[Advogado]

Originally Posted by Bogie Shooter

Wouldn't the meeting just be a rehash of all the Opinions posted on TOTV? Ideas are nothing more than just opinions.

Several of the POA leaders were plaintiffs in the successful class action lawsuit against the Developer and are exceptionally well informed about what's going on in regard to the IRS lawsuit. Their opinions are worth listening to.

[Bogie Shooter]

Originally Posted by Advogado

Several of the POA leaders were plaintiffs in the successful class action lawsuit against the Developer and are exceptionally well informed about what's going on in regard to the IRS lawsuit. Their opinions are worth listening to.

I assume if there is anything new (factually) the POA would share it in the monthly bulletin.

[villagerjack]

Originally Posted by EdV

I decided to do a little exercise to get an approximate value of the penalty that might be involved if the VCCDD decides to negotiate a settlement with the IRS.

The press loves to throw the 355 million dollar figure around because it turns head and sells newspapers. But the truth is that the IRS is only staking a claim on the taxes that should have been paid on the interest by the bondholders if the bonds had been issued as taxable municipal bonds.

Keep in mind that these are very rough estimates for discussion purposes (see the attached images). So I looked up the budgets that have been posted for the VCCDD in the current and recent years and with some extrapolation was able to construct a table of values representing the interest paid by the VCCDD starting back in 2003 and continuing through 2012.

Next I computed the tax based on a 29% tax rate. That is rate purported to be the rate that the IRS uses in settlement discussions as reported on page 12 of this document. And finally I added in the interest rate that the IRS used during those years. This yielded the sum total of 43 million dollars in uncollected taxes with interest.

However, if the VCCDD were to refuse to negotiate a settlement and the IRS were forced to go after the bondholders, the statute of limitations limits them to going back only 3 years prior to the year they notify the taxpayer of the deficiencies. So I recomputed the values based on that and come up with a new figure of around 13 million dollars owed to the IRS.

So if a negotiated settlement is reached, I’m guessing it will be in the 10-12 million dollar range.

Now this does not include the actual cost to the VCCDD for buying back the outstanding bonds at their present value and issuing new taxable Muni bonds. But keep in mind that the VCCDD has already paid off over fifty million of those bonds in principal payments to date.

Originally Posted by rubicon

The core issue here is the viability of the IRS claim regarding the poltical status of the district as qualifying for tax-exempt status and what each of the respective parties have a financial interest will do.

As to the actual transactions one should look to the Notice of Proposed Issue because it explains how and why the IRS came to their conclusions. what Iam leading up to is if in fact residents are left with this mess an obvious class action is going to take place. If that happens then it is going to be encumbent on the residents to argue that point because if the assets were over valued then the district purchased more in bonds needed to cover the sale.

My response to glowing praise of the Developer since 2006 have been consistent. I understand business but in doing my due deligence since moving here a common theme in the Developer's methods of operating left me uneasy. I do not want to be right here. I mention this only as a caveat because I am still seeing some well meaning people continuing these glowing praises. To my way of thinking residents need to shift their thinking to one of self preservation.

Most of us paid for a house, land that it rests on and a bond for the initial infrastructure. We pay monthly amenity fees, taxes and other fees. We may be asked to pay taxes and penalities for a bond issue that according to the IRS finding wasn't even in control by the District which is suppose to protect us and hansomely benefited the Developer.

On that add the fact that it now brings into question the remaining financing method of completing the build out.

No one knows the outcomes nor the amounts involved what we do know is that those people (person) in charge has left us all with a stomach ache

I believe the POA needs to establish a series of meetings so that residents can gaher and exchanged ideas...Perhaps someone close to POA officials can make that suggest.

How about doing a "little exercise" on the value of homes in the Villages over the last Downturn and compare them with the value of homes during the downturn with other similar developments, say like Stonecrest or Del Webb for example.

I still own a home in a Del Webb project in South Carolina. The value of that home is about $100,000 less than it was in 2007. In fact it was listed originally with a realtor (his value) for $365,000 and now I am lucky if i can get $240,000 or less for this 2040 s/f home with a wooded view close to all amenities. The value of my home in The Villages would list for $335,000 for a Golf Course CYV with just 1600 s/f. I paid just over $300,000 for that home. THAT is attributed to the way the Morses run things here. The trouble with some of these so called analyses is that they analyze everything, concentration on what they perceive to be negative issues. Even if had to pay a penalty, I am still way ahead of the game

[villagerjack]

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[manaboutown]

This seems to explain it pretty well. Although I just ran across it most of you have probably seen it since it is a couple of days old.

IRS rule ending some Villages tax-free bonds won't affect all CDDs - OrlandoSentinel.com

an excerpt:

"Consider, for example, that the Village Center District in 1998 paid the family of developer H. Gary Morse $31 million for items that the Sumter County property appraiser valued at $1.1 million. They included retention ponds, a nine-hole golf course, an RV parking lot, a pool, a tennis court and a guardhouse.

