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Okay, this is actually about bonds, directly.

As part of our public-private fiasco, the city bought a bunch of rental properties (for grossly inflated prices), with the intent of tearing down to make way for the development. With the development stalled, they are continuing to rent out.

To buy the properties they sold a bond anticipation note, which will be coming due next fiscal year. They had to go for a short term (3 year) note, instead of seeking long term financing, because of some rule that you can't do long term tax exempt bonds if there are commercial rents.

To complicate matters: some of these properties are residential rentals, one is commercial. The wording I have seen on the tax exemption refers to "commercial," but I don't know if that is generic and also refers to renting out houses. Why this is important is they want to refinance with a long term bond and they are talking as if they are only renting out the houses (they are in fact renting out the commercial building, which is what generates most of the rental income).

So, does one of you muni nuance experts have a clue whether the "commercial rent" long tax exempt exclusion allows for residential rentals?

Thanks. (On the good side, my investigations of the developer have convinced me he is such poison no one will provide any private financing, without which the rest of the bonds won't get spent—I'm estimating $100 million or more in toxic waste lost to a single bank, and probably well more than $150 million lost across banks and high risk lenders—more power to the high risk lender who laundered the money the same day.)
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