[billy2fish]

http://www.orlandosentinel.com/laurenonlake

Click on this link in Lauren Ritchie's response you will see an exchange between the IRS and a Mr. Israel who has POA for the vccdd's it's quite long but at the end of the exchange,bottom line is the IRS is willing to settle the whole matter for $ 16,458,454 chump change in my opinion.Please remember I am not a lawyer,so correct me if I am mistaken

[Bogie Shooter]

Originally Posted by BobKat1

This issue certainly seems like something the Daily Sun should at least cover, just to give updates to homeowners. Not reporting on it can potentially generate a lot of misinformation.

Daily Sun Saturday May 30, 2009. See Section C, Page 1.
The staff report gives the updated facts....no hype, guesses or opinions.

[EdV]

Originally Posted by SteveZ

.... What consequences are those?...

Well since you asked the question, let’s take a look at what’s on the table right now.

Based on the IRS letter date 05/18/09, Agent Dominic Servadio has made a specific proposal for The District/Developer to consider to bring the whole matter to an end. But it’s nothing more than a starting point for negotiation between the IRS and the Developer and the two districts that he owns and controls. Additionally it contains a caveat that implies that if the District/Developer chooses to elevate this to Appeals, then the IRS will open up other related bonds to detailed examination, something that the IRS probably knows the Developer would prefer to avoid. A veiled threat indeed.

So if the District/Developer decided to settle on that basis (which is doubtful at this point) the Developer would re-purchase the golf courses and other amenities to the tune of 355 million dollars that he sold to the District, and the District would turn around and payoff the bonds. This would reduce the amenity fees from an average of $130/mo to maybe $95/mo.

On the other hand, if the amenity fee was kept at the current rate, it would provide some $16 million/yr to improve the current amenities. Perhaps reopening the indoor pool or widening and refurbishing the multimodal cart paths north of 466, without regard to the districts that they wind through and other improvements as noted by the IRS agent.

And before everyone assumes that the IRS is out to get you, the TV homeowner, think again. If you actually read all of the points and counterpoints made in the documents that are on-line and available to you (as Ms. Ritchie has suggested) you may in fact come to the same conclusion that I have. And that is the IRS has it’s cross-hairs focused right on the Developer and his family related trust funds that were the direct beneficiaries of these transactions, not on TV homeowners or the thousands of investors in these federally tax free muni-bonds.

[ijusluvit]

Here are some of the reasons why there won't be a "consequence" for TV homeowners:

1) If, worse case scenario, the IRS will finally only settle for some payment, Mr. Morse will likely pay it to resolve the matter completely and prevent other transactions from being subject to review. (so many cans of worms!)

2) If Mr. Morse tries to pass the payment on to residents in any discoverable way, the POA will file suit. (Thank God for the POA!)

3) As in the last suit against the Developer, the POA will have a tremendous case. The IRS findings will be irrefutable arguments: that the districts which issued the bonds are not really governmental and the fact that the homeowners are paying 16m in annual interest payments to repay bonds which allowed the Developer to realize extraordinary profits. (It's a no-brainer Judge!).

4) Number 3 means that Number 1 is what's likely going to happen. (Mr. Morse is smart!)

Hey, what do I know? But I feel pretty comfortable, and I think you should too.
Have a wonderful day!

[chuckinca]

Per EdVinMass: "So if the District/Developer decided to settle on that basis (which is doubtful at this point) the Developer would re-purchase the golf courses and other amenities to the tune of 355 million dollars that he sold to the District, and the District would turn around and payoff the bonds. This would reduce the amenity fees from an average of $130/mo to maybe $95/mo."

I'm guessing that the golf courses are the free for life executive courses, the other amenities are the free rec centers, pools, courts, etc.

If they revert to the developer and the amenity fees are back to $95/Mo, does the $95/Mo cover the use (not purchase) of the free amenities?

.

[SteveZ]

Whatever the outcome, negotiations of merit do not occur in the media.

[Lauren Ritchie]

Folks,

I have been reading the posts that assume the golf courses, ect., will go back to the developer in the event the bonds are recalled. That is completely in error.

The devleoper has zero liability in this transaction. He is simply a seller to the governmental district. Morse made his money, and on his sub S corporation tax return, he declared $53 million profits and paid taxes on it. That information was contained in previous IRS documents, noting that what he did was proper.

The developer is not in any way legally considered as the district. Even the IRS has not attempted to prove that. What the agency has tried to show is that the developer has enough influence over the district that the transactions were not "arm's length" and therefore do not qualify to be paid for with tax-exempt bonds.

This was a business deal between a legally constituted government and a legally constituted business in the state of Florida. When you try to run the scenarios that may be possible, this is a vital thing to consider. I can understand how people get confused -- The Villages has fostered the father-developer notion for years. But it's not legally accurate.

Realize that Morse did not issue these tax-exempt bonds. The board of supervisors of your district government did. Whatever consequences there are will be borne by the district government -- unless Morse choses to get involved. The question really is whether he will find it enough to his advantage to do so or whether he will decide it is in his best interest to walk away.

Lauren

[chuckinca]

If the developer had influence over the districts and the districts were incorrect to issue tax exempt bonds, how does the developer have zero liability?

.

[JimJoe]

Originally Posted by chuckinca

If the developer had influence over the districts and the districts were incorrect to issue tax exempt bonds, how does the developer have zero liability?

