"The warranty of tax exemption is standard and is intended to put the cost on the issuer in exactly this kind of situation. That is how the system works."

Is this carved in stone? If so, Where? The bonds WERE tax exempt when issued. How could anyone guarantee tax exemption forever if it was still an IRS open item? If this is thecase then the M/V of these bonds wouldnot have dropped after this latest pronouncement. Do you know if it did ?

so is it time to sell .....?:loco:

Not at all. At least not because of this ruling by the IRS.

NO It is not time to sell it is time to buy. This issue is going to get straightened out. As to the bonds there may well be a question of material misrepresentation which is going to take everyone back to a review and debate concerning the application.

Now a days it is not wise to give people the benefit of the doubt because unlike bygone days people's attitudes have changed and there are far too many characters whose reputations are in dispute.

However, let me advance an argument in favor of the Developer. While CDD are new The Villages appears to be the largest of its kind. And so it would seem that during the incubator period (until the build out) it is important for the Developer with sway over the project and counties stay involved to keep it all going forward. Perhaps if the Developer moved away too quickly the project would have faltered?

Folks keep debating the valuation formula utilized in the transaction between the Developer and District. TheNotice of Proposed Issue dated January 2009 addressed that issue in quite a bit of detail. Suffice is to say the newspaper accounts etc reported the IRS was not impressed.

Bottom ine for me is that it appears this controversey is moving forward and the sooner it is resolved the better for all of us.

Jack, with all due respect you’re missing the point.

Do you realize that as we speak right now, you yourself could be one of those bondholders that you claim should be “his loss”?

Seriously. Have you ever invested in a mutual fund, be it a stock fund or a bond fund. Did you ever scrutinize the purchases and sales that the fund made while you held stock in that fund or did you just keep an eye on the total return on your investment?

Anyone that invested in a Municipal Bond Fund (usually a tax free one but not always) over the past 10 years or so is a potential current or previous bondholder of VCCDD Tax Free Bonds.

Am I making sense or are you still unsure of what I’m trying to tell you?

Think of the warranty on your car. It is intended to protect you, the buyer, if anything goes wrong with the car. If a wheel falls off during the warranty period, it doesn't matter if the manufacturer put the wheel on in good faith. When he gave you the warranty, he assumed responsibility if anything went wrong with the car. Same principle here.

Frankly, as a Villager, I would rather see the bond holders, as opposed to the Center Districts, take the ultimate hit, but, whatever you may think, it just simply is not going to happen-- although the bond holders may take a loss for reasons I am not going to get into.

By the way, although I have not followed the price of the relevant bonds, of course it dropped. The bond holders may have some difficulty in getting paid and also some tax problems as a result of the latest IRS ruling.

I have owned since 2007 and had 6 great years enjoying the amenities at a reasonable cost, provided by the Developer who got rich on this very unique place. There are some who think he got too rich but in the end I am paying a very affordable price unlike anywhere else. If I had listened to all the attackers ( who are still here BTW) I would have missed out on six glorious years. I hope he makes another billion and buys more yachts and jets or spends it anyway he chooses. I will not make my life decisions based on nine year old newspaper articles by reporters who have very limited knowledge if what they are talking about. If you would not give these reporters your investment portfolio to handle, why trust them with anything else, especially where you are going to spend your retirement days?

I am not selling. I like it here.

However, it is time for all of us to get involved in civic affairs, supporting the POA and attending district governmental meetings come to mind. In regard to this IRS issue, we should be staying informed and trying to watch developments so that no resolution of the matter is cooked up that prejudices the residents to the benefit of the Developer.

It's awful easy to lulled into thinking that we live it in fantasy world, removed from real world issues. I admit that that has happened to me, and I really have not been following a lot of local political issues as closely as I might have in my pre-Villages days. Maybe this IRS issue is a wake-up call.

The Morse family has made and continues to make a ton of cash out of TV. Granted, if they have to pay back taxes, it will hurt the bottom line. However, if they do anything to diminish their investment into the lifestyle here, they open themselves up to litigation hell as home buyers will be inundated with attorney offers...some possibly class action. This will add to their loss on the IRS ruling. Don't fret....they are smart and will challenge the IRS ruling in court and if they lose, they will accept the loss. Unless their greed defies logic and they want to take on 120,000 lawsuits.

At this point in time, the developer has not spent any money to defend this issue with the IRS. The lawyer fees are being paid by the Central District CDD's which receive their funding from the homeowners' amenity fees. Therefore, it is the village homeowners who are paying for all costs involved in defending this issue.

What is the support of that statement?

