[NJblue]

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.

Yes, it is a simple example, but I don't know how real-world it is.

[NJblue]

Originally Posted by Advogado

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.

I would think the re-issuance of the bonds as taxable would not be a big deal and in fact may actually save money since prevailing interest rates are much lower now than when the bonds were issued. Does anyone know if these bonds were callable? I would assume that they are. If so, the bond holders would have no recourse to loss of future tax savings if the CDD just called them and then re-issued them as taxable bonds.

[Advogado]

Originally Posted by NJblue

I would think the re-issuance of the bonds as taxable would not be a big deal and in fact may actually save money since prevailing interest rates are much lower now than when the bonds were issued. Does anyone know if these bonds were callable? I would assume that they are. If so, the bond holders would have no recourse to loss of future tax savings if the CDD just called them and then re-issued them as taxable bonds.

You are right about the callable aspect. As indicated in my post, I have not been inclined to get into trying to come up with a cost number until we see what the proposed settlement terms are or determine that there is no settlement. You are also right that interest rates are low right now, but we don't know how long it will be, if ever, that substitute taxable bonds will be issued. Also, we don't know what effect all this will have on the credit rating of taxable bonds (and interest rates) issued by the Center Districts at some unknown time in the future. The most recent Tutt memo sure makes it sound as though the Districts are going to contine to fight for a long time.

Also, since the Developer faces potential liability to homeowners if this thing causes the amenity system to collapse, one solution would be for him finance the settlement-- perhaps by buying back the amenity facilities. Wouldn't that be ironic?

[nitehawk]

Originally Posted by nitehawk

So whats the big deal----issue more bonds to pay the ruling against the villages - and start all over again - let the residents buy them. call them kool aid coupon bonds

Originally Posted by Advogado

Why it's a big deal has already been explained numerous times in this thread, in the POA Bulletin, and in various newspaper (other than the Daily Sun) and magazine articles. It's nothing to joke about.

Originally Posted by NJblue

I would think the re-issuance of the bonds as taxable would not be a big deal and in fact may actually save money since prevailing interest rates are much lower now than when the bonds were issued. Does anyone know if these bonds were callable? I would assume that they are. If so, the bond holders would have no recourse to loss of future tax savings if the CDD just called them and then re-issued them as taxable bonds.

Originally Posted by Advogado

You are right about the callable aspect. As indicated in my post, I have not been inclined to get into trying to come up with a cost number until we see what the proposed settlement terms are or determine that there is no settlement. You are also right that interest rates are low right now, but we don't know how long it will be, if ever, that substitute taxable bonds will be issued. Also, we don't know what effect all this will have on the credit rating of taxable bonds (and interest rates) issued by the Center Districts at some unknown time in the future. The most recent Tutt memo sure makes it sound as though the Districts are going to contine to fight for a long time.

Also, since the Developer faces potential liability to homeowners if this thing causes the amenity system to collapse, one solution would be for him finance the settlement-- perhaps by buying back the amenity facilities. Wouldn't that be ironic?

I was not joking about issuing more bonds "Thank You" maybe the kool aid was a joke. advogado you seem to be very knowledgeable about this subject-- you first think is is a joke to re-issue bonds then think is may be a good idea ---- dont understand?

[NJblue]

No, we don't know what the future holds. However, the back-of-the-envelop analysis that EdV did as well as my own analysis tells me that this is not going to be a huge deal one way or the other. It's a shame that some people read threads like this and decide to hold off purchasing here thinking that this is going to financially ruin them. It's not. I'm quite confident that those who choose to wait it out will lose in the long run since the prices of houses will continue to climb.

[Bucco]

Originally Posted by NJblue

No, we don't know what the future holds. However, the back-of-the-envelop analysis that EdV did as well as my own analysis tells me that this is not going to be a huge deal one way or the other. It's a shame that some people read threads like this and decide to hold off purchasing here thinking that this is going to financially ruin them. It's not. I'm quite confident that those who choose to wait it out will lose in the long run since the prices of houses will continue to climb.

Good post. I concur with your comments, posted much the same early on in this thread, along with many others.

This has interest, needs to be paid attention to, but does not deserve all this hand wringing.

Many many more REAL issues to "worry" about.

Not pro or con developer...just think this is being made into something it is not nor ever will be.

Been here 13 years and lived through a number of "sky is falling" issues

[Advogado]

Originally Posted by nitehawk

I was not joking about issuing more bonds "Thank You" maybe the kool aid was a joke. advogado you seem to be very knowledgeable about this subject-- you first think is is a joke to re-issue bonds then think is may be a good idea ---- dont understand?

