24 September 2008

Letter from a Reader who has lived in The Villages

Dear Mr. Blechman,

I started reading your book, "Leisureville..." tonight and am amazed at how correctly you described life in The Villages. My husband and I lived there six months of every year for nine years. We left because I just couldn't stand the place any more. I felt I was being intellectually and culturally smothered to death. You cannot imagine, or maybe you can, how small and petty people think and behave there. I had to get out.

The Villages is NOT a gated community. The roads are maintained by the counties, not The Villages, so anyone can gain access to any "village" at any time. We lived in Santo Domingo (Yes, it was spelled correctly when we bought there.) and there were two entrances. One for residents where we could swipe our card to have the gate open. The other lane was for visitors and a gate attendant was available. However, anyone could get into any area of our village at any time. In fact, we had three robberies within a few weeks on our block. No one was ever arrested. The place is full of workers all the time. The idea of a "secure" place to live is ludicrous. The Villages newspaper rarely reported any problems and if they did, it was just a paragraph or two on a back page. Did you know that only in recent years they printed death notices? That's how crazy it is down there.

I loved your description of the music played on the radio station. I never had it on in our home but soon before we decided to get out of there my husband and I were riding our bikes to Barnes and Noble in the new town square. As we were riding by the "lake Sumter" I heard the radio station broadcast coming out of a lightpost. As we entered Barnes and Noble the same radio broadcast was coming out of a pole by the entrance to the store. I looked at my husband and said, "We're out of here. This place is too much." I'd always said I felt like I had to behave like a Stepford wife but I wasn't proud of that. Your friend IS proud of that. Frankly, I think that's pitiful.

So now we live back north full time near our children and grandchildren. There are three small children living next door to us and I'm fully appreciating how "normal" life can be so enriching. We're scheduled to go back to The Villages this coming March. We've rented a small villa to spend some time with the many friends we have back there. But a month is enough. In fact, I don't know if I can stand being there for an entire month. We shall see.

You were right when you said they're segregated communities. I did see some "oriental" (funny word) couples there but they always socialized together. The few black couples we knew did seem to socialize with the 97% white population. But little racial jokes were always thrown out there when the black couples weren't around. It was disgusting. Also, if you aren't a conservative Republican you don't fit in. Gary Morse is one of the biggest contributors to that party and all the media reflects his political philosophy.

I tried all the activities. I was a cheerleader, line danced, clogged, golfed, played tennis, pickleball, mah jong and bridge. My favorite activity was the Friday afternoon Philosophy Club meetings. I actually met some thinking, intelligent people there. But it finally came down to this -- I dreaded going there in the autumn and was thrilled to leave there in the spring. And that was with three trips back home to see family during that six-month time period.

I'm worried about this country and how we have so many retirees who think that is the greatest lifestyle. It points out how shallow and self-centered we've become. As far as we're concerned there's never a "beautiful day in The Villages."


22 September 2008

Massive Turnout for Palin in The Villages

No real surprise here. The Villages is a must-visit Republican bastion of veteran-voters on the Republican Whistle-stop Tour each year. The developer, Gary Morse, is one of the biggest donors to the Republican Party in the nation.

Here's an account of the event, as presented by The Villages' developer-owned daily newspaper:


20 September 2008

"Active Adult’ Housing Loses Luster" -- NYTs

I find this paragraph particularly interesting because it shows what happens when your community is "governed" by a developer -- anything. In this case, with the housing market cratering, developers are starting to drop age-restrictions on existing communities. -- Otherwise known as Buyer Beware....

"[He] cited several recent instances in which developers had asked local authorities to lift, or at least ease, age restrictions for projects approved as 'active adult.' In consideration of poor market conditions, he said, restrictions were dropped at [several] projects."
September 14, 2008
‘Active Adult’ Housing Loses Luster

A FEW years ago in New Jersey, housing complexes for those 55 and older were proliferating, with new projects seeming to pop up and sprawl out nearly anyplace with acreage — be it urban, suburban or rural.

As the housing slump persists, however, the bloom is off the rose for the “active adult” sector — perhaps even more so than for the overall market. One factor may be the disinclination of would-be buyers to lower their price expectations on the houses they have lived in for decades.

Jeffrey Otteau of the Otteau Appraisal Group is offering brokers and developers new data showing reduced demand for such housing around the state, and a large inventory of unsold units.

At the Rivervue at Hoffman’s Marina project in Brielle, the original price range on 14 new units was $900,000 to $2.2 million. But earlier this year, after half had been sold, the remaining seven were made available in the $675,000 to $1.2 million range.

