[perrjojo]

Everyone here seems to have an "opinion" and it is just that, an opinion. In my "opinion", I know that I can not just go out and sell bonds. Someone has to approve the sale of these bonds and the bonds must comply with rules and regulations. Who approved and endorsed the sale of these bonds? If I buy that bond and the interest is tax free, that is a good deal for me. So...if the IRS decides these bonds are not tax free; do I, as owner of theses bonds now owe tax on these bonds. It would seem to me that if indeed the bonds are not "legal", who is responsible for the sale of the bonds to the public? I think the issue is FAR more complicated than whether Gary Morse was pulling a fast one. There are far more unanswered questions.

[rubicon]

Originally Posted by TexaninVA

I respectfully disagree with the notion that our immediate and best course of action is to “sue the Developer.” Mistakes and various other Developer imperfections notwithstanding, our community would never have grown into what it has without the leadership and vision of Gary Morse. It seems to me the best way forward is, with respect to the IRS issue, for the residents’ and Developer’s interests to be aligned where possible. At least give that a chance before suing him. The IRS ruling, while unwelcome news, is also not unexpected given the bureaucratic proclivities of our beloved tax collection agency.
In any event, the Developer still has a very large stake in the success of his commercial ventures. Likewise, we (the residents) have a large stake in preserving our lifestyle and home values. Why start fighting with each other? The common opponent here is the IRS.
Thus, I am trying to put myself in the Developer’s shoes, and ask what I would do? I don’t know much about Gary Morse except that he’s in his mid-70s, is a gifted businessman / leader, and worth a billion or more. Good for him … American Dream etc. I also have to think that he has a certain level of pride and attachment to his creation.. ie TV. He spent his whole adult life building this place. My instinct, were I he, would be to contest the issue, minimize the $$ damage, and find a way to keep the community going. OTOH, if I’m mid-70s, have all the money I’d ever need and the residents of what I created immediately ganged up to “sue me” and in general, be unpleasant about it, I think I could find myself saying “to heck with it” and set a course to Barbados aboard the yacht Cracker Bay.

TexaninVA: I appreciate, respect and understand your rationale.

Let me first point out that what I said was (apparently not clearly) that an attorney should have or must be hired to follow this case and explore our options. Secondly, my personal view is that the Developer could care less about anyone or anything other than his financial interests and quite honestly I find no fault with that since this is all about business. Everything he has done and the manner in which he accomplished it tells me that is the case. Third the Developer is way ahead of all of us on the IRS thing and if he had any intentions of hiding assests, etc it is already done or in the making to do so.

If one recalls the Amenity Lawsuit filed by the POA was the only way to get the Developers's attention.

The reasons are unimportant but I abhor lawsuits and it is the last thing that I would want to do. However in my personal opinion our derrieres are up against the wall.

So far all that has been done hasn't exactly addressed the residents exposure and interests and since the residents were not a party to these agreements it seems we have been placed in a very bad situation. If the IRS decisions stands and if the Developer doesn't step up ( an unlikely happening) then one of two things will occur. We will either have to raise amenities to pay the tax bill or drastically reduce services.

While one viable option in the decision model is to do nothing I personally believe we need to begin gathering facts and potential scenarios to protect our interests.

[johndamelio]

Rubicon.......well put !

[bmarlo767]

Originally Posted by janmcn

Everybody talks about what a genius Gary Morse is for creating such a wonderful development. Did it not ever occur to him over the past decade or more that what he was doing was not legal in the eyes of the IRS? How did he reconcile this in his mind?

It seems that this is economics 101, that you can't use tax-free bonds in a profit making enterprise.

The reason to issue tax free bonds is so Someone can make money.

[mickey100]

Originally Posted by Advogado

I think you may not be clear on the fact that the bonds under IRS examination are not the infrastructure bonds attached to our houses. The bonds under examination were all issued by the Center Districts. The Center Districts used the proceeds of most of the bonds to pay the Developer (at what the IRS alleges were artificially inflated prices) for the amenity facilities.

Therefore, contrary to your post, Villagers cannot be directly assessed for the costs involved here. This is because the Center Districts can only tax within their boundaries, which do not include residents and cannot raise the amenity fees in excess of the CPI. Instead, the risk to Villagers is that IF the IRS investigation results in the Center Districts incurring huge costs, the Center Districts may not be financially able to continue to furnish the amenities to us. For a more detailed explanation, go to the POA website: http://poa4us.org/bulletins_files/bulletin200908.pdf


For accurate information, forget most of what you read in the Daily Sun and VHA Bulletin and look to either the POA Bulletin or to publications outside The Villages.

