Despite the help of many MPR members, we were unsuccessful in our efforts.

As you may know, the Saint Paul City Council, sitting as the Housing and Redevelopment Authority (HRA), first took up the matter of this financing at their meeting of October 27, 2004. They held a public hearing, following which they unanimously adopted the preliminary resolution for the financing.

Unfortunately, a form that was supposed to be on file at the City before the public hearing was not on file. The group SaveWCAL used this harmless and minor procedural defect to cause the City Council to hold another public hearing, this time immediately prior to the vote on the final resolution, on December 8. The group actively lobbied councilmembers against the resolution, and their attorney spoke against it during the public hearing at the meeting.

Despite indications from councilmembers or aides to councilmembers that the proposal would pass, it failed to be adopted on a 3-3 tie vote, one councilmember abstaining due to a conflict of interest.

Because of the earlier unanimous support we received, because the vote was so close, and because of the significantly greater costs that commercial rate financing will impose on us ($240 thousand per year), we felt obligated to make an effort to have the matter brought up for reconsideration. According to the Council's procedural rules, a motion for reconsideration had to be made sometime before the end of the next meeting of the entity (that would have been December 22), and had to be made by someone on the initially "prevailing side". That meant that we had to persuade Councilmembers Jay Benanav or Dan Bostrom or David Thune to make the motion and change their vote.

We made a strong effort, through grass roots lobbying and through personal contact. Many of you sent emails and made other contact. I saw some of your correspondence, and it was lucid and persuasive. Although Councilmembers Kathy Lantry, Debbie Montgomery and Lee Helgen continued to support us, no one who voted against the resolution was willing to change their vote. (Councilmember Pat Harris had a conflict and could not vote.)

I would like to thank everyone who helped in this effort. The acquisition of WCAL represents an important strategic effort, unleashing a great deal of creative energy inside MPR and attracting passionate attention from potential listeners. We will pursue alternatives, making every effort to keep our borrowing costs low, so that we can devote our resources to providing the best public radio in the nation.

There were some questions raised, comments made, and responses given by councilmembers who voted against this proposal, and by others, that created confusion and misperception and deserve a response. Some of you asked us about these issues by phone or by email. The question or comment is presented here in italics, and our response follows:

1. A councilmember wrote: The main purposes of conduit bonds are to eliminate blight and create jobs. The blight argument is a non-issue. It does not apply in this case. The question of job creation is debatable. St. Paul's gain has directly resulted in a loss of jobs in the community hosting St. Olaf. Job raiding and dislocation of workers - especially within the State of Minnesota is frowned upon and is not in keeping with the City's policies.

Another councilmember wrote: I can't seem to figure out how the criteria re: "reducing blight or eliminating chronic unemployment" is met. Believe me, if I could I would. It would be so much easier than reading 1200 e-mails and making my friends REALLY angry with me. I hope my wife will eventually forgive me. The purchase is probably an excellent business decision and I'm sure will have all kinds of positive impact but just does not seem to fit the conduit financing criteria.

SaveWCAL wrote: MPR's proposal to the HRA does not meet statutory requirements and therefore is against the law. And further: Conduit revenue bonds are to be used "for the purpose of preventing the emergence of blighted and marginal lands and areas of chronic unemployment." MPR's proposal to the HRA does not meet statutory requirements and is therefore against the law.

MPR replies: The proposal for conduit revenue bonds for this project falls squarely within the purposes of the authorizing statute. Conduit revenue bonds are authorized by Mn Stat 469.152, which has several stated purposes. The principal purpose relied upon by nonprofit organizations when they ask issuing authorities to issue tax exempt conduit bond financing on their behalf is the following: "to reduce the cost of borrowing by local governments for public purposes". We believe, and the City Council could have determined, that the operation of a public radio station is a "public purpose". This alone would have been sufficient to justify approving the issuance of the bonds. This has been the rationale for the issuance of conduit revenue bonds for the purchase of public radio stations in countless situations throughout the country, and even here in Saint Paul when MPR refinanced its purchase of KSJN 99.5 FM in 1990. The City Attorney and the City Council's bond counsel both assured the Council that this was the case.

Another stated purpose of conduit revenue bonds is "the active promotion, attraction, encouragement, and development of economically sound industry and commerce". The end of such "promotion, attraction, encouragement and development" is to prevent blight and unemployment. This is the purpose upon which much attention and misdirection was focused by councilmembers and SaveWCAL. It is not the sole purpose of conduit revenue bonds. But even if MPR were only relying on this purpose in the statute, this project should be eligible.

