WASHINGTON — The Bartram Park Community Development District in Jacksonville, Fla., has received an audit notice from the Internal Revenue Service for $28.7 million of special assessment municipal bonds issued in 2005.
The audit was disclosed by the CDD in a material event notice it filed Wednesday with the Municipal Securities Rulemaking Board’s EMMA system. The Bartram 2005 bonds are not in default, said James Oliver, Bartram’s district manager. He declined to comment on the IRS audit.
However, Bartram had to draw money from the debt-service reserve fund to meet a May 1 interest payment date for $30.3 million of bonds it sold in 2006 U.S. Bank NA, the trustee for the bonds, reported Thursday. In January, the district notified holders of the 2006 bonds that it was seeking to recover at least $17.5 million in debt service assessments through foreclosure on four developers associated with the 2006 bonds.
Florida’s community development districts have become a ripe area for IRS audits. The districts issue bonds to kick-start infrastructure development ahead of residential and commercial property construction. The bonds typically are structured to be repaid with proceeds from assessment fees, usually collected when property is sold. The economic recession scorched the CDDs, leaving many of their bonds in default.
The Florida Community Development District Report, a website managed by the Distressed Debt Securities Newsletter, says that of Florida’s 438 CDDs, which issued about $6.5 billion of municipal bonds, more than 120 are in default, representing $3 billion.
The Bartram development, located east of Jacksonville, issued the 2005 bonds in two series with maturities in 2015 and 2035. Some of the bonds for both the 2015 and 2035 series have been redeemed, according to disclosure documents.
Bartram said in bond documents that it would include about 5,169 multifamily residential units and 126,540 square feet of office space. At the end of March, the district reported about 2,000 of the residential properties have been sold.
Banc of America Securities LLC, now Bank of America Merrill Lynch, underwrote the bonds. Squires, Sanders & Dempsey LLP was bond counsel and Hopping Green & Sams PA represented the district. Fishkind and Associates Inc. was financial adviser.
An attorney with Hopping Green declined to comment.
The audit notice, dated March 8, said the bonds were selected “as part of a project initiative involving governmental bond issues.” The IRS has been auditing developer-driven deals such as independent, multifunctional special district financings since last year, Cliff Gannett, acting director of government entities, has said.
In April, the South Village Community Development District in Clay County said it is being audited. In March, the Aberdeen Community Development District of St. Johns County reported an IRS audit.
In January, the Stoneybrook South Community Development District received an IRS audit notice for $48.5 million of defaulted bonds.
