Bond question with a twist

[Harry Gilbert]

Simply who owns the bond that you make payments on? Does the developer hold the bonds or are they sold on the open market?

[784caroline]

Its not the Developer but the Community Deelopment Districts AND they are bought and sold on the open market...here is a link for pricing on CDD 7 Bonds

http://trades.municipalbonds.com/bonds/issue/92707VAA2

[ricthemic]

Its not the Developer but the Community Deelopment Districts AND they are bought and sold on the open market...here is a link for pricing on CDD 7 Bonds

http://trades.municipalbonds.com/bonds/issue/92707VAA2

Thank you for the info and the link. I am not astute on alot of things and bonds is one of them. One of the things I can't understand is, I believe these bonds are purchased by private investors if so why is Sumter County a public agency collecting,depositing,accounting,paying out to investors/agents all the funds. So who pays the salaries of these public county employees for all this work? Property taxes??. so all the sumter county homeowners outside of the villages are paying for these salaries too? Just one of things I don't get but like I said I don't get alot of things. Maybe the county makes money of them too..

[StarbuckSammy]

Good question. Not all of the bond offerings become public sales. Some are held by private investors including I am sure the developer. It only makes sense for the developer to eventually offer the bonds via a public bond offering and not to hold on to them. The bonds are used to pay off the developer's bank debt used to construct the infrastucure for the various villages etc. I would assume that the Sumter County Tax Collector, for a fee, collects the funds from homeowners and then sends the funds to the designated trustee. That trustee then distributes to the bond holder(s) etc.
This is a good question and should be asked to the Sumter County Tax Collector.

[784caroline]

Under Florida Statute 197, the Tax Collector has the responsibility for
the collection of ad valorem taxes and non-ad valorem taxes assessments. These are levied by the county, municipalities, and various taxing authorities in the county. Taxes are based on the assessed value and the millage of each taxing authority.
�Non-ad valorem assessments are based on the improvement or service cost allocated to a property (example~ Solid Waste, lighting, or paving assessments) and are levied on a benefit unit basis, rather than on value.
�Ad valorem taxes are based on value placed on real property

Your CDD Bond is considered a Non-ad Valorem tax !!

[Mickedamouse24]

Why can the bond payment not be claimed as a deduction on your yearly tax for real estate?
:sad:

[gongoozler]

Why can the bond payment not be claimed as a deduction on your yearly tax for real estate?
:sad:

They (bonds) are not covered in the Federal tax code . . . the bond (on your individual property) is for bringing utilities, roads, etc to your property and it is not a tax! The bond on the golf courses, recreation centers, etc are different and on the north side of 466 are being studied by the I.R.S. because they were sold as tax-free bonds and that MAYBE a violation of the Federal tax code.

[784caroline]

Its the recreational Bonds that are being questioned by the IRS NOT these CDD Bonds

[Harry Gilbert]

Thanks all,

The main gist of my question was to see if these bonds can be bought and it seems they can be ( I have a lot more research to do first) my thinking is If a villages homeowner is paying 6-7% interest than the bond should be paying a return of 4-6% roughly. A lot better than anything else out there. I've got all winter to research this issue and will update the board if it looks like it will be a doable deal for myself or others.

But while thinking about this last night a new question came to mind.

I understand that the developer needs to recoup the infrastructural costs and it needs to be split between all homeowners in a particular village based on lot size, larger lot more $$$. but how do all the bond amounts come out to nice even round numbers? $20K, $50k etc.

[villages07]

Harry .... I have purchased several iterations of various CDD # district infrastructure bonds on the financial resale market. They have face interest rates ranging from 5.375 to 6.5 and, depending on the markup or discount to par value of 100, have yielded anywhere from 5.5 to 7% tax free. They are not insured so may discourage investors not familiar with the area. I feel they are a solid investment since I know what is behind them ... the sound standing of the Villages and its residents. They pay out twice a year...in May and November.

Several outfits locally advertise muni bond resales, including Villages CDD bonds. FMS Bonds (who I use) and Lawson Financial. I'm sure there are others. By all means, do your due diligence research before investing in them.

The bond that each homeowner pays is calculated to the penny. Folks here only speak in round numbers. And, I believe Sumter County is charging something like $100 per year to collect the bond payments for the CDDs.

[Harry Gilbert]

"The bond that each homeowner pays is calculated to the penny. Folks here only speak in round numbers. And, I believe Sumter County is charging something like $100 per year to collect the bond payments for the CDDs."

Thanks that makes sense.

I have a long cold winter to learn about bonds but they do sound like a worthwhile investment

[784caroline]

AS a previous poster stated these Bonds are considered speculative and NOT rated...however that said we bought CDD #5 and CDD #7 Bonds with interst rates paying between 5.35% to 6.5% tax free. These bonds are 30 year bonds BUT they all have call features put into them at the 10 year mark at PAR. The other peculiar thing about these bonds is that they have a Sinking Fund Provision...and what that means is that as we as homeowners pay off your individual bond on your property, the CDD has the right, through a lottery drawing, to redeem at PAR in $5K increments part of your bond holdings.

You are required to buy a minimun of $10K in bonds but what that means if your bond is selected in this lottery you can have these bonds redeemed (at PAR) in part or in their entirity through the sinking fund...so the income stream you may be expecting through this purchase can change.

if your intentions are to buy some of these bonds, best approach would be to buy a ladder of these bonds.......the income is very goood.

You cannot buy these bonds from anyone..i know when we first saw the ads in the local Village Sun newpaper, I tried calling Fidelity, T Rowe Price and others to see if I could buy form them directly. Even talked to the T ROWE PRICE BOND desk in Tampa Fl ..they could not get them. Eventually we found a good broker with FMS BONDS in Miami and they have been very good.......even tranfered the bonds after purchase to whatever brokerage account you want. BY the way they get their supply of bonds through inter-dealer purcahses and specialize in buying bonds through estate liquidation. In other words you typicaly are not buying new issues. The only problem with this is that the Sinking Fund can kick in sooner and call provision rather than 10 years away when newly issued may be 7 or 8 (or whatever). I will still take (hopefully) 7-8 years of tax free money at 5-6% .