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RELEVANT LINKS: <br />The three most common conduit bonds in Minnesota are: <br />• Qualified 501(c)(3) bonds, where the user of bond proceeds is a <br />nonprofit 501(c)(3) entity. Typical examples include nonprofits that <br />own nursing homes, hospitals, senior and other affordable housing, and <br />schools (from K-12 to college). But any nonprofit with 501(c)(3) status <br />is eligible for this type of financing, so bonds have been issued for <br />entities as diverse as the YMCA to Minnesota Public Radio. <br />• Housing revenue bonds (exempt facilities), where the user of bond <br />proceeds is a private for -profit entity that builds housing intended for <br />occupancy by persons or families who meet specified low-income <br />guidelines. <br />• Small issue manufacturing bonds, where the user of the proceeds is a <br />manufacturing business that constructs manufacturing facilities that <br />meet certain federal requirements. <br />There are other less common conduit bonds that cities may occasionally <br />encounter, but the three listed above represent the bulk of this bond type. <br />B. Tax increment and abatement private activity <br />bonds <br />Minn. Stat. § 469.178. Minn. The other category of common private activity bonds are those issued in <br />Stat. § 469.1814. <br />the context of economic development and redevelopment. Cities may issue <br />See Handbook, community bonds secured by tax increments (all the increased taxes in a TIF district or <br />Development and <br />Redevelopment. portion thereof) or abatements (the taxes imposed by a participating taxing <br />jurisdiction, usually just the issuing city). <br />The city may be the "user" of these bonds, for example, when proceeds <br />finance public streets or other public infrastructure needed for a private <br />development project. But bond proceeds maybe delivered to a private <br />developer to finance aspects of the private development permitted under <br />law —such as land acquisition, excavation, and other eligible private <br />improvements. In those cases, the private developer becomes the "user." <br />In most cases, where the private developer is the user, the issuing city will <br />also require the developer to provide additional security, such as an <br />agreement to maintain a minimum value, or a guarantee to cover debt <br />service if tax increments or abatements fall short of expectations. The <br />result is that these bonds are treated as "private activity bonds," and must <br />be issued as taxable bonds. <br />By contrast, conduit bonds are tax exempt despite the fact that they are <br />issued for the benefit of, and secured by, a private entity —but only <br />because the private entity accomplishes some public purpose identified by <br />Congress in federal tax law. <br />League of Minnesota Cities Handbook for Minnesota Cities 10/26/2017 <br />Debt and Borrowing Chapter 23 1 Page 9 <br />