Hidden debt shocks New Tampa community
Article Courtesy of The St. Petersburg Times
By Dong-Phuong Nguyen
Published January 18, 2009

NEW TAMPA | When Jal and Shiraz Irani moved into Cory Lake Isles, they thought they'd found paradise. The developer had lined the streets with miles of brick, planted dense tropical foliage along the winding entrances and created a private beach and a fish-filled lake. The Iranis pay a few thousand dollars a year in community taxes for the amenities. But apparently, that may not be all they have to pay. The couple was stunned to discover recently that the house they bought two years ago carries a massive debt: $23,093.

The Iranis are among 65 homeowners in the northeast Hillsborough development who are on the hook for a $1-million bond debt taken out more than a decade ago by the developer who built the community. The homes are scattered throughout the development and it's unclear why only 65 of the roughly 1,000 are affected.

If the developer doesn't pay, liens can be placed on the homes. And if the owner ever decides to move, it will be virtually impossible to sell the house with a title that doesn't come back clean.

"Obviously, you have to inform the prospective buyer," said Realtor Russ Perkowski. "With as many homes that are on the market, I think a lot of buyers would look for something else."

Embattled developer Gene Thomason has been

To develop Cory Lake Isles, Gene Thomason borrowed $20-million that is being repaid with a tax on the properties. But homeowners say they did not know of another bond he took out, and they could be on the hook if he fails to pay it off.

fighting with residents for at least five years over his handling of the community's finances. For years, homeowners have accused him of mismanaging their money and spending it on personal projects. They have taken their fight to court.

"Just when I was thinking nothing more can surprise me, I am surprised," Shiraz Irani said. "This is shocking."



In the 1990s, Thomason was building an empire. He dug a 165-acre lake on 588 acres. He placed Canary Island date palms on each lot. And he borrowed about $20-million to create the development, with the understanding that homeowners would repay the money through taxes.

Few knew Thomason also took out a Series B bond, which developers commonly use to pay for infrastructure such as water, sewer and streets. The debt is secured by a lien against properties in the development, said James Nicholas, a retired University of Florida professor of urban planning and law who helped write much of the state's community development district law. Typically, the bonds are paid off with a tax levied on residents, Nicholas said.

That didn't happen at Cory Lake Isles. Instead, Thomason began making the bond payments himself, said Bill Rizzetta of Rizzetta & Co., the financial consultant for the development. Residents weren't even aware of the debt.

But a few months ago, Thomason missed a deadline to pay taxes. The Hillsborough County Property Appraiser's Office prepared tax bills for those homeowners reflecting the debt. The letters were about to go out when Rizzetta received Thomason's payment. Rizzetta notified the county that Thomason had paid.

Then he sent a two-page letter to homeowners alerting them of the situation: "Please be advised that the developer's recent payment only applies to the annual payment due for the upcoming fiscal year. This does not affect your ultimate obligation to ensure payment for 2009-2010 fiscal year and beyond, should the developer fail to do so."

Rizzetta's letter was the first time the residents had even heard of the debt.

"We had no idea," said Shiraz Irani. "Nobody ever told us."



This indignity is magnified for residents, who share the same brick-lined streets with Thomason. He lives in the community, owns several lots and is building a mansion on one of the most exclusive parcels.

He has long had strained relations with some of the neighbors. For 18 years, he controlled the taxing district board, serving as chairman alongside four other hand-picked supervisors. Several years ago, residents began peppering the board with questions during every meeting.

Eventually, some sued Thomason for financial records, and a judge ordered the documents turned over. Other residents filed a suit accusing Thomason of commingling community development district funds and personal projects. That case is pending.

Neighbors packed the meetings, which grew so contentious that the community development district board hired off-duty sheriff's deputies to keep order. As one meeting dragged on, a deputy remarked: "All these rich folks talking about $5,000 palm trees. That's fine with me. It's paying my mortgage."

In November, residents overwhelmingly elected three home­owners to the board, wresting control from Thomason, who had resigned.



David Burman, who was elected to the board, is among the 65 residents affected by the bond. He said he refinanced his home and has closed three times since moving in five years ago.

"We knew nothing about it," he insists. "I looked through all my closing documents, and it's not in there."

Nicholas, the urban planning expert, said the state law that governs community development districts explicitly states a new owner must be notified in writing at closing that there is a bond debt tied to the property.

"Everybody's been to real estate closings where you sign 100 times in three minutes," he said. "They may have signed one of those."

But even if they didn't, the situation is more complex than it appears. "In Florida, in theory, all of that debt is covered by (state law)," Nicholas said. "However, it leaks like a sieve, and people get around it."

Developers have somehow taken out these bonds and "skirted completely around (state law) with no detriment to themselves," he said. They are able to work around it so that the bonds fall under different codes. To make matters worse, nobody enforces the law, he said.

Thomason has acknowledged that he is responsible for the debt, according to a memo written by the taxing district's attorney, Mark Straley. He suggests residents hire lawyers "if they believe they have a legal claim against the developer, the builder, or their title insurer."

When the issue came to light a few months ago, Thomason assured the residents in a letter that he would pay the $1-million debt off by Jan. 1.

However, Rizzetta said Thomason has not paid it.

Reached on his cell phone, Thomason said that he's working on figuring out "what we're going to do about that situation."

"I can't tell you anything at this point," he said. "We're in this other litigation that's going on in this community. I have to be very careful what I say."