A final point regarding the concern expressed by some posters that the IRS actions here are politically motivated-- because of the Developer's large donations to the Republican party: The IRS investigation was begun under the Bush administration-- which, while it indicates nonpartisanship, is an indication of how long the investigation has dragged on.

While my above explanation is a simplified one, I hope it clarifies a little bit this complicated situation.

Thank you... nice summary.

[mickey100]

Originally Posted by rubicon

TexaninVA: I appreciate, respect and understand your rationale.

Let me first point out that what I said was (apparently not clearly) that an attorney should have or must be hired to follow this case and explore our options. Secondly, my personal view is that the Developer could care less about anyone or anything other than his financial interests and quite honestly I find no fault with that since this is all about business. Everything he has done and the manner in which he accomplished it tells me that is the case. Third the Developer is way ahead of all of us on the IRS thing and if he had any intentions of hiding assests, etc it is already done or in the making to do so.

If one recalls the Amenity Lawsuit filed by the POA was the only way to get the Developers's attention.

The reasons are unimportant but I abhor lawsuits and it is the last thing that I would want to do. However in my personal opinion our derrieres are up against the wall.

So far all that has been done hasn't exactly addressed the residents exposure and interests and since the residents were not a party to these agreements it seems we have been placed in a very bad situation. If the IRS decisions stands and if the Developer doesn't step up ( an unlikely happening) then one of two things will occur. We will either have to raise amenities to pay the tax bill or drastically reduce services.

While one viable option in the decision model is to do nothing I personally believe we need to begin gathering facts and potential scenarios to protect our interests.

I agree - we need to protect our interests, and be ready to step up legally if the need be.

[gomoho]

If the CDD issued bonds to pay the developer back for the amenities -who did they issue these bonds to??? and who is the recipient of all this tax free money???

[Challenger]

Originally Posted by TexaninVA

I respectfully disagree with the notion that our immediate and best course of action is to “sue the Developer.” Mistakes and various other Developer imperfections notwithstanding, our community would never have grown into what it has without the leadership and vision of Gary Morse. It seems to me the best way forward is, with respect to the IRS issue, for the residents’ and Developer’s interests to be aligned where possible. At least give that a chance before suing him. The IRS ruling, while unwelcome news, is also not unexpected given the bureaucratic proclivities of our beloved tax collection agency.
In any event, the Developer still has a very large stake in the success of his commercial ventures. Likewise, we (the residents) have a large stake in preserving our lifestyle and home values. Why start fighting with each other? The common opponent here is the IRS.
Thus, I am trying to put myself in the Developer’s shoes, and ask what I would do? I don’t know much about Gary Morse except that he’s in his mid-70s, is a gifted businessman / leader, and worth a billion or more. Good for him … American Dream etc. I also have to think that he has a certain level of pride and attachment to his creation.. ie TV. He spent his whole adult life building this place. My instinct, were I he, would be to contest the issue, minimize the $$ damage, and find a way to keep the community going. OTOH, if I’m mid-70s, have all the money I’d ever need and the residents of what I created immediately ganged up to “sue me” and in general, be unpleasant about it, I think I could find myself saying “to heck with it” and set a course to Barbados aboard the yacht Cracker Bay.

A reasoned and well thought out comment. An exception to most on this subject

[jaringg]

Originally Posted by carm310

Can you share more information for those of us outside the bubble at this time? : D

this is a link to the story
IRS officials: Villages not a "government" that can issue tax-exempt bonds - Orlando Sentinel

[TVMayor]

Originally Posted by jaringg

this is a link to the story
IRS officials: Villages not a "government" that can issue tax-exempt bonds - Orlando Sentinel

In part the article states...

Ultimately, the burden falls on the holder of the bonds, who can challenge the decision in court, Israel said. In such cases, he said developer districts also have the option of settling with bondholders or reaching an agreement with the IRS to prevent the agency from going after bondholders.

[DonH57]

I'm feeling the same way about the whole thing Asianthree. Quite frankly tired of hearing about it.