.

A good question but the answer may be unfortunately .. because the IRS goes after the seller of the alleged improper bonds, which is apparently the villages government who get its money from the amenities fees or from taxation of villagers,,,, not the person who was paid with the money raised by the bonds. IT may be an important question for the POA to consider if the residents suffer any adverse consequences from this unfortunate situation... but if this type of arrangement is authorized by Florida law it may be there was no wrongdoing.. and the villagers could end up paying the bill... Job security for lawyers.

[l2ridehd]

I read a lot of this information. Seems the risk is if these bonds are not tax exempt, but the interest is subject to IRS tax, then the rate which the CDD is able to sell these bonds goes up. Instead of a 4 to 5 % interest rate it goes up to 6 to 8% rate. That would increase your annual bond payment because your paying a higher interest rate. As to what happens to the past interest collected as tax exempt someone will pay higher taxes then they thought for a lower rate of return received. I am sure lawyers will be very involved with that decision and would somehow try to make that come back to the CDD which sold it as supposedly tax free interest which now is not. Then the question becomes would that get passed back to the homeowner. If it does your payment goes up for the bond portion of your annual payment. Probably not a huge amount to all of us, but an amount to pay the 2% delta that usually becomes a premium for tax free vs taxable. How much gets charged retro active is up to the lawyers and the IRS.

So is there homeowner risk? I think the answer is yes. Is it substantial? I don't think so. Probably worst case would be $700 to $800 per homeowner paid over time by the time you include lawyers, IRS penalties and interest.

[SteveZ]

And we are still back at "what consequences?"

People can "what if" the situation to death, and still be wrong. If the IRS and TV negotiate an arrangement, that's business. It happens whenever a business wants to cut its costs in defending an action, and the IRS knows it. If there was true "bad faith" here, the matter would be in the hands of the U.S. Attorney's Office, not the money-collectors.

So, the matter will continue until it ends. If the TV "government" made a mistake, why is that a surprise? Has anyone ever lived anywhere where the local government didn't make mistakes which either raised taxes, impacted services, or caused layoffs? Why is there an expectation that the TV government would be "perfect" in every way?

The lawyers for TV and the IRS will resolve the matter, because neither side wants to look stupid in public, and whatever the arrangement is (from dropping the matter to settlement at $___) , both sides will issue statements to their advantage - - and t matter will be "old news" in a day.

Maybe I'm living in a fog, but I just don't see anything happening which will cause me to change my style of living here. Let the games continue...

[OpusX1]

I have been reading about this for several months now. I am in agreement with Steve.
Here is one point that I have not seen addressed. When a entity sells tax free bonds they hire Bond Consul to make sure things are on the up and up. If the sold bonds were declared taxable I would think that the Bond Consul firm would be on the hook so to speak as would the insurance firm that insures the Bond Consul firm against errors and omissions. All so the IRS ruling will have statewide impact over all the other CDD. The point is that there are many deep pockets ahead of Village residents. There is enough here to keep several Law firms busy for years.

[nitehawk]

Thank you Lauren for you information - I for one like to hear what is going on and with the bond issue. I not like some people do not chose to bury my head in the sand

[EdV]

Originally Posted by Lauren Ritchie

Folks,
I have been reading the posts that assume the golf courses, ect., will go back to the developer in the event the bonds are recalled. That is completely in error.

No one is assuming anything here. Just speculating on possible ways in which this could be resolved. It's not as much about what he can or cannot be compelled to do but more about what he probably should do to clear up the mess that he created.

Originally Posted by Lauren Ritchie

.....The developer is not in any way legally considered as the district. Even the IRS has not attempted to prove that.

If you feel strongly about this, then why at the same time that you posted this here did you post the following statement in your column today:

"What is conspicuously absent from the revenue agent's scenarios is what role Morse might have in this, if any. The agent spent considerable time and energy building a case that the developer is the district, and the district is the developer. If so, shouldn't the developer — the biggest beneficiary in this arrangement by far — bear some responsibility? Or is he absolved by declaring his profits from the bonds as taxable?"

Originally Posted by Lauren Ritchie

Realize that Morse did not issue these tax-exempt bonds. The board of supervisors of your district government did.
Lauren

No, it's Morse's government not the homeowners government(s) that issued these tax-exempt bonds. The two CDD's under scrutiny here were established under chapter 190 by virtue of the landowners of Real Property physically located within the boundaries of those two CDDs. And absolute control of it remains with the owners of record which, under Chapter 190 can (and does) include private corporations and trusts. And that clearly is the Morse family aka The Developer and can be identified by the land owners of record in the Registry of Deed of the counties in which they reside. The homeowners in The Villages and the numbered CDD that their property is a part of, do not own so much as one square inch of the real property inside the boundaries of the VCCDD or SLCDD.

But ironically, due to the nature of this unusual governmental structure, those two special CDDs cannot foist their tax woes immediately onto the homeowners in The Villages. Those two special CDDs have no taxing powers over the numbered CDDs and only real source of income is the amenity fee whose annual increase is capped at the inflation rate.

[MelZ]

EdvinMass

Thanks for the post I apprecaite you insight. My attitude to this is similar to any IRS issue, they make claims (usually very large), you refute with documentation, they negoitiate or go away.

Kind of reminds me of the schoolyard bully.