16 March 2009

Interesting post about computers from a reader who works in a retirement home

People who once used computers to interact have just shut them down or left them behind in their last move. “Can’t be bothered, or don’t want to do than anymore,” is often the reply. And yet I see the computer and the internet as a saving grace for the elder with limiting physical abilities and increasing isolation. I’m advocating for facilities to install access for hook ups to every room/apartment in a facility and to encourage, through planned activities to help elders stay in touch with their families, make new internet friends and stay current in what is happening in the rest of the world.

I’ m also aware of the predators who are on line and the vulnerability of this population. But we learn to protect ourselves when we live in the world outside of retirement homes/villages, why not teach the retirees to be protected?

I think she's got a great point. Nothing more important than staying in touch to help maintain a sense of community and a feeling of connection. What do you think?

09 March 2009

Excellent Op-Ed (Australian) based on Leisureville

Leisureville has been released in Australia and New Zealand. Here's a really thoughtful op-ed in a leading newspaper that discusses the book and its ramifications.


Short excerpt:
"A community that refuses to invest in the future sends a message that there is no value in giving back to society unless one directly reaps the rewards. Not only is this selfish, but it is self-destructive. A successful society demands co-operation. It demands that the rewards reaped from the work of past generations are repaid by investing in future generations. Turning your back on young people contributes to the very fragmentation of social values about which you complain."

Author on Dennis Miller Live

Andrew Blechman is featured on Dennis Miller's coast-to-coast live radio show: http://radiotime.com/program/p_123379/The_Dennis_Miller_Show.aspx

Geritopias: Aging Badly (reader email)

Dear Mr. Blechman,

Just read one of your articles published in the "Arizona Republic" today entitled: Retirees glide to the finish on 'playgrounds'

Years ago as a much younger woman working in the banking industry, I was transferred to a branch located in Sun City West. I had been to Sun City before and we visitors always marveled at how neat and tidy everything was there - much unlike our "lived-in" communities - and Sun City West was no different, just newer.

By that time Sun City was 20 years old and the original residents were by now, 20 years older. Patterns were already becoming evident. People who had retied in the beginning with good health and good resources had experienced some unsettling changes over time. They had often developed life-altering illnesses and because of unforeseen economic conditions, their solid economic base had eroded and they no longer has very solid financial setting. For some, their illnesses required very costly treatment and medication that they hadn't anticipated on.

The young crop of retirees in their late 50s who were healthy, wealthy and active, were drawn to the new Sun City West. They didn't want to live in Sun City which was much slower and too insulated. It was interesting to observe that about-to-be-oldsters didn't and do not want to hang out with official oldsters because they see what the future will be bringing to them and they don't want to face it or to know the realities.

Therefore, since Sun City did not draw or attract newer retirees to replenish the fading popluation, the aging population continues to grow. It is a downward spiral. Add that to the fact that they don't want to invest in the future. Why should they when it won't benefit them? And they need their money now. The fact that spending money today will help forestall some unpleasant realities down the road, eludes them. They bought a false reality. They had earned their money. It was their's. If they lived in a walled-in complex and separated themselves from the outsiders, then they wouldn't have to be paying for things like elementary schools since they didn't have any in their complexes. There would be no loud noises like the ones that kids make and no messes like kids make. It is really like a warped "Stepford" like existence. There was even a horrible quote from one oldster-ette in a recent newspaper article, "All the taxes we do pay, we want to keep and spend on ourselves".

I found them to be very unloving, unaccepting, judgemental and critical. We would often hear of people turning in their neighbor's to the local association for real or unreal infractions - like having a cat outside who dared to invade their back yard.

Sad to say, the few that are really vocal tend to get the recognition which then unfortunately tends to create the appearance that all oldsters are alike when that is not true either.


Penny M.
Phoenix, AZ

HIV up among people over 50


Villagers begin to awake from financial slumber....

Hi Andrew:

We have resided in The Villages for approximately 2 years and are currently in the process of selling this home in order to move to a smaller Senior Community in Ocala with no bonds and a great deal of homeowner partcipation in its operations.

When I began reading your book, I was extremely pleased to discover that my Husband and I were not the only people who believe that The Villages is a MONEY ORIENTED VENTURE FOR THE BENEFIT OF THE MORSE FAMILY! This was our primary reason for initiating the sale of our house. From the very beginning, all things (property sales, newspaper, re-sales of houses) deals with an extreme amount of "Brainwashing". "How wonderful it is to live in The Villages". This is a bad concept for those of us who are educated, can think independently and ask questions.

