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private business use of the financed pipeline.16 Our resolution
of the issues presented represents a matter of first impression.
1. Arguments of the Parties
Respondent determined that petitioner’s arrangement with
Company conveys priority rights to the capacity of the pipeline
and results in private business use of more than 10 percent of
the bond proceeds under section 141(b)(1). Respondent also
determined that payments received from the sewage ratepayers are
private payments that represent more than 10 percent of the debt
service on the bonds under section 141(b)(2).
Petitioner argues that the only purpose for constructing the
pipeline is the governmental purpose of sewage disposal. It
contends that the arrangement with Company does not involve any
use by Company of the financed pipeline and that Company uses
only the wastewater that is disposed of through that pipeline.
Petitioner contends that Company’s use of the wastewater begins
only when the disposal function of the pipeline is completed and
Company takes responsibility for the waste byproduct. Petitioner
argues, in the alternative, that, if Company’s arrangement is
16Respondent addresses his determination and his contentions
on brief to Company’s arrangement with petitioner. He does not
rely on the arrangements with the irrigators. Payments from the
irrigators will not exceed 5 percent of the debt service on the
proposed bonds. Further, as we discuss below, the sewage
ratepayers use the pipeline as members of the general public.
Therefore, their use cannot cause the pipeline to be private
business use property.
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