WASHINGTON — The Internal Revenue Service is auditing $80.2 million of capital improvement revenue bonds issued by the Arborwood Community Development District in Fort Myers, Fla. in 2006.
The Arborwood CDD disclosed the audit on the Municipal Rulemaking Securities Board’s EMMA system on Wednesday.
“The IRS routinely examines municipal debt issuances to determine compliance with federal tax requirements,” the agency said in a letter to the CDD.
The IRS requested 16 items from the CDD for the audit including a list of transaction participants, the non-arbitrage certificate, and the trust indenture. The information was due to the IRS by Nov. 7. The agency sent the letter to the Arborwood CDD on Oct. 1 but the authority didn’t disclose it until this week.
The Arborwood CDD was created according to Florida’s Uniform Community Development District Act of 1980, like several hundred other CDDs in the sunshine state. Officials at Arborwood could not be reached for comment.
The proceeds of the 2006 bonds were issued to refinance the acquisition of $68.14 million of 2005 bond anticipation notes. The 2005 notes were issued to finance the acquisition of approximately 561.19 acres of preserves and wetlands and to fund a portion of the total capital improvement plan, according to bond documents.
Under the $261.35 million capital improvement plan, the CDD was to acquire, construct, and maintain certain public infrastructure improvements, including water management, utilities, right-of-way improvements and wetland mitigation.
At the time the bonds were issued, there was a five-member board of supervisors serving as the governing body of the district, the bond documents said. The landowner of the development was initially Worthington Holdings Southwest, LLC.
This audit comes as the IRS chief counsel recently “tentatively” announced that at least $364 million of bonds issued by the Village Center CDD in central Florida may not be tax-exempt because the issuer may not be a political subdivision.
The IRS questioned the bonds’ tax-exempt status, after determining a controlling portion of the governing board of the Village Center CDD District at the time it issued bonds was elected by one property owner.
Prager, Sealy & Co., LLC was underwriter for both the Arborwood and the Villages Center CDD. Tampa-based Nabors, Giblin & Nickerson, P.A., was bond counsel, for the Arborwood CDD bonds.