Your book "put into context" facts that Villagers should know and should care about before it is too late to relocate!

Thank your for writing it!

Diana P.

Interest letter from a reader who deals with geriatrics


I am an RN in Maine, who does admission and scheduled wellness updates on clients in an independent retirement community.

I have noticed an increase in concerns about ability to remain in the apartments where clients now live due to loss of income from investments. “Where am I going to go, when my investments don’t give me the income?” “Will I become homeless?” These were questions one man voiced as he was trying to reach his financial planner in Florida at Christmas.

Rents for all apartments went up 6% in Jan.2009.

Decrease in occupancy as some families take parents into their own homes to save money.

A client planning to move into assistant living facility even though he is independent in his needs, because he is about out of money and MaineCare will pay for assisted living if income qualifies.

Clients not obtaining dental and podiatry care or hiring added services or additional meals in the community dining room, since they are watching their savings decrease and shelter is more important.

Many of my clients lived in those Florida and Arizona communities prior to the Maine relocation. They returned to Maine due to loss of spouse, to declining physical and mental abilities, often brought unwillingly by their children.

What happens to the person who has no family to help financially? What about the people who can not meet community fees and rents and have no where to go after living in the active retirement communities for 5-25 years-it is their home!

Many of my clients miss the warmer client, the social opportunities, and the homes and sometimes the pets, they had to leave behind. Depression, at least one suicide and increasing isolation are very evident after the move north.

Interesting times for this segment of our population. And interesting personally, since I am part of this cohort.

Maybe another book? –Revisiting Leisureville During the Current Economic Meltdown!

Isabelle M., RN

Fiscal Train Wreck Approaches the Station: senior entitlement programs will require major generational sacrifice....


Senior benefit costs up 24%
'Health care crisis' leads to 8-year rise
By Dennis Cauchon

The cost of government benefits for seniors soared to a record $27,289 per senior in 2007, according to a USA TODAY analysis.

That's a 24% increase above the inflation rate since 2000. Medical costs are the biggest reason. Last year, for the first time, health care and nursing homes cost the government more than Social Security payments for seniors age 65 and older. The average Social Security benefit per senior in 2007 was $13,184.

"We have a health care crisis. We don't have an entitlement crisis," says David Certner, legislative policy director of the AARP, which represents seniors.

He says seniors shouldn't be blamed for the growing cost of government retirement programs.

The federal government spent $952 billion in 2007 on elderly benefits, up from $601 billion in 2000. It's the biggest function of the federal government. States chipped in $27 billion more in 2007, mostly for nursing homes.

All three major senior programs — Social Security, Medicare and Medicaid — experienced dramatically escalating costs that outstripped inflation and the growth in the senior population.

Benefits per senior are soaring at a time when the senior population is not. The portion of the U.S. population ages 65 and older has been constant at 12% since 2000.

The senior boom, however, starts big time in 2011, when the first baby boomers — 79 million people born between 1946 and 1964 — turn 65 and qualify for Medicare health insurance. The oldest baby boomers turn 62 this year and qualify for Social Security at reduced benefits.

USA TODAY used a variety of government data to calculate the cost of providing Social Security, medical benefits and long-term care to an aging population. Billions of dollars paid to non-seniors — the disabled, children and others in the programs — were removed to create an estimate that focuses exclusively on seniors.

Findings include:

•Medicare experienced the most explosive growth from 2000 to 2007. The Medicare prescription-drug benefit, started in 2006, accounts for about one-fourth of the increase in Medicare, which provides health benefits for people 65 and older.

•Long-term care costs per senior have declined slightly in the past three years because of a move away from nursing homes to less expensive home care.

•The cost of senior benefits is equal to $10,673 for every non-senior household.

•About 35% of the federal budget is spent on senior benefits, up from 32% in 2004.

Eugene Steuerle, a senior fellow at the non-partisan Urban Institute, notes that the full cost of senior benefits goes beyond Social Security, Medicare and Medicaid. A complete estimate would include other programs for retirees, such as military and civil servant pensions and medical benefits, he says.

The Urban Institute estimates that kids receive an average of about $4,000 per child in benefits, including the child tax credit and other indirect assistance.

Economist Dean Baker calls it "granny bashing" to focus on the cost of senior benefits. The elderly paid a designated tax for Social Security and Medicare taxes during their decades of working to support these programs when they retired, says Baker, co-director of the liberal Center for Economic Policy and Research.

