for Nov 2014 #MNBroadband Conference

1. Abatement Findings
• Will produce benefits to the political subdivision at least equal to the costs;
and
• Is in the public interest because it will:
(1) increase or preserve tax base;
(2) provide employment opportunities in the political subdivision;
(3) provide or help acquire or construct public facilities;
(4) help redevelop or renew blighted areas;
(5) help provide access to services for residents of the political subdivision;
(6) finance or provide public infrastructure;
(7) phase in a property tax increase on the parcel resulting from an increase
of 50% or more in one year on the estimated market value of the parcel,
other than increase attributable to improvement of the parcel; or
(8) stabilize the tax base through equalization of property tax revenues for a
specified period of time with respect to a taxpayer whose real and
person property is subject to valuation under Minnesota Rules, chapter
8100 [relating to certain public utility companies]

2. Findings Applied to Broadband
• Provide telecommunications, cable and internet
“infrastructure” and “services” to residents
• Enable economic development in the region – provide
employment opportunities
• Allow the governmental units to provide their services
more efficiently by connecting with governmental
buildings
• Help develop educational programming for school
districts
• Enable health care organizations to access and retain
information

3. ABATEMENT PROCESS
• PUBLIC HEARING - Notice of the public hearing must
be published in a newspaper of general circulation in
the political subdivision at least once more than ten
days but less than 30 days before the hearing
• ABATEMENT RESOLUTION - The resolution must
include “a specific statement as to the nature and extent
of the public benefits which the governing body expects
to result from the agreement” which would include the
findings described above

4. ABATEMENT LIMIT
• The maximum abatement
• For all properties
• For each taxing jurisdiction
• In any year
• May not exceed the greater of:
– 10% of the net tax capacity of such Participating
Governmental Unit for the taxes payable year to
which the abatement applies; or
– $200,000

5. DURATION
• Up to 15 years if the city/town, county, and school
district in which a parcel is located all approve an
abatement for such parcel or
• Up to 20 years if one of the taxing jurisdictions declines
to participate

6. LEVY
• Each governmental unit must add to its levy the
total estimated amount of all current year
abatements granted
• The total general levy remains the same (not
“abated”)
• The levy is outside any levy limits that may exist

7. BONDS
• Abatement bonds may be issued as general obligation
bonds
• Abatement bonds are not subject to net debt limits even
if issued as general obligation bonds
• General obligation abatement bonds may be issued
without an election
• Exception – need an election if bonds are for a building
to be used primarily and regularly for conducting the
business of a local, state or federal unit of government

8. ABATEMENT BONDS USE LIMITATIONS:
pay for public improvements that
benefit the property
• Includes public facilities, public infrastructure and facilities to
provide access to services for residents as referred to in the public
purpose finding
• Includes types of improvements financed with special assessments
under Minnesota Statutes, Chapter 429
• Does not need to be publicly owned but public entity should have
an agreement with the private entity to provide telecommunications
services to all citizens at the same or similar rates during the term
of the abatement bonds
• Minnesota Statutes, Section 429.021, Subd. 1(20) defines the cost
of burying lines of a telecommunications carrier within the public
right-of-way as an “improvement” which may be assessed under
certain circumstances

9. ABATEMENT BONDS USE LIMITATIONS:
acquire and convey land or other property
• Acquire property that furthers the public purpose cited for
granting the abatement
• Minnesota Statutes, Section 475.51 defines “acquisition” to
include “purchase, condemnation, construction, and
acquisition of necessary land, easements, buildings,
structures, machinery or equipment”
• Broadband property acquired by the private entity:
– land (right of way and easements across private property)
and
– other property (including the fiber cables and the
telecommunications network)

10. ABATEMENT BONDS USE LIMITATIONS:
reimburse property owner for cost of
improvements made to the property
• Proposed abatement bonds will be loaned to the private
entity to reimburse cost of improving property by
installing the fiber cables to create a
telecommunications network
• The abatement properties will be the properties served
and benefitted by the broadband project

11. ABATEMENT BONDS USE LIMITATIONS:
pay the costs of issuance of the bonds
• Includes all costs related to the bonds:
– legal
– fiscal consulting
– printing
– rating agency fees
– upfront trustee fees

12. ALLOCATING BONDS TO COSTS
• The amount of the abatement from each participating
governmental unit must be proportional to the public
benefit received
• Bond proceeds must be allocated to the cost of the
portion of the Project within the jurisdiction of the
participating governmental units
• Necessary to fully understand the other funding sources
and their restrictions on uses to ensure that all costs of
are covered by an authorized source

13. PROPOSED FINANCING STRUCTURE
• One issuer of publicly offered GO abatement bonds
• Primary Issuer secured by GO abatement bond from
each other participating governmental unit
• The general obligation pledge of each participating
governmental unit is relatively secure but there are risks
to the Primary Issuer, including the risk of non-payment
or delays in payment
• Loan bond proceeds to the private entity to finance a
portion of the costs of the Project

14. Loan Repayment
• Loan repaid revenues of the private entity
• Operating and maintenance costs paid first
• Principal of and interest on bank loans paid ahead of
Loan of bond funds
• Risk project isn’t completed
• Risk private entity ceases operations

15. BUSINESS SUBSIDY
• Business Subsidy includes “the principal amount of a
loan at rates below those commercially available to the
recipient”
• Business Subsidy Law requires an agreement between
the government units and the private entity to
– meet certain wage and job goals and
– to agree to operate the project for at least five years
• Exception: after a public hearing governmental units
can determine creation of jobs is not a goal of the
subsidy and set the wage and job goals at zero