04-17-2008 Charter Packet - Laserfiche WebLink

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Kennedy c H •A R T E R D Offices in Minneapolis Saint Paul St. Cloud 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis, MN 55402 (612) 337-9300 telephone (612) 337-9310 fax http://www.kenaedy-graven.com Affirmative Action, Equal Opportunity Employer February 29, 2008 Gordon Heitke City Administrator City of Lino Lakes 600 Town Center Parkway Lino Lakes, Minnesota 55014 RE: Charter Proposals Dear Gordon: STEPHEN J. BUBUI. Attorney at Law Direct Dial (612) 337-9228 Email: sbubul@tictm edy-graven.cam VIA E-MAIL AND U.S MAIL As a follow-up from the Council's work session on February 27, 2008, I understand that Mayor Bergeson requested clarification about how the various proposals affect the City's ability to issue improvement bonds on a tax-exempt basis. Following is additional information on that point. The general concern is that bonds secured in part with special assessments may be issued on a tax-exempt basis only if the assessments are not treated as "private loans" under federal tax law. Treasury Regulations, Section 1.141-5(d) describe the requirements that must be met in order for special assessments to avoid treatment as private loans. Most significant is the "equal basis requirement," stated in Section 1.141-5(d)(5) as follows: Owners of both business and nonbusiness property benefiting from the financed improvements must be eligible, or required, to make deferred payments of the tax or assessment ...on an equal basis (the equal basis requirement). A tax or assessment does not satisfy the equal basis requirement if the terms for payment of the tax or assessment are not the same for all taxed or assessed persons. Applying this rule to the five special assessment systems shown in the grid discussed on February 27, the result is as follows: Chapter 429: Meets the equal basis requirement, as all benefited persons are subject to the same rules. Bonds may be tax-exempt 329677v1 SJB L14140-86