05 March 2009

IRS to Villages Developer -- You Bilked Residents of Millions of Dollars, PART TWO: The Mystery Deepens

Who will pay IRS in Villages bond mess?
by Lauren Ritchie
March 4, 2009

On Sunday, this column examined a preliminary ruling by the IRS warning the government that runs operations at The Villages that $64 million in tax-exempt bonds issued in 2003 are on the verge of being declared taxable -- and it hints that another $200 million may face the same action.

The money from the bonds was used to buy everything in the community from the right to collect future fees, to retention ponds, sewer plants, clubhouses, swimming pools and golf courses. The seller was developer Gary Morse and his family.

About half the monthly amenity fee paid by Villages residents goes to repay the bonds. The fee is $135 if you buy a house today and is less if you bought earlier.

IRS Agent Dominick Servadio, who has been auditing the bonds for more than a year, concluded preliminarily that they should be taxed because:

*The district doesn't qualify under IRS rules as a valid issuer of tax-free bonds.

*The transactions didn't benefit the general public -- a requirement of tax-free bonds -- but instead, only the developer.

*The Village Center Community Development District issued $53 million more than the properties it bought were worth and handed the cash to Morse, who declared it as a gain on the sale on the corporation's 2003 tax return. Issuing bonds for more than 5 percent more than what's needed throws the bonds into the taxable realm under IRS arbitrage rules, the agent contended.

*The appraisal firms that set the value of the properties were tools of the district who did what they were told. They were not independent appraisers, as the IRS requires.

Whoa. So what does all this mean? Armageddon? Or simply scorched earth? The $64 million dollar question -- literally -- is who will pay?

Or is it possible that this will all vanish quietly?

Dream on.

Audit results

The outcome of any audit is difficult even for experts to predict, but knowing the backdrop against which the story is unfolding helps to put it in perspective.

First off, you should know the IRS has taken a bold interest in community development districts such as the dozen that operate in The Villages. In fact, auditing CDDs for compliance is a priority for the tax-exempt bond division of the agency, according to its published 2009 goals. Part of the IRS' intent this year is to survey such districts and possibly follow up with audits. The head of the bond division of the agency has spoken in speeches about the research the IRS is doing on CDDs.

So Servadio isn't sitting at the end of a tree limb alone, cackling and punching buttons on his little calculator. One can infer that his tough assessment of the district's bonds has the backing of his bosses.

Clues to the dynamics of how this audit is progressing are tucked into the exchange of documents between the IRS and the California lawyer for The Villages, who is among the best tax-exempt-bond-controversy attorneys in the country.

First, the district's lawyer asked Servadio in writing for a meeting with the IRS' Robert Henn, who manages field operations in the IRS division that oversees tax-exempt-bond financing. Servadio ignored the request. Second, there are hints that palms in the district office are sweating, regardless of what officials may say publicly. A letter from the district's lawyer, Perry Israel, to Servadio stated that the district wanted to get this matter cleared up quickly because some of the preliminary rulings "go to the ability of the District generally to issue tax-exempt bonds." Ouch. That would instantly dry up the river of money that flows to Morse.

And, the district has given the standard notice to the standard bond-watching agencies that the 2003 issue is being audited and that the audit is serious. However, the notice also encompasses other bonds that are similar in structure, even though they aren't being audited. Apparently, the district suspects this won't end with the $64 million but eventually will involve about $271 million of recreational-revenue bonds issued over the years.

$18,000 per household?

So, what is likely in this situation?

First, on one end of the scale, it is extremely unlikely that the IRS will drop the audit. You can safely cross that one off the list.

On the other end, if the IRS decides that the Villages district is not a "qualified issuer" of tax-exempt bonds, as Servadio contends, then it might be prudent to step back -- say, approximately to Leesburg. Armageddon would be a tea party compared with the financial explosion and subsequent mop-up that would be involved.

The reason is the stunning size of the sums in the scenario. Consider that the district -- read that "the residents of The Villages" -- still owe about $700 million. That's a liability of about $18,000 for each household in the retirement community, which sprawls across Lake, Sumter and Marion counties. Four important parties are involved in the bond transactions -- the district, Morse, bond buyers and The Villages residents -- and the possible outcomes vary dramatically for each if the bonds are deemed taxable.

Bond buyers are the easiest. Theoretically, they would owe the IRS taxes on the interest they received. However, the IRS views buyers as innocent parties, and it tries to make sure they don't get hurt.