What is the "wholly public purpose" in buying those items? Those are things the residents already paid for in the price of their house, and they're not necessary infrastructure, such as a road or wastewater plant. The ownership and maintenance of the things bought by the bonds should have been simply transferred to the CDD where they are situated, along with the right to collect the amenity fees to cover the expenses.

Instead, the residents paid ridiculously inflated prices for their golf courses and pools a second time, and then, because of the interest on the bonds, they paid thrice."

[villagerjack]

Originally Posted by NJblue

If you take a step back, you will see that parks, swimming pools, bridges, etc. in a city are no different than such things in a CDD like TV. The developer in both scenarios is very much a for-profit institution. Likewise those who benefit from the projects are the general public - residents of a city/county on one hand or residents of TV on the other. And, the owners of these "amenities", the city/municipality and the CDD are both not for profit entities.

Why should the residents of a municipality be able to 1) have low taxes because their "amenities" are paid for in tax-free bonds and 2) further benefit from this by being able to deduct the property taxes that are used to pay for these "amenities"? As you will note, city residents get a two-fold tax advantage for their amenities whereas people in a CDD like TV only benefit from the lower interest rates of tax-free bonds (we can't deduct our amenity fees). And now the IRS wants to take even that one single benefit away from us.

There seems to be a lot of foaming at the mouth about Morse doing something "shady" when it is we who are the primary beneficiaries. I think that the wrath should be directed at the IRS who wants to punish those of us who live in a CDD while those who have their amenities provided by a city/county get a double tax benefit.

Thank you. You could not be more right. All through the downturn the Villages was selling 150-200 homes a month. While values declined somewhat they did not decline as much as similar developments and that is attributed to the Morses and they way then run things. See my other reply about my home in a Sun City Development.

[NJblue]

Originally Posted by iaudit

I think the problem with negotiating a settlement on the previous purchases is that it would impact all future purchases. As I mentioned in a previous post, most of the amenities south of both 466 and 466A have not been purchased by the central districts. If they have to purchase these facilities with taxable bonds that carry a higher interest rate, it could significantly impact the amount that the developer will receive for these facilities.

In reviewing your figures in the first table, the principal amount does not agree with the total bonds issued which is $426 million, not $50 million. I don't know why the budgets would have the principal and interest for these bonds, they were purchased by outside interests, not the central districts.

What makes you think that the price that the developer will get for these amenities will be dictated by the tax status of the bonds used to pay for them? When you buy a car, does the car dealer ask you how much your financing will cost before he tells you how much he will sell the car to you for? While this may be part of the sale-price equation for Morse, it certainly doesn't have to be.

[NJblue]

Originally Posted by rubicon

We may be asked to pay taxes and penalities for a bond issue that according to the IRS finding wasn't even in control by the District which is suppose to protect us and hansomely benefited the Developer.
.

Why do you think it was the developer who benefitted from tax free nature of the bonds? I suggest that you look at the CDD budget line item associated with interest on debt repayment and then increase that amount by 30 percent or so to reflect taxable bond interest rates. Then look to see how the result gets covered by our amenity payments. Which other line item expense of the CDD would you have reduced to pay for the additional interest fees? Or, how much additional in amenity fees do you want to pay to cover the shortfall? It is WE who have benefitted handsomely because of the tax free nature of the bonds.

[EdV]

Originally Posted by villagerjack

Google it.

Why should I Google it when you're the one making the claim about this situation being in the news 10 years ago. How about providing a reference link like I usually do to support your statements.

[rubicon]

Originally Posted by Bogie Shooter

Wouldn't the meeting just be a rehash of all the Opinions posted on TOTV? Ideas are nothing more than just opinions.

Bogie Shooter I envision meetings with a written agenda setting out the facts, definitions, parties involved and in what manner, applicable laws/rules regarding this issue, limitations, plans goals etc. so everyone is on the same page. The meeting will need a strong gatekeeper to ensure we are getting objective and factual dialogue and not just belly aching. People coming together will grow closer with one another because we all have a common goal ( we are all stakeholders) and once people meet in most instances frienships/understanding will be found but mostly the collective commitment to a just cause. Also the people attending will not on ly be TOTV people but other residents also

[villagerjack]

Originally Posted by manaboutown

This seems to explain it pretty well. Although I just ran across it most of you have probably seen it since it is a couple of days old.

IRS rule ending some Villages tax-free bonds won't affect all CDDs - OrlandoSentinel.com

an excerpt:

"Consider, for example, that the Village Center District in 1998 paid the family of developer H. Gary Morse $31 million for items that the Sumter County property appraiser valued at $1.1 million. They included retention ponds, a nine-hole golf course, an RV parking lot, a pool, a tennis court and a guardhouse.

What is the "wholly public purpose" in buying those items? Those are things the residents already paid for in the price of their house, and they're not necessary infrastructure, such as a road or wastewater plant. The ownership and maintenance of the things bought by the bonds should have been simply transferred to the CDD where they are situated, along with the right to collect the amenity fees to cover the expenses.

