First, there is no hostility, only unanswered questions. Second, I don't have CUSIPS handy.

Second, This is the quote from the lawyers.

“The IRS seems to be adding a new requirement for an issuer to be a political subdivision,” said Scott Lilienthal, president of the National Association of Bond Lawyers and a partner with Hogan Lovells US LLP. “That new requirement doesn’t seem to be based on any existing authority. If the IRS wants to revisit the definition of a political subdivision then it should so through the formal rulemaking process and issue guidance on a prospective basis only.”

Where is it wrong? Do you have the Legal Opinion they issued? It is not enough to say "With respect to your quote from the President of the National Association of Bond Lawyers, what else would you expect him to say since his members rendered opinions that these bonds were tax exempt? "

You can call me sweetie anytime, my graciegirl.

The purchase prices which are to be paid to the developer in the future by the central districts for various infrastructure and amenities are my greatest concern. How will they be fairly determined? That is at the heart of the financial black hole Villagers face IMHO.

By the way, this is a highly informative thread. I want to sincerely thank those who are contributing facts and helpful links.

There is nothing wrong with making money. I'm all for it. Some people are jealous some are not. I think for many people it is the manner in which the money is made that is the issue. Bernie Madoff also made a ton of money. It was the manner in which he made the money that got him in trouble. When his business practices made his investors a lot of money, not a one had anything bad to say about him as well. I think the problem with the Morses is how the money is made that bothers some folks. The control that the developer keeps on the amenity facilities keeps these CDDs from being public entities. If, and I say if, the IRS appeal goes against the developer and if it impacts the pockets of the residence in TV I think many of the Morse's supporters will turn on them just like Madoff's investors did.

Well we agree on one thing anyways.

Logic
 

A couple of observations. It is not logical to allow the developer to have continued control over the residents but at the same time claim it is a Governmental controlled community. As they say you can't have it both ways. If you look at Fl Statue 718 which is used for Condo's it is clear that the developer must have a hands off/arm length when the units are buoght or turned over to the buyers. A question is why did the Fl Legisture pass such a law that allow CDD's and permit the Developer to continue to have extraordinary powers over residental properties that have been purchased. That in itself looks out of line? Having said all of this does anyone really doubt The Villages are being singled out because of it conservative views and public image? Come on..there is common sense. If you do I have a bridge for sale. It is unfortunate that we may have been tricked into the conditions we are in by (a) the Fl Politicians trying to make it comfortable for Developers to maximize returns for Developers and (b) an Federal Gov. looking to go after conservative groups. Guess who is in the middle. Yep. We are everybody's lunch..:icon_hungry:

Morse and Bernie Madoff in the same sentence? Whoa.

A CDD is so different from anything that any of us has ever seen before that it almost cannot be described. I know one thing. If some of the people who post on here would take over running this place, I could not get out of here fast enough.

Actually, CDDs can be described and understood. What we are trying to rationally determine here is just how they are structured and operated within The Villages. Among other issues are the central districts which are controlled by the developer and contain no residents structured and operated within the letter and the spirit of the Florida and US law governing such entities?

Let's leave the hysteria and demeaning other posters out of it.

Good point. The IRS insists the Village Center and Sumter Landing community development districts are not "valid issuers" of tax-exempt bonds, which are most commonly used by cities and counties to finance public projects.
(IRS Agent Dominick) Servadio (Jr.) contended that the districts that issued the bonds don't meet the test of a genuine "political subdivision." Its governing board isn't chosen by residents, it has no authority to exercise police power and its power to take private property for public projects is very limited.

The sky isn't falling
 

Bloomberg

Dirt-Bond Sales Near ’07 Peak Belie IRS Tax Ruling: Muni Credit

Demand for $6 billion of bonds sold to finance Florida housing developments shows no signs of waning even after the Internal Revenue Service said debt issued for a project of billionaire H. Gary Morse isn’t tax-exempt.

A Florida land-backed bond sale last week by Verona Walk Community Development District brought issuance of such debt this year to $323 million, close to the highest since 2007, data compiled by Bloomberg show. In May, the IRS alerted Morse that bonds sold to finance a district he created weren’t tax-free, a decision with potential implications for hundreds of similar entities.