Often, the issuer of the bonds -- in this case, the district -- pays the cost of the bondholder tax liability through a settlement, and the bonds retain their tax-exempt status. The amount usually is 29 percent.

However, this situation is more complicated than someone making a simple mistake. The agent in this case has contended that even the structure of the district is set up to deliberately avoid taxes that should be paid.

And, if the IRS views a bond issue as taxable because the amount sold was more than 5 percent over what was needed -- and the district's bonds do fall in this category -- a whole realm of other possibilities opens, including a settlement structure based on the taxable earnings from the excess money, which is $53 million of the $64 million. And then, of course, you've got to figure in the penalties.

Best-case scenario

The fates of the Morse family and the district are inextricably entwined -- at least they will be if Servadio has his way.

Through 104 pages of meticulous analysis, the agent built a compelling case that the developer so tightly controls the district trustees -- his employees and business associates -- that they are the same entity. Under that scenario, both the district and the developer together likely would face exposure to whatever sanctions finally are imposed.

And the chances are high that any exposure would include the total $271 million worth of recreational-revenue bonds rather than just the one issue of $64 million.

For the district and Morse, the best-case scenario would be that the IRS is willing to structure a settlement that allows one or both of them to pay the bondholders' liability, and the bonds are allowed to remain tax-exempt. That seems unlikely, considering that the IRS contends that the district doesn't have the authority to issue any tax-free bonds, which puts $700 million in outstanding bonds at risk.

If the situation unfolded about as badly as possible, the district and developer could end up having to redeem $271 million worth of bonds, pay the interest liability of bondholders and face sanctions imposed under a separate rule that punishes people who participate in promoting abusive tax shelters. If it played out like that, the district might never be able to issue tax-free bonds again.

Asked what the effect of having to call such a massive amount of bonds might have on the district's finances, bond attorney Michael Williams of Akerman Senterfitt in Orlando said he didn't know.

"That's an issue where a lot of numbers come into play. They're changing every day if not every minute," he said.

Whatever that means.

Settlement structuring

Janet Tutt, the district's manager, said it is "premature to assume anything." She did not answer the question of whether the district could redeem the bonds and continue operating.

She did say, however, that the district disagrees very strongly with Servadio's conclusions, and it is preparing a response to his preliminary ruling that it hopes will set some facts straight.

Which brings us to the very important third party, The Villages homeowners. Unfortunately, the community-development districts in The Villages have only one source of money, and that is the people who own the property. The district has the authority to charge fees and to impose property taxes on residents. It has not yet ever used the latter power.

If the district is sanctioned financially, it stands to reason that homeowners would end up reaching into their pockets. But that would depend on how IRS structures any possible settlement. It could create one that fell nearly entirely on the developer, for example.

The IRS can settle an audit at any time. But that too seems unlikely given what's at stake.

Only one thing seems certain: This will unfold slowly as the firefight cranks up. And it is time for homeowners to worry less about their tee time and marvelous activities and more about their future property values and financial liability.

Copyright © 2009, Orlando Sentinel

02 March 2009

IRS to Villages Developer: You Bilked Residents of Millions of Dollars

IRS, Villages tangling over maze of bonds

Lauren Ritchie
Orlando Sentinel

March 1, 2009

Perverted is a word whose use has evolved almost exclusively to have a sexual connotation.

However, Mr. Webster still defines it as "to cause to turn aside or away from what is good or true or morally right: CORRUPT."

And to "pervert" is the verb an IRS agent deliberately chose when he recently issued a preliminary ruling that eventually could shatter the financial stability of the government that runs operations at The Villages retirement community.

For the past year, the IRS has been investigating $64 million worth of tax-free bonds sold in 2003 by the Village Center Community Development District and has concluded that they ought to be taxed.

But that's just the start.

If this ruling were to hold, the Villages government would be staring down staggering financial exposure — it has roughly $200 million more in similar bonds among the total of $700 million outstanding.

The fallout is impossible to predict this early, even though the sums at stake are almost unfathomable.

The money is so much because the 75,000 or so people who live at The Villages have paid developer Gary Morse and his family for everything in the community ranging from the right to collect future fees to retention ponds, sewer plants, clubhouses, swimming pools and golf courses.

Frightening prospect

Village Center District authorities vehemently disagree with the IRS conclusion, and no wonder. Even settling the matter quietly typically would cost a bond issuer many millions if the IRS stuck to its opinion. The district ultimately could get that kind of cash from one source and one only: Villages residents.

But it's too early to speculate on the various scenarios of how this might play out, said Michael Williams of the Orlando firm of Akerman Senterfitt, the district's bond lawyers.