Instead, the residents paid ridiculously inflated prices for their golf courses and pools a second time, and then, because of the interest on the bonds, they paid thrice."

Wow a million sure buys a lot in this part of the country? Land to build a golf course, a golf course, tennis court, pools, a guardhouse and who knows what else, all for a million. I'll take two.

Using her logic if you buy land for a home, build a home on in and then take out a mortgage and pay interest on it your are paying thrice. hey if you add appliances you may be paying four times . She probably lives in a condo with that kind of an astute analysis. She really has no clue.

[iaudit]

Originally Posted by NJblue

What makes you think that the price that the developer will get for these amenities will be dictated by the tax status of the bonds used to pay for them? When you buy a car, does the car dealer ask you how much your financing will cost before he tells you how much he will sell the car to you for? While this may be part of the sale-price equation for Morse, it certainly doesn't have to be.

Simple example. Let's say there is $100 collected in amenity fees. Current principal and interest for tax free bonds is $50. $50 is left to maintain amenities. If higher interest taxable bonds are issued and the principal and interest is now $55, that leaves only $45 to maintain amenities.

In the second scenario, a prudent buyer of the amenities (Central District) would reduce the amount paid for amenity facilities so that the principal and interest payment would remain at $50, leaving the remaining $50 to maintain the amenities at their current level.

[villagerjack]

Originally Posted by iaudit

Simple example. Let's say there is $100 collected in amenity fees. Current principal and interest for tax free bonds is $50. $50 is left to maintain amenities. If higher interest taxable bonds are issued and the principal and interest is now $55, that leaves only $45 to maintain amenities.

In the second scenario, a prudent buyer of the amenities (Central District) would reduce the amount paid for amenity facilities so that the principal and interest payment would remain at $50, leaving the remaining $50 to maintain the amenities at their current level.

When you get free unlimited access to 32 golf courses, 100 pickle ball courts 90 tennis courts 65 swimming pools a multitude of rec centers in a safe community where home values were relatively stable during a downturn and are rising now with some of the nicest folks in the world for $145 a month I would say that is a fair deal. If you feel it us not a fair deal, someone will step up to buy your place. Your home is worth a lot more than other places because of these amenities so even if there was a settlement and amenity fees were raised, we are still way ahead of the game. I gave you previous examples of home values in other areas which no one wants to touch.

[rubicon]

Hi guys up to now you all have had informative and helpful post and now the testerone seems to be taking hold and is counter-productive. Save the aggression for the basketball court...we are all friends here with a commom goal

[Advogado]

Originally Posted by EdV

I decided to do a little exercise to get an approximate value of the penalty that might be involved if the VCCDD decides to negotiate a settlement with the IRS.

The press loves to throw the 355 million dollar figure around because it turns head and sells newspapers. But the truth is that the IRS is only staking a claim on the taxes that should have been paid on the interest by the bondholders if the bonds had been issued as taxable municipal bonds.

Keep in mind that these are very rough estimates for discussion purposes (see the attached images). So I looked up the budgets that have been posted for the VCCDD in the current and recent years and with some extrapolation was able to construct a table of values representing the interest paid by the VCCDD starting back in 2003 and continuing through 2012.

Next I computed the tax based on a 29% tax rate. That is rate purported to be the rate that the IRS uses in settlement discussions as reported on page 12 of this document. And finally I added in the interest rate that the IRS used during those years. This yielded the sum total of 43 million dollars in uncollected taxes with interest.

However, if the VCCDD were to refuse to negotiate a settlement and the IRS were forced to go after the bondholders, the statute of limitations limits them to going back only 3 years prior to the year they notify the taxpayer of the deficiencies. So I recomputed the values based on that and come up with a new figure of around 13 million dollars owed to the IRS.

So if a negotiated settlement is reached, I�m guessing it will be in the 10-12 million dollar range.

Now this does not include the actual cost to the VCCDD for buying back the outstanding bonds at their present value and issuing new taxable Muni bonds. But keep in mind that the VCCDD has already paid off over fifty million of those bonds in principal payments to date.

While I appreciate your effort and will not attempt to come up with a better number, I am afraid that your number may turn out to be way too low. As you point out in your last paragraph, you are ignoring what may be the biggest cost in any settlement. Furthermore, you are only looking backward. What about the taxes that the bondholders will be liable for in all future years? The Center Districts covenanted to maintain the tax-free status of the bonds for the life of the bonds. Will the IRS say to the Center Districts that the only way for the Center Districts to do so is to pay all the future taxes? What kind of damages will bondholders claim for their loss of tax-free income? How do the Center Districts deal with bondholders who disagree with the Center Districts' terms in a buy back offer? It is complicated and uncertain and in the hands of the IRS and the Center Districts.

I could go on, but my point is that I think that neither you nor I can come up with a meaningful cost estimate at this point-- unless we make certain assumptions that may turn out to be wrong. I think that we just have to wait and see how things play out and what kind of a settlement, if any, the parties work out.