the bond holder, with a claim on the investment. Left hand side of the bond holder ledger, in this case the investors who bought the bonds from wall street broker. (not related to anyone in TV, which GoldWingnut makes his assumption mistake about my post)

Bonds are a debt (liability) for the bond seller, the CDD, and shows up on the right hand side of the bond seller / CDD on which owes the interest and principal to the bond holders / buyers

On the left hand side of the of the CDD ledger, there is the cash (asset) from the sale of the bonds.
The CDD then uses the cash to create another asset or investment in the infrastructure of the CDD. . .

That is where the confusion lies, with the word investment used correctly for both the CDD and the bond holder, which is the buyer of the bond, without mentioning that the bond is also a debt / liability / financing method to the CDD which they must repay, or they lose ownership in their villages' investments.

So the CDD isn't going to lose ownership in the CDD, they will just exercise their lien on your property through their assessment for non payment.

PAY YOUR BOND ASSESSMENT EVERY YEAR OR PAY IT OFF BUT DON'T ASK REALTORS FOR PERSONAL FINANCE ADVICE!

damn, not living in TV and recently retired trying to get into retirement mindset is slow. . especially during the winter time in NE. . (currently here in TV visiting friends and not missing NE at all)

[Papa_lecki]

Nope, not my assumption. The CDD holds the bond liability though. .


I think the home owner has the liability. The CDD is just the collection vehicle, they collect from the debtor (homeowner) and pay the debtee (the holder of the bind investment).

If a homeowner defaults on their bond, the CDD downs pay it, the next owner of the house does.

[tophcfa]

I think the home owner has the liability. The CDD is just the collection vehicle, they collect from the debtor (homeowner) and pay the debtee (the holder of the bind investment).

If a homeowner defaults on their bond, the CDD downs pay it, the next owner of the house does.

Here is a quick and basic view of these bonds from the standpoint of a bond investor. I understand this is a different view than how a homeowner views things, but it helps one understand the whole picture from a different perspective.

These are tax free municipal bonds being issued by the CDD’s. There are basically two types of municipal bonds, revenue bonds and general obligation bonds. General Obligation bonds (GO’s) are backed by the full ad valorem taxing powers of the issuing municipality. Revenue bonds are backed by a pledged specific revenue source, such as a toll road or utility charge. These bonds are technically revenue bonds issued by the CDD’s. Investors in the bonds look to the CDD’s ability to pay the bonds obligations through funds raised by a non ad valorem special tax assessment. This special tax assessment represents a first lien on property holders (homeowners bond balance) and is the sole revenue source backing the creditworthiness of the bonds from an investors standpoint. The credit worthiness of the bonds is based on the stability of the underlying special assessment tax base as well as the revenue generated from the special assessment being sized adequately to sufficiently pay all required debt service obligations in a timely fashion.

[BrianL99]

I think the home owner has the liability. The CDD is just the collection vehicle, they collect from the debtor (homeowner) and pay the debtee (the holder of the bind investment).

If a homeowner defaults on their bond, the CDD downs pay it, the next owner of the house does.

Mr. CoachKandSportsguy is correct in his analysis of how CDD bonds work. They are not simply an "investment vehicle", as described by Mr. Goldwingnut, nor are they immune to being influenced (nor beyond manipulation) by the Developer.

They are indeed a loan from and liability for, the CDD's.

CDD Bonds never attach to a "homeowner", they attach to land only. They are not a debt of the homeowner. Only landowners assume the obligation. A homeowner never assumes liability nor becomes a debtor. Perhaps it's only semantics, but if you're going to get into the weeds, accuracy is important.

[Goldwingnut]

Nope, not my assumption. The CDD holds the bond liability though. .

The comprehension issue here is that the word investments is used colloquially for two different points of view correctly, without proper attribution to the point of view.

Bonds are a financing vehicle for an investor, a way to raise money for investment purposes. Financing is about raising money for investments with a future payout(s) for the buyers of the financing vehicle in some form. (bonds, equities, mortgages, etc.)

Bonds are an investment to buyers.
Bonds are a financing vehicles/processes for investors to raise money for their investments.
There are multiple financing processes for investors to raise money for their investments

The comprehension issue here is that the word investments is used for two different points of view, depending upon whose view point is active.

Bonds are an asset for the bond holder, with a claim on the investment. Left hand side of the bond holder ledger, in this case the investors who bought the bonds from wall street broker. (not related to anyone in TV, which GoldWingnut makes his assumption mistake about my post)

Bonds are a debt (liability) for the bond seller, the CDD, and shows up on the right hand side of the bond seller / CDD on which owes the interest and principal to the bond holders / buyers

On the left hand side of the of the CDD ledger, there is the cash (asset) from the sale of the bonds.
The CDD then uses the cash to create another asset or investment in the infrastructure of the CDD. . .

That is where the confusion lies, with the word investment used correctly for both the CDD and the bond holder, which is the buyer of the bond, without mentioning that the bond is also a debt / liability / financing method to the CDD which they must repay, or they lose ownership in their villages' investments.

So the CDD isn't going to lose ownership in the CDD, they will just exercise their lien on your property through their assessment for non payment.

PAY YOUR BOND ASSESSMENT EVERY YEAR OR PAY IT OFF BUT DON'T ASK REALTORS FOR PERSONAL FINANCE ADVICE!

damn, not living in TV and recently retired trying to get into retirement mindset is slow. . especially during the winter time in NE. . (currently here in TV visiting friends and not missing NE at all)

Your logic is sound and valid. Your most sound advice is obviously not asking the realtors for personal finance advice. It is very much akin to not asking a car salesman if it's a good price for the car they are trying to sell you.

The most confusing term in The Villages is The Villages. The name is used to refer to the community, the developer, the district government, and several other entities, all of which are generally not related to the other. Many people don't recognize or understand that these are not the same entity.

[tophcfa]

Mr. CoachKandSportsguy is correct in his analysis of how CDD bonds work. They are not simply an "investment vehicle", as described by Mr. Goldwingnut, nor are they immune to being influenced (nor beyond manipulation) by the Developer.

They are indeed a loan from and liability for, the CDD's.

CDD Bonds never attach to a "homeowner", they attach to land only. They are not a debt of the homeowner. Only landowners assume the obligation. A homeowner never assumes liability nor becomes a debtor. Perhaps it's only semantics, but if you're going to get into the weeds, accuracy is important.

Definitely semantics, it’s a first lien on the land the home is built on. The homeowner owns the land and the house has little to no value without the land it’s built on.