Land-backed debt, dubbed dirt bonds, is the riskiest municipal segment, accounting for almost half of default filings where investors didn’t get paid, according to Concord, Massachusetts-based Municipal Market Advisors. Still, buyers are drawn by the extra yield. Wells Capital Management and Nuveen Asset Management plan to keep their bonds from Morse’s project while continuing to buy debt of certain districts.

“There’s a yield premium in the market for this type of debt that makes them competitive,” said John Miller at Nuveen, who oversees $95 billion of local debt in Chicago. “That tends to limit the amount by which the bonds would fall.”

The names were used to illustrate a point that we should not relinquish objectivity and take everything for granted no matter where we live. If you feel comfortable with power and money being used carte blanche without any accountability from a voting populous then TV is your heaven. Many more of us would like to have the ability to question means and motives when necessary. This is one of those times! If you feel that by someone taking over running this place after being elected by residents instead of being hand-picked then many of us will be glad to help you pack.

The going forward implications of this is actually more interesting to me than the amount that the IRS claims that is owed to them from past interpretations of the law/tax code. Quite frankly the amount that is owed is unlikely to be enough on a per household basis (roughly $6,000) to make anyone really change their mind about living here. How, from whom or if that ever gets collected is an interesting discussion, but the forward-looking ramifications are more interesting to me.

First, I'm not sure I agree that the tax exempt versus taxable status of the bonds really has an impact on the selling price of the amenity. (Which is why I fail to see how the developer was the direct benefactor of the tax-free nature of the bonds.) If, for example, you want to buy a car, the seller of the car does not base his price on whether you have to pay 8% interest or 5%. Your negotiated price is based on the value of the car. However, if you are able to secure a 5% loan from a relative versus paying the going rate of 8%, it is you who will benefit - not the seller of the car.

Of course, our situation is a bit more complicated than this. In our case, the amenity fees were set based on the availability of low-rate tax-free bonds. If this changes in the future, it may be necessary to sell new houses with a higher amenity fee associated with them to pay the higher interest rate.

What happens to existing amenity fee contracts is a different issue. I haven't read the fine print of my agreement lately so I don't recall if there is a loophole which allows them to be raised higher than CPI (perhaps by a vote???) If not, I fear that the central CDDs will be forced to cut back on some of what they provide. Personally, I would rather pay an incremental increase in the amenity fee than to see services cut back.

I don't think we were "tricked" into the existing condition by the Federal Government. I think the Developer took advantage of the residents by stretching the limits of the laws, and left us holding the bag. As far as the federal government i.e. IRS going aftger conservative groups ( Morse ), the last time I looked the IRS investigation began under a conservative president. I believe the IRS had legitimate concerns, and frankly I agree with their conclusions. But realistically, we're past the blame stage. Our priorities now are to make sure we, the residents don't get stuck paying the bill, and to do what we can to make sure this doesn't happen again.

Using Madoff in the same sentence as Morse is beyond the pale. You should know better. Most of the folks here are satisfied with the way the Morses have run the Villages Amenity Program at a very affordable price with amenities available to all. We left another over 55 facility in another state built by Del Webb because residents were allowed to take over the facilities and let their various clubs run the operation and instead of fairness we had facilities which were monopolized by a vocal few who worked their way into the structure. Tennis and Pickle Ball teams took over the tennis and pickleball courts. Swimming clubs and lane swimmers block off half the pools, ETC ETC. If you were a snowbird you were out of luck using the amenities since you were not a member of the clubs and could not join because you were not present to participate all year long. This does not happen here because of the control the Morses have. It is the primary reason we, as snowbirds, bought here and it is in my estimation one of the key reasons why the Villages with a large snowbird population is so successful. Snowbirds did not have to sell their primary home to purchase here. I still own that home in another state and the value is about $100,000 less than it was in 2007. In contrast the value of my home here is about 10% higher, than it was when I bought it in 2007. Residents running the place is not a panacea for anything. In fact, it could make it a lot worse as a few power hungry (sound familiar?) folks get control.

In what way did we get taken advantage of? If the bonds were sold as taxable bonds, the interest rates would have been higher and the amenity fee to pay back those bonds would have had to have been higher. So, who was the benificiary of the deal? I would say that we the residents were by nature of lower amenity fees.