You are, of course, right when you indicate that there is a good possibility that taxable bonds will need to be issued to repurchase the existing bonds. I guess the tone of my response to your earlier post was provoked by the intro to your post, which started out asking, "What's the big deal".

I've spent a lot of time thinking about this whole issue and believe that any plan to reissue bonds is not going to be simple. However, we don't know if and when that is going to happen. The last official word we have on all this is the recent Tutt memo, which indicates that the Center District is going to fight on--continuing to spend our amenity fees on its attorneys to defend a financing plan designed to inflate the Developer's profits. Not exactly what we thought we would be paying our monthly fees for. However, thus far, our amenities seem to be continuing at about the same level, so at this point, we can't complain too much.

Sorry if you and I got off on the wrong foot.

[Challenger]

If taxable bonds had been issues at the outset, at some higher rate of interest, say 1%,I would estimate that the District would have already paid more than $2,000,000 more in interest to bondholders. These additional costs would have to come from District funds, ie residents. Is it possible that the origional decision was made in an effort to provide the lowest possible cost structure for the interest payors(residents)?

[EdV]

Yesterday I threw some numbers up in an attempt to get a rough handle on the true cost of the IRS case against the VCCDD. But I wasn’t including an estimated true cost of calling all of the outstanding tax-free bonds and re-issuing them as taxable bonds. That amount could be anybody’s guess.

But there’s another option available. The developer and his two special CDDs could agree that in addition to paying the back taxes from 2009 with interest, they could agree to pay the IRS the taxes that would be due on the interest paid to the bondholders each year. This solution has the additional benefit of spreading the payments out over the next twenty years and avoids the complicated and messy task of recalling and reissuing all those bonds.

I of course cannot predict whether this will be a viable solution to all parties, but I can run the numbers to come up with a rough figure for the total cost.

So in the attached spreadsheet I’ve made the following assumptions:

I’ve included bond payment data from both districts.
A tax rate for the prior years (2009-2012) of 20% negotiated down from the 29% the IRS traditionally proposes.
A tax rate of 18% for the remaining years of the outstanding bonds.

What I come up with is an initial settlement of around $11 million paid to the IRS on acceptance of the agreement and then an additional $29 million paid to the IRS over the next twenty years or so.

Pure speculation no doubt, but at least something to think about.

[EdV]

....

[Parker]

The sky is falling? I hadn't noticed.

[mickey100]

i don't think anyone has a good idea of what will happen. Its all conjecture and wishful thinking. A few years ago a group of posters was "confident" that the IRS inquiry would come to nothing, and that they would never rule against Morse and The Villages. I think it is foolishness to act as though we have a crystal ball and can predict the future.

[graciegirl]

I do not understand the animosity against the developer. You hear ONLY from some posters when it is time to rant against the Morses. WHY?

I am VERY skeptical about anyone who doesn't keep an open mind about what appears to be an issue that will be debated for years before a final settlement comes and I cannot see why anyone would continue living in this place if they think the Morses are a bunch of rich, greedy, people without a conscience who jump at any opportunity to take from us.

The IRS feels that money is owed them. The other side feel it is not. It isn't like they didn't pay their income tax for pete's sake.

It is an issue of some rarity that has to do with whether the municipal bonds issued by a CDD have taxable interest.

Most of us go to an accountant to help us with our income taxes and make sure we get all the breaks coming to us. I see it as the same type of issue.

I have never met anyone before moving here that just decided to hate someone based on their financial success. That is like hating someone because they are poor. Classes were left behind in the countries that our forefathers left and we live here in the great country where we are supposed to be respecting people of all walks of life and economic conditions.

People can post a lot of things saying one thing and meaning another but when hatred rears it's ugly head you can read between the lines.

Maybe the Morses are a bunch of low lives and they are sitting there in their homes giggling about all of the money they have made off us, but what if they are decent people? WHO KNOWS?????

I see good in this family because of what they have created and how they maintain it and what is offered to us seniors over a pretty wide economic range.

I think it is foolishness that we have a crystal ball and can predict the future....too.

[EdV]

Originally Posted by mickey100

Class action lawsuit against the Developer seems likely should The Villages be required to pay.

Originally Posted by mickey100

.... I think it is foolishness to act as though we have a crystal ball and can predict the future.

...

[mickey100]

I think there are very few people that Hate the Morses because the are financially successful. I do think many people question their ethics however based on their previous history such as the need to file a class action lawsuit for the residents to obtain what was rightfully theirs.