The Villages Voice - April 2013NOTE: Adobe PDF Reader is required in order to view the complete Village Voice. If you do not have Adobe PDF reader installed, please download it at www.adobe.com. This is a free download.
Click on the image to the left to view this issue.
District Prevails In IRS Finding
DISTRICT PREVAILS IN IRS FINDING
The IRS valuation of property transfers from the Developer to Villages Center Community Development District was highly favorable to residents, finding that the Developer undervalued the sales by $47.1 million. This was both a vindication of the Developer, and reassurance to Villagers that the Community Development District form of government is working well in The Villages and benefiting Villagers.
IRS Delays are Frustrating and Costly
The IRS has been reviewing the District’s purchase and issuance of tax exempt bonds for about 4-years . After multiple years, departments and lead investigators, Villagers’ frustration has been mounting along with $100s of thousands in legal fees, plus the losses of amenity fees from delays in transfers of properties in CDDs 6 and higher. A principal cause of the lengthy review could have been the inability of the IRS to grasp the fundamentals of the unique Community Development District form of government adopted by The Villages, Disney World and about 600 other developments in the state of Florida.
The IRS and Skeptics Had It All Wrong
The IRS initially demonstrated a misunderstanding of Florida law involving the creation, purpose and operation of CDDs. Additionally, the IRS probably began its pursuit against the District on a basis of flawed information and erroneous assumptions concerning CDD budgeting and financing, as did a small group of Villager skeptics who brought suit against the Developer, claiming shortfalls of about $40 million in amenity funding after property transfers, which never occurred. The Defendants in that suit included Village Center Community Development District and the Developer. To avoid a lengthy law suit, the Developer agreed to a settlement between the parties. The Amenity Authority Committee was created and about $40 million was to be paid as a result of the 2007 Settlement Agreement, plus $7 million to the five plaintiffs and their attorneys.
Property Transfers Result in Surpluses – Not Shortfalls
The plaintiffs in the Settlement claimed an immediate need for about $12 million and another $12 million through the current fiscal year. However, the Amenity Authority Committee receipts so far total about $24 million including interest, but the AAC has spent only about $12 million since 2007, and has not demonstrated a need for the remainder of the funds for their originally claimed purpose. Villagers should also note that there is about $17 million more in Settlement funds coming through year 2020. In the meantime, the AAC may not need these additional funds either. The plaintiffs’ projected shortfall in amenity revenues, primarily due to debt services on bonds, has just never materialized. To the contrary, those amenity surpluses have contributed to other revenue stream surpluses that have already grown District Reserve and Investment Funds to more than $100 million.
While the IRS estimated that the Developer left about $47 million on the table, it could be argued that the IRS valuation is also a conservatively low estimate of the transferred facilities and amenities, since substantially more revenues above expenses over these years have been realized to Villagers due to the favorable cost to Villagers for the properties. The professional and effective operation and management of the transferred properties and associated amenity streams by the District Government and oversight by Community Development District resident-elected Supervisors have fully funded all of their nearly $200 million annual budgets. The District’s 5-year Capital Improvement Plans are also fully funded with budgeted revenues and without the use of any Settlement funds.
IRS Critical Decision Still Pending
There remains an IRS decision pending on the District being a subdivision of government authorized to issue tax exempt bonds, which is anticipated soon after this favorable valuation findings. Villagers may be more confident now that the IRS will return a “no finding” upon official completion of this review, as they did once before on a similar review in 2003. If there is a second “no finding”, the IRS itself may also be more reluctant to respond to a third cry of “Wolf” in The Villages. Although, skeptics may still do a rain dance under any dark cloud approaching The Villages, Villagers can be reassured that the Developer and CDDs are partners remaining in their future that can provide for The Villages’ perpetual success.
Villagers Have Vital Role in The Villages Future
A benefit of the long and critical review by the IRS of The Villages has been a demonstration that The Villages CDD system of government has not only been prospering, but the key to its perpetual success. However, Villagers’ participation in the Community Development District form of government will remain critical as The Villages nears buildout and the transfer of properties from the Developer to the District is complete. The CDD government requires citizen involvement in selection of good elected supervisors and support in the operation and maintenance of The Villages – just like any other successful democratic system.