Williams, who is bond counsel to 20 of the state's 582 community development districts, said he was surprised by the IRS opinion because the agency had not given an "adverse determination" in 2003 after it examined similar bonds.

Technically, that is true.

However, the letter "clearing" the district in the earlier audit wasn't exactly glowing. The Jan. 29, 2003, letter stated, "Our closing of these cases, however, should not be construed as an approval of your method of operations." The agent went on to detail the IRS' concerns — many of the same ones that have emerged in the recent audit.

The scolding didn't slow the Village district any. Several months later, it sold the $64 million worth of bonds that the IRS is now auditing.

Fancy IOUs

Think of bonds as fancy IOUs for gigantic loans. The money the district borrowed six years ago went to buy golf courses, guard houses, an emergency-services station, a golf-ball washer, a clubhouse sound system, pool tables, pump houses, postal facilities, golf-cart paths and more.

Residents pay a monthly amenity fee — it's $135 if you buy a house today — not only to make payments on the loan but to take care of the facilities the district bought.

So far, so good. And easy to understand. Take a deep breath and read on.

Part of what has the IRS piqued is that $53 million of the $64 million worth of public money bought nothing concrete. Rather, it purchased from the developer the right to collect future amenity fees.

To complicate matters, this is not the first time. In six transactions over the years, this method of financing used public funds to pay $271million to Morse for tangible property worth only $51.6 million, IRS Agent Dominick Servadio Jr. calculated.

How could that happen, dear reader? The answer lies in the "perverted" portion of the agent's 104-page report. What follows is what you need to know.

A puppet government?

The Village Center District was set up under Chapter 190 of Florida statutes, which allows developers to create governments to pay for infrastructure and later, for residents to run their own public systems, such as sewer and water. The law anticipates that as time passes, people move into the district and begin serving on the board of trustees, eventually displacing the developer and his representatives. VoilĂ ! Democracy at work.

However, the Village district was set up in a way that allows Morse to stay behind the scenes but still direct the operation, Servadio wrote. It will never have residents, and for as long as Morse wants, it will be controlled by board members he can select. The district and the developer are "almost indistinguishable," Servadio wrote.

That alone makes the Village district seem a puppet government, but then the lawyer-Gods who created it went even further. They sprinkled it with a potent pixie dust that allows it to buy property anywhere in The Villages — and force those who have no representation on the board to pay for the purchase.

That "effectively perverts" the intent of the law and "allows the developer to engage in unchecked self-dealing ... with absolutely no oversight," Servadio wrote. The set-up "disenfranchises" residents who can have no say in the dealings, the agent contended.

No sense of humor, these federales. Just because a developer wants to make an extra couple hundred million by charging unsuspecting retirees is hardly a reason to get worked up in Florida.

The IRS's case

Servadio's report, a public record available to anyone from the Village district office, concluded that the $64 million in bonds should be taxable because:

•The transactions didn't benefit the general public, a requirement of tax-free bonds — only the developer. •The district issued $53 million more than the properties it bought were worth and handed the cash over to Gary Morse, who declared it as a gain on the sale on the corporation's 2003 tax return. Issuing bonds for more than 5 percent over what's needed throws the bonds into the realm of taxable under IRS rules, Servadio contended.

•The firms that set the value of the properties were simply tools of the district who did what they were told. They were not independent appraisers, as required.

One, who listed The Villages on his Web site as a regular client, wasn't qualified to appraise the properties, used only data provided by the district to come up with his "valuation," and employed improper methods in calculating the value, Servadio wrote.

•The bonds somehow made it through the scrutiny of lawyers and were sold, even though roughly two-thirds of the money pledged to repay the loan was already pledged to repay previous bonds.

So what does the Village district have to say about all this? The district administrator declined to discuss Servadio's specific allegations.

The IRS allows the district to respond, and it is in the process of "clarifying all the factual errors, assumptions and interpretations," District Administrator Janet Tutt stated in an e-mail.

The bond lawyer, Williams, said one example of an error in Servadio's report is that the agent appears to assume that roads in the district are limited-access, and that's not true. He said he couldn't remember the other errors.

Tutt wrote in an e-mail: "I believe our response will address any questions you may have."

The district has until March 25 to submit its statement to the IRS.

So what does all this mean? Let's try to sort some of it out Wednesday.

Lauren Ritchie can be reached at lritchie@orlandosentinel.com or 352-742-5918.
Copyright © 2009, Orlando Sentinel