Last month at Rivervue, a “live free for one year” deal was instituted and led to three quick sales of remaining units, said Tom Neumaier, the marketing director for the builder, the Robertson Douglas Group. Under the program, buyers who provide a down payment of 25 percent are guaranteed that their mortgage payments, taxes, association fees and all other costs will be paid for the following 12 months, he said.

“Given the problem of purchasers who have an existing home to sell in a slow market, and who are trying to avoid a double mortgage payment, we came up with this idea to give them peace of mind,” Mr. Neumaier said.

Right now, he said, would-be buyers with a house on the market are advised that “an existing home that is priced right will sell.”

“We have found a lot of people struggling with what has happened to the value of an existing home over the past two years, making them reluctant to make the move as empty nesters,” he said. “But what we try to help them understand is that prices are also down on the new house they will buy, and they will really come out O.K.”

Douglas Fenichel, a spokesman for the developer K. Hovnanian Homes, said that since buyers over 55 had most likely owned their homes for a long time, they should have built up enough equity to “price it competitively when they put it up for sale, and still make some money.”

Paul Schneier, the president of Pulte Homes’ metropolitan New York-New Jersey division, made the same point in explaining why sales this year at his company’s Wanaque Reserve by Del Webb complex, in Bergen County, had exceeded 2007 levels.

“This community attracts many buyers from Bergen County and Rockland County,” Mr. Schneier said. “These are affluent areas where people already own homes in prime locations, and have probably built a lot of equity in those homes, and won’t have as much of a problem selling them to move to Wanaque.”

Nevertheless, Mr. Otteau said it was clear that virtually all developers of age-restricted housing had significantly reduced asking prices for their units over the last two years. Several developers — although not K. Hovnanian — conceded that to be true.

Market reports indicate that sales are lagging, inventory is swollen and an increasing number of older home owners are choosing to “age in place,” as Mr. Otteau put it, meaning they will remain in their homes awhile longer with the hope that the market will shift and values will again rise.

Mr. Otteau said he knew of nine planned projects that had been scrapped because of weak market conditions.

Of course, developers and builders may tend to disagree about whether their individual projects might be in trouble, and some can point to certain projects where sales are hot.

Just last month, said Don Bompensa, a Lennar company executive, there were people sleeping in the parking lot overnight to be the first to make offers on 25 new units being built alongside the golf course at Greenbriar Oceanaire in Waretown.

“We are honestly not surprised,” said Mr. Bompensa, president of Lennar’s New Jersey division. “We’ve been developing this premier active-adult community since 2001, and have sold more than 900 of the 1,400 single-family homes to date — including 27 in the month of August alone.”

Also, K. Hovnanian, which developed the Four Seasons brand of over-55 condominiums, announced last week that it had begun construction of several dozen new two-bedroom two-bath units at the Four Seasons at Great Notch community.

The announcement had been preceded by another less positive one from the publicly held K. Hovnanian: On Sept. 3, it reported its eighth consecutive quarterly loss. But at Great Notch, sales have continued to be relatively lively, said Sean Mulhall, the community manager.

Other K. Hovnanian executives cited a pent-up demand for over-55 housing priced in the low $400,000’s, particularly at Great Notch, which is only 12 miles from Manhattan.

“Active-adult communities is one of the only segments of the market where we are adding units,” said Mr. Fenichel of K. Hovnanian, “because they’re selling.”

But that optimism aside, Mr. Otteau cited several recent instances in which developers had asked local authorities to lift, or at least ease, age restrictions for projects approved as “active adult.” In consideration of poor market conditions, he said, restrictions were dropped at projects in Bound Brook, Hackettstown, Maplewood, Fort Lee and Morris Township.

Copyright 2008 The New York Times Company

11 September 2008

IRS investigating Villages' financing -- PART TWO


Special report COMMENTARY
Before accruing more debt, Villages residents need a voice
Lauren Ritchie
September 10, 2008

(Second of two parts.)

On Sunday, this column looked at an IRS examination of whether bonds issued by the government behind The Villages retirement community should be tax-exempt.

One of the main questions the IRS is trying to answer is whether the Village Center Community Development District, which is controlled by the developer, should be allowed to issue the same kind of bonds that cities and counties do.

To be qualified, the entity must be a genuine government, not just a sham way for the developer to make money.

There is no question that The Villages developer by law is allowed to create governments -- he has set up a dozen of them so far.

Those governments, called community development districts, can have varying powers, but the law allows them to do almost anything that a city or county can, short of operating their own police departments and approving their own growth plans.

A community development district can issue unlimited numbers of bonds, and the Village Center district hasn't been shy about using that power.

That district and a second similar one in the Sumter County portion of the 77,000-resident mega-community on Aug. 31 together owed $281.5 million worth of outstanding loans in the form of recreational revenue bonds.