It's all going to work our just fine. These are just the opening shots of what I think will be a protracted legal battle. Don't get your undies in a bundle.

"Do you realize that as we speak right now, you yourself could be one of those bondholders that you claim should be “his loss”?"

I really do not see that happening.

"Seriously. Have you ever invested in a mutual fund, be it a stock fund or a bond fund. Did you ever scrutinize the purchases and sales that the fund made while you held stock in that fund or did you just keep an eye on the total return on your investment?"

I invest plenty. Whats your point?

"Anyone that invested in a Municipal Bond Fund (usually a tax free one but not always) over the past 10 years or so is a potential current or previous bondholder of VCCDD Tax Free Bonds."

Your point?

"Am I making sense or are you still unsure of what I’m trying to tell you?

You mean.....When did i stop beating my wife.?

I agree. However, If they were going to settle, now would be a good time to do it since long term interest rates are very low however, they are not dealing with a weak person in Morse and the IRS is not exactly in favor these days.

Looks like the market, the ultimate arbiter, does not buy into your thesis and if you do, now is the time for you to buy these bonds and make a bundle.:$::$:

Was This A Legally Required Disclosure?
 

Bloomberg Articles

Billionaire Morse

IRS questions bonds from GOP donor development - Businessweek

After closing in November 2011 it was some time before I heard anything about the on going IRS problems.

I am wondering if this un-resolved IRS issue was not required to be disclosed to all prospective buyers before their closings, in fact I am pretty certain it was required?

Florida’s Required Real Estate Disclosures
Florida business and real estate attorneys Roddy Lanigan and Eric Lanigan have represented buyers, sellers, developers, appraisers and contractors in residential and commercial litigation.

There are an increasing number of mandatory disclosure obligations placed on those who sell Florida real estate and it’s hard to keep up with all the new requirements.

Here are a summary of disclosures required for Florida residential transactions units. Many of the following disclosures are required on commercial transactions. Local residential disclosures may exist so it is always prudent to inquire about such requirements before escrow closes.

The Top Real Estate Claim

The No. 1 claim on Errors & Omissions Insurance is “failure to disclose” an item that a buyer felt was material. There are some general guidelines to help protect against non-disclosure liability lawsuits. Part of this is ensuring that all real estate documents are reviewed by an attorney before signature. A key factor is to ensure that all disclosures are in writing and which have acknowledgment signatures.

Disclosures That Are Required

TDS (Transfer Disclosure Statement)
This law requires sellers to give prospective buyers a written disclosure statement of items including possible easements, neighborhood issues, appliances, structural defects, modifications, and other material defects that may affect the principal’s decision in a transaction.

I understand car and dishwasher warrantees but where is this warranty on the bonds?

"By the way, although I have not followed the price of the relevant bonds, of course it dropped. The bond holders may have some difficulty in getting paid and also some tax problems as a result of the latest IRS ruling."

Please enlighten me. I believe it s your position that the CDD bonds have a "WARRANTY". Although I never heard of a Warranty on Bonds, if these bonds have said Warranty then why should the price of the bonds drop? Can you give a link to the Warranty? Thanks

If you really want to get into it, here you go. Let me caution you, it would have been simpler to take my word for it:

Municipal Securities Rulemaking Board::EMMA

I'm not going to walk you through it, but you can find everything you could want to know here about the various relevant bond issues here. Have fun.

I thought so. A warranty, in all likelihood, does not exist. If it did, the price of the bonds would not have dropped when the ruling came out. Seems like when you guys are asked a specific question that challenges your view, it is never answered. Take your word? No thanks. Bondholders of CDD bonds are no different than other investors and should do their own due diligence. IMO they will shoulder any losses, as they should in the event this adverse ruling is held up in appeals. IMO it is too far reaching and will affect too many CDD,s and investors.

Why the hostility? I didn't just say "take my word", I told you how you could verify my word. I merely cautioned that doing so would take a bit of work on your part. Did you click on the link I gave you and read the Official Statements? Although I said I wouldn't walk you through it, I will give you some help:

"The District has covenanted in the Indenture to comply with all provisions of the Code necessary, among other things, to maintain the exclusion from gross income of interest of the Series 1999 Bonds for purposes of federal income taxation." Direct quote form the Official Statement for the 5/1/96 Rec. Rev. 1996A bonds issued by the Villages Center District. Please check it.

Also, a common sense test regarding the question of liability: If the Center Districts were not going to end up holding the bag if the IRS prevails, why do you think that they are spending hundreds of thousands of dollars in attorneys' fees fighting the IRS?

Your link produced a blank slate.

The District can only comply with provisions existing at the time of issuance which it s suggested, they did comply. The IRS being what they are, changed the game.