Note that it is not the purpose of conduit bonds to eliminate blight or solve existing unemployment; instead the purpose of conduit bonds is to avoid the need to eliminate blight and unemployment. If the financing serves the purpose of promoting economically sound industry and commerce, and the borrower operates a revenue-producing enterprise, it is eligible for tax exempt conduit bonding.

The project to be financed will promote, attract, encourage and help to develop economically sound industry and commerce in Saint Paul -- by assisting MPR in further growing its public broadcasting activities. The project includes the addition of jobs to downtown Saint Paul, so that Minnesota Public Radio can operate the new station. One of MPR's promises to St Olaf was that we would give priority to hiring WCAL employees for KSJN or for WCAL. We have already hired seven WCAL employees. At the same time, St Olaf College will have funds available to hire additional professors and support staff, maintaining employment in Northfield. St Olaf has already announced the uses they intend to make of the proceeds of the sale, including endowed professorships in several disciplines. By borrowing from the future, as MPR is doing, St Olaf is able to replace jobs and MPR is able to add jobs, creating a net increase in employment.

In addition, the project includes construction in downtown Saint Paul. As part of its capital project to expand its studio and production facility in Saint Paul, MPR tore down one of downtown's ugliest buildings and is building an architecturally significant building in its place. The construction plans have been modified to include studios and offices for the new KCMP (formerly WCAL). Effectively, then, the project does help to avoid blight.

The City Council should have been able to find the project eligible for tax exempt conduit bond financing either under the "public purpose" language of the statute, or under the "promotion of industry and commerce" language.

2. A councilmember wrote: The decision made by St. Olaf was not (as asserted initially to the City Council) made out of the blue. In testimony at the Council hearing, it was admitted that MPR has solicited this sale several times over the past five years.

MPR replies: MPR never asserted that the decision made by St Olaf College was made "out of the blue". But we are at a loss to understand why this issue is relevant. In testimony before the City Council, we indicated that we had communicated to St Olaf regularly over several decades that, if ever they decided to cease operating or to sell WCAL, they should inform us. We felt a dual responsibility – the addition of the WCAL frequency to our stations and services would provide a marvelous opportunity to expand the diversity of public radio that we offer; and it was important to save the WCAL frequency for public radio.

This was not an unusual emergency request – nonprofits regularly request that the HRA issue tax exempt conduit revenue bonds on their behalf to finance large capital projects. Such financing enables the nonprofit to devote greater resources to its mission-related activities instead of the payment of interest. Saint Paul's HRA has been supportive of the city's nonprofit community in this regard – its hospitals and nursing homes, its charter schools and private schools, its museums, its social service agencies and other nonprofits have all used conduit revenue bonds for their large capital projects -- and this project is no different. The financing is repaid with privately raised funds and earned income, not with public funds; the City takes no credit risk and even earns a substantial fee for the issuance of the bonds.

3. A councilmember wrote: The initial vote taken by the Council was believed to be for the sole purpose of financing the construction of MPR's new facilities. When it was revealed that the Council had not been made aware of the financing for the WCAL purchase, the bond attorneys and the city attorney's office recommended that the public hearing and vote be reheld and retaken.

MPR replies: MPR met with each councilmember or councilmember's aide before the initial vote in October and made it clear that the principal purpose of the proposal was to add the refinancing of the purchase of WCAL to the existing bonding authority that the City had granted to MPR in 2002. The purpose of replacing the initial financing of the WCAL acquisition was clearly stated on the application and on the agenda item that was voted upon.

Here is the agenda item that appeared on the HRA agenda on that day:

PUBLIC HEARINGS
3. Preliminary Approval for Issuance of $22 Million Conduit Revenue Bonds for the MPR Project and Acquisition of WCAL/KMSE, District 17.

Having to redo the public hearing was not related to a failure of notice to councilmembers, but rather a failure to have a draft of a form provided by the state's Department of Employment and Economic Development related to the approval process on file at the City. Although this failure was harmless, it nevertheless fell to bond counsel to determine whether it created a sufficient defect in the process to threaten the bonds. Bond counsel decided to recommend that the public hearing be re-held.

Conclusion

I hope these comments bring some light to questions you may have about the process and substance of this issue.

In spite of this disappointment, we recognize that the City of Saint Paul has been enormously helpful to us in our capital project. We thanked the councilmembers for supporting that portion of our proposal that provided additional financing for our building project, and expressed our hope that they share our enthusiasm for the significant addition this project brings to the architectural heritage of Saint Paul, not to mention the much improved and enlarged production and broadcast facility for MPR.

If you have further questions or comments, please don't hesitate to email me at TKigin@mpr.org or call me at (651) 290-1554.