Board of supervisors

Most of the cash went to Villages developer Gary Morse and his companies. In exchange, the district got real property, such as pools and clubhouses and golf courses. But the majority of the bond money bought something intangible -- a revenue stream. Morse sold the rights to collect amenity fees from homeowners in The Villages. The monthly fee for those buying today is $130, and it is to rise to $135 on Oct. 1.

The IRS agent who has been asking questions about how the district runs quickly homed in on The Villages' way of using the law that governs the districts.

Florida Statutes, Chapter 190, says that a board of supervisors is to run the districts. The first board is chosen by the landowners, which is to say, the developer.

But as the community grows to either 250 or 500 "qualified electors," (depending on the type of district), the five supervisors are to be elected by voters, just as city council members or county commissioners are. This makes sense, considering that the supervisors have the power to levy special assessments, impose property taxes and take private property through eminent domain.

However, the transition to voters didn't happen in the Village Center district, which in April had only 17 landowners. The district still is run by a board of supervisors chosen by the landholders, and the developer has interests in or connections to enough landholders and acreage to control the majority of votes, the district's tax attorney said in a June 12 letter to the IRS.

Today, those supervisors are Gary Moyer, vice president of development for The Villages; W. Thomas Brooks, corporate treasurer of The Villages; John Wise, chief financial officer of The Villages; Stephen J. Drake, purchasing director of The Villages; and Charles Smith, a Morgan Stanley broker with offices in The Villages.

In defense of board, bonds

The power of these men extends far beyond the geographical confines of the Village Center district.

The big money comes from Villages homeowners who each month pay an amenity fee to the Village Center district but who live in other parts of the retirement community. That means they have no say on the board that decides whether to issue bonds.

No wonder the old cry of "taxation without representation" comes to mind.

Janet Tutt, manager of the district, bristled at the statement that the district is controlled by the developer.

She said it's a pure illustration of the city council-city manager form of government.

"I don't answer to H.G. Morse or any of the Morses," she said. "I don't take my directions from them."

Tutt said the bonds were perfectly legitimate and the business of issuing them is conducted by the most reputable of companies, including Citigroup Inc. All of the district's supervisors are upstanding people in the community who wouldn't risk their reputations by participating in anything improper.

"In these bond transactions, we're making sure that we're only paying what the appropriate amount is," she said.

If the developer doesn't like the price, "he can sell it to someone else," Tutt added.

Asked if she had ever suggested the district do anything that was in the best interest of the residents but not in the best interest of the developer, Tutt said no.

"My problem is I don't know what that issue would be," she said.

Debt deprives residents

I can solve that problem.

Because I am not drinking Villages Kool-Aid, I can easily imagine several such scenarios. Here's the most obvious:

Let's say the district board was filled with people who don't work for The Villages and aren't in any way obligated to Morse.

Such independent supervisors might not see any good reason to buy the rights to collect amenity fees for 30 years into the future, thereby saddling residents with almost unconscionable debt. (For example, Villages residents will shell out $134.7 million -- that includes interest -- to pay off the $64 million in bonds the IRS is examining right now.)

If district supervisors had never bought the golf courses or clubhouses or pools -- or the rights to amenity fees -- the developer still would be obligated to provide those things, the district's lawyer said.

But there wouldn't be any bond debt.

Consider that last year, roughly $33 million was collected in amenity fees, and nearly $16 million of it went to pay bond debt, leaving the other $17 million for maintenance and operation of recreational facilities.

Without bonds, that $16 million annually could be going into building and operating even more fun stuff for Villages residents instead of paying off the loans that made Morse rich.

How about free drive-through carwash facilities for residents? Would that be cool or what?

Or community-wide wireless Internet?

Or perhaps the money could go toward eliminating the cost residents have to pay to drive their golf carts on the paths around the courses so they can play that "free" golf for life.

Stay tuned

One thing is clear -- more bond debt is not in the best interest of Villages residents, who already are on the hook to repay $709 million in outstanding loans.

The IRS audit has been going on since Jan. 7, and the district sent its most recent responses to the agent's questions on Aug. 20.

Now it's a waiting game.

Lauren Ritchie can be reached at Lritchie@orlandosentinel.com or 352-742-5918.
Copyright © 2008, Orlando Sentinel

*** The Villages under IRS investigation ***


COMMENTARY Special report
IRS trying to get to bottom of Villages bond-financing history
Lauren Ritchie
September 7, 2008

Sixty-two pages of questions and answers tell the tale: The Villages retirement community is on the verge of making an IRS agent's head implode. Soon, his brain will begin to drain out his ears.