There are nearly 580 CDDs operating in Florida alone that have been relying on the assumption that they are political subdivisions that can issue tax-exemot bonds. The decision also threatens the tax-exempt status of bonds issued by thousands of organizations with similar structures around the country.

“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.”

Why wouldn't the District defend itself against a dishonest IRS that admittedly unfairly targets specific individuals and organizations for nefarious reasons?

You can blame the IRS for being a bad guy, or you can blame the Developer for pushing the limits of the law beyond what other CDD's in the state have done."We believe that an entity that is organized and operated in a manner intended to perpetuate private control, and to avoid indefinitely responsibility to a public electorate, cannot be a political subdivision of a State," according to the memorandum from the IRS Tax Exempt Bonds division. The bottom line is, The Villages was warned previously yet continued on the path of issuing the bonds in a manner that obviously doesn't meet the definition of a political subdivision. At this point, no one can predict the affect the publicity will have on property values, or where the money will come from if the district is forced to pay. There is no question that it has a potential negative impact on the residents if our amenity fees have to be re-directed to pay the back taxes. The Orlando Sentinel is running another article Wednesday which is supposed to look at potential impacts.

Support the POA
 

For $10 a year you can join the POA. They are the only group looking out for the Homeowners. It is the best thing we can do at this time. "Strenght in Numbers".:bigbow:

How many times has it been stated by people who know that our amentity fees will not be affected? The publicity ain't good for sure. AND some posters just seem to enjoy the heck outa anything that makes us look bad. What is that all about??????????????????????????

For some strange reason the Orlando Sentinel has always had a bad attitude toward anything The Villages has ever done. I haven't read any good press from any of its "editorial" writers. The IRS isn't looking too good these days sweetie and if we all had to pony up, someone figured it would be about six grand and change apiece. Back at the beginning of this INVESTIGATION, if I remember correctly, the fee was much smaller and the Morses didn't pay it but chose to bet that the CDD form of governance was a viable entity. I do believe that those who think they THE Morses are wise and those who think they are smarmy AND stupid will never agree.

I will wait and see. I don't know the Morses, does anyone? Ten years ago they weren't rolling in dough. Today they are. Doesn't bother me, but it sure bothers a lot of people. Class envy is rampant in these postings.

If this place became governed by a "public electorate" we would have Ocala. Not bad, certainly not bad, but The Villages it is not.

I shouldn't have called anyone sweetie, but Sweetie himself. I think that was snarky.

Folks shouldn't spread rumors that the Morses bought us our house or give us anything or that I shill for the developer. That is worse than mean.

I agree. Rampant on this board are class envy and enjoying scaring people with rumors.

First, my link did not produce a blank slate. It gave you a method of getting to the official statements for all the bonds in question. Here it is again: Municipal Securities Rulemaking Board::EMMA
Simply go there and plug in the CUSIP of whichever of the bonds you are interested in in the upper right hand corner of the screen (the search window) and start reading.

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?

This being said, I reiterate that I am hoping that the Center Districts can find some way to avoid liability here-- which would be good for the Villagers. Again, the Villagers' dog in this fight is a desire that all of this not impact the continuation of the amenity system, which is owned and operated by the Center Districts. I am sure that this view is also that of the other posters who have been pointing out that we have an issue here that could impact all of us and I cannot fathom the reason for the hostility that some of you have expressed toward us.

Furthermore, while I hate to defend the IRS, there is not a shred of evidence to indicate that it is unfairly targeting the Developer here. The investigation was begun under the Bush administration.

I would appreciate it if you could address facts and not attack the other posters. Your approach does not lead to an intelligent discussion of the issues.

To answer your factual points:
Of course our amenity fees will not be affected. That is part of the problem. The amenity fees are capped by the CPI and seem to get raised to the max every year anyway. The central question is, once again: If the Center Districts get hit with huge costs here, where will the money come from to continue the amenity system? It has to come from somewhere. Do you have a answer?

It doesn't matter here if the Morses are wise or swarmy. That is not the point at all.

The Orlando Sentinel has gotten some of its facts wrong in its reporting, but at least it is reporting-- which the Daily Sun has not been.

The fact that The Villages is, in general, efficiently run is true but irrelevant to the central question.

Newer Amenity Facilities
 

The other thing that has not been mentioned is that there has not been a transfer of ownership of amenity facilities since 2004, almost ten years. Essentially, most of the amenity facilities south of Rt. 466 are still in the hands of the developers. Depending on the final disposition of this issue, the purchase price of these facilities by the Central Districts will be significantly impacted.

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.”