[djl8412]

Originally Posted by asianthree

i think a wait and see not going to worry about something i have no control of

That is exactly the problem here and why the IRS ruled the way it did. We as residents have NO clout. The developer controls the media, movie theaters and hand picks the 2 major CDD members who hold all the cards. Put all the spin you want to it but this has been on going for 5+years and the warning shots from the IRS sounded well before that. No matter what, if any, settlement is reached it will involve lots of $ and be assured residents will pay for it some how.

[Advogado]

For the benefit of those of you who are not members of the POA, here is the e-mail alert that the POA sent its members last night. Incidentally, if you have yet joined the POA, you might think about doing so now. If the IRS investigation does not end well, the POA is the only organization that we Villagers have to protect our interests.

IRS UPDATE – JUNE 6, 2013
On June 6, 2013, the Daily Sun, buried on page 6 of the Local Section, published the following article:
“District weighing options after IRS ruling by David Corder
THE VILLAGES - In a nonbinding opinion*, the Internal Revenue Service has ruled the Village Center Community Development District is not a political subdivision of the state. The ruling, contained in a memorandum released Wednesday to the district, means that about $364 million of the CDDs bonds could be declared taxable. ‘It’s a setback for the district, but it’s not the end of the process,’ said Perry Israel, the attorney representing the VCCDD. We’re going to be continuing with the examination process. ’Israel maintains the IRS is overstepping its bounds. ‘I’m concerned the IRS seems to still be trying to make law through the enforcement process rather than through the regulatory process,’ he said. ‘They have the ability to write regulations. They didn’t do that. What they did is they came up with a rule that’s not easy to interpret.’”
*The POA is unsure what this statement means, as this language was not found in the IRS Opinion.

In the April, 2013 POA Bulletin we advised that there were actually three questions, not just one, that had to be answered affirmatively in order to achieve tax exempt status, which are identified below. On February 23, 2009, the IRS Agent notified the VCCDD that after reviewing all of the documents, he had three questions regarding the tax exempt status of thebonds:

1. Is the VCCDD, the Issuer of the Bonds under investigation, a qualified issuer of tax exempt bonds? (This is the subject of today’s IRS finding that the VCCDD is not qualified to be an issuer of tax exempt bonds because it does not meet the criteria to be a political subdivision of the state.) It should be noted that by using the “income approach” (Revenue minus cost and expense) for determination of the acquisition price for the various amenity transfers, it made no difference to the District if the bonds issued were tax exempt or not. The issuing of tax exempt bonds by the District simply increased the Developer’s profit on the transaction, by lowering the interest cost.

2. Did the Series 2003 facilities acquisition price reflect the fair market value of the assets? i.e., were the Bond Issues properly sized to carry out the government purpose of the Bonds or were the amenity facilities overpriced and thus the bonds over-issued? (This is the subject of the April Bulletin article dealing with the valuation procedures in which the VCCDD claimed 'victory'. 3. Were the Bond proceeds used for an essential governmental function or do the nature of the facilities acquired with the Bonds result in private business use, and hence are the Bonds Private Activity Bonds? A negative response to any of the three questions could result in the bonds not being tax exempt.

The potential impact on the Villages amenities system of an IRS finding that the bonds are not entitled to be tax exempt has been discussed in earlier issues of the POA Bulletin. In a nutshell, the amenities system would be threatened if the outcome of the IRS investigation leaves the Center Districts with such large financial liabilities that the Districts can no longer continue to maintain and furnish the amenities. A complete analysis can be found in the August 2009 Bulletin, which is available on the POA website: poa4us.org. (Click on archived Bulletins) Copies of relevant documents can be found at districtgov.org, by clicking on the IRS Updates link.

The POA's Position. Because of the potential implications for Villagers of an adverse determination on valuation of the assets, the POA sincerely hopes the IRS (or a court, if litigation ensues) eventually agrees with Mr. Israel’s analysis. With respect to the entire IRS investigation, the POA has not taken a position on the relative merits of the positions of the IRS and the VCCDD / SLCCDD, although we sincerely hope that the VCCDD and SLCCDD are able to prevail in regard to all three questions. The POA's objectives in this matter are to keep residents informed of developments and to try to protect your rights by doing what we can to try to ensure that any resolution of the IRS investigation does not jeopardize your amenities or result in the costs of an IRS victory being passed on to you. We have previously written to the IRS to express our concerns, and we will continue to report to you at POA meetings, in the Bulletin, and in the E-Mail alerts to our members all publicly available news in this matter.