An agent auditing tax-exempt bonds sold by the mirror government behind The Villages first began asking questions on Jan. 7 as part of what he described as a routine examination.

Since then, his questions about $64 million worth of "recreational" revenue bonds -- sold in 2003 to buy golf courses, cart paths, ball washers, a clubhouse sound system, pool tables, guardhouses, postal facilities, pump houses and more -- have grown more complex and pointed.

You can see what the agent is thinking by the questions and can almost picture him turning this Rubik's cube of financing genius over and over as he tries to wrap his mind around the most clever scheme since carpetbaggers realized they could charge old ladies in Jersey $10 a month for swamp lots. It's like he just can't believe it's true.

Welcome to Florida, Agent Dominick Servadio Jr. Sit back and marvel about how business is done in a state where we affix our lips to every developer fanny within reach.

The inception

Here's the short version of how The Villages developed -- with the help of a state law that spurs growth:

The developer builds a community. The law lets him create his very own government, which has the power to borrow breathtaking sums of cash by selling bonds. The developer-controlled government uses the bond money -- bonds are nothing more than loans -- to buy the developer's investment in amenities such as golf courses and pools. But the biggest percentage of the cash from recreational bonds goes to purchase the right to collect fees every month from residents. For example, of the $64 million worth of bonds the IRS is examining, $53.1 million bought nothing concrete. It went to purchase the rights to the future amenity fees.

As of Aug. 31, 10 of the 12 governments in The Villages owed a stunning $709 million on outstanding loans they took out partly to pay developer Gary Morse for everything from future fee collections to retention ponds, sewer plants, clubhouses, swimming pools and golf courses. A developer typically wraps the cost of amenities and infrastructure such as sewer lines into the price of a house. Morse didn't do that, which is why residents are paying now, according to the manager of The Villages' governments.

Well, at least that's the theory. If so, residents should have gotten pretty sweet deals on the prices of their homes, shouldn't they?

Morse becomes almost unfathomably rich from the bond proceeds. And residents are saddled with 30 years of payments on $709 million worth of loans.

Was this legitimate?

Now, along comes the IRS in a quest to answer just a single question: Was this one particular developer-controlled government, the Village Center Community Development District, qualified to issue tax-exempt bonds? In other words, is this a cross-your-heart legitimate government? Or just a fiendishly brilliant legal dodge designed to enrich the developer?

The answer could rock the municipal bond world if the ruling goes against The Villages governments. Aside from the Village Center district, another 578 of these governments operate in Florida. If the IRS were to impose a different interpretation than in the past, bond buyers could end up having to fork over income tax on the interest from their investment, which they don't have to do now.

So who are these buyers? That isn't easy to discern. But administrators at the districts say some bonds are owned by Villages residents themselves.

The Village Center district has hired a California lawyer to get it through this IRS examination. However, the district's manager is itching to pick up the phone and call Servadio. She thinks if she can just talk to the agent, he'll understand -- and go quietly away, satisfied that everything is on the up-and-up.

"Our frustration is that we don't see it any differently than a utility purchase. The questions he's asking -- he's getting pieces of the pyramid," said Janet Tutt, the manager. "If we all just sat down in a room and created the big picture, and he could see the whole picture, it would be easier."

However, this is not the first time the Village Center district has faced off with the feds over whether its bonds should be tax-exempt and whether it's adhering to the law.

Earlier concerns

Here's what W. Mark Scott, director of the IRS' tax-exempt bond division, wrote to the district on Jan. 29, 2003, when the bonds got a thumbs up after an earlier audit.

"Our closing of these cases, however, should not be construed as an approval of your method of operations. We have concerns regarding: the amount of control the developer has over the issuer; the questions of value of the assets sold by the developer to the issuer as these are not arm's length [transactions]; the treatment of income and expenses (whether income is properly reported and expenses deducted only once); compliance with state law."

Other than that, everything was just peachy. The fact that the IRS thought the deal smelled funky didn't slow down the district when it wanted to issue more bonds. Several months later, it sold the $64 million worth of bonds that the IRS now is looking into.

On Wednesday, we'll take a deeper look at this particular IRS probe and where it might be headed.

Lauren Ritchie can be reached at lritchie@orlandosentinel.com or 352-742-5918.
First of two parts
Copyright © 2008, Orlando Sentinel

Fox News now pumped out of The Villages' lampposts

The Villages media is owned by and controlled by conservative developer Gary Morse, who has now decided to supply headlines on his radio station via Fox News (replacing headlines from the Associated Press). All hourly news updates will now by handled by Fox .... and that means it will be pumped out of the lampposts and fake rocks in The Villages' two downtowns.