[Challenger]

Originally Posted by djl8412

That is exactly the problem here and why the IRS ruled the way it did. We as residents have NO clout. The developer controls the media, movie theaters and hand picks the 2 major CDD members who hold all the cards. Put all the spin you want to it but this has been on going for 5+years and the warning shots from the IRS sounded well before that. No matter what, if any, settlement is reached it will involve lots of $ and be assured residents will pay for it some how.

Speculation!

[mickey100]

Originally Posted by Advogado

For the benefit of those of you who are not members of the POA, here is the e-mail alert that the POA sent its members last night. Incidentally, if you have yet joined the POA, you might think about doing so now. If the IRS investigation does not end well, the POA is the only organization that we Villagers have to protect our interests.

IRS UPDATE – JUNE 6, 2013
On June 6, 2013, the Daily Sun, buried on page 6 of the Local Section, published the following article:
“District weighing options after IRS ruling by David Corder
THE VILLAGES - In a nonbinding opinion*, the Internal Revenue Service has ruled the Village Center Community Development District is not a political subdivision of the state. The ruling, contained in a memorandum released Wednesday to the district, means that about $364 million of the CDDs bonds could be declared taxable. ‘It’s a setback for the district, but it’s not the end of the process,’ said Perry Israel, the attorney representing the VCCDD. We’re going to be continuing with the examination process. ’Israel maintains the IRS is overstepping its bounds. ‘I’m concerned the IRS seems to still be trying to make law through the enforcement process rather than through the regulatory process,’ he said. ‘They have the ability to write regulations. They didn’t do that. What they did is they came up with a rule that’s not easy to interpret.’”
*The POA is unsure what this statement means, as this language was not found in the IRS Opinion.

In the April, 2013 POA Bulletin we advised that there were actually three questions, not just one, that had to be answered affirmatively in order to achieve tax exempt status, which are identified below. On February 23, 2009, the IRS Agent notified the VCCDD that after reviewing all of the documents, he had three questions regarding the tax exempt status of thebonds:

1. Is the VCCDD, the Issuer of the Bonds under investigation, a qualified issuer of tax exempt bonds? (This is the subject of today’s IRS finding that the VCCDD is not qualified to be an issuer of tax exempt bonds because it does not meet the criteria to be a political subdivision of the state.) It should be noted that by using the “income approach” (Revenue minus cost and expense) for determination of the acquisition price for the various amenity transfers, it made no difference to the District if the bonds issued were tax exempt or not. The issuing of tax exempt bonds by the District simply increased the Developer’s profit on the transaction, by lowering the interest cost.

2. Did the Series 2003 facilities acquisition price reflect the fair market value of the assets? i.e., were the Bond Issues properly sized to carry out the government purpose of the Bonds or were the amenity facilities overpriced and thus the bonds over-issued? (This is the subject of the April Bulletin article dealing with the valuation procedures in which the VCCDD claimed 'victory'. 3. Were the Bond proceeds used for an essential governmental function or do the nature of the facilities acquired with the Bonds result in private business use, and hence are the Bonds Private Activity Bonds? A negative response to any of the three questions could result in the bonds not being tax exempt.

The potential impact on the Villages amenities system of an IRS finding that the bonds are not entitled to be tax exempt has been discussed in earlier issues of the POA Bulletin. In a nutshell, the amenities system would be threatened if the outcome of the IRS investigation leaves the Center Districts with such large financial liabilities that the Districts can no longer continue to maintain and furnish the amenities. A complete analysis can be found in the August 2009 Bulletin, which is available on the POA website: poa4us.org. (Click on archived Bulletins) Copies of relevant documents can be found at districtgov.org, by clicking on the IRS Updates link.

The POA's Position. Because of the potential implications for Villagers of an adverse determination on valuation of the assets, the POA sincerely hopes the IRS (or a court, if litigation ensues) eventually agrees with Mr. Israel’s analysis. With respect to the entire IRS investigation, the POA has not taken a position on the relative merits of the positions of the IRS and the VCCDD / SLCCDD, although we sincerely hope that the VCCDD and SLCCDD are able to prevail in regard to all three questions. The POA's objectives in this matter are to keep residents informed of developments and to try to protect your rights by doing what we can to try to ensure that any resolution of the IRS investigation does not jeopardize your amenities or result in the costs of an IRS victory being passed on to you. We have previously written to the IRS to express our concerns, and we will continue to report to you at POA meetings, in the Bulletin, and in the E-Mail alerts to our members all publicly available news in this matter.

I agree Advogado. The POA has always looked out for the residents.