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would require calculation of the minimum annual basic rent
payable by petitioner on the basis of the annual debt service of
newly issued tax-exempt bonds bearing the interest rate for such
bonds extant at that time. By January 1992, interest rates on
newly issued tax-exempt bonds had declined dramatically to
approximately 6.5 percent from the 10.5 percent rate extant in
1984 when Mercer County issued the 1984 tax-exempt bonds.
Petitioner determined from the refinancing study that if the 1985
sale and leaseback were modified to require petitioner to pay
minimum annual basic rent calculated by reference to tax-exempt
bonds issued in early 1992, its minimum annual basic rent obliga-
tion would be decreased by approximately $4.2 million. Conse-
quently, petitioner concluded that it would attempt to effect a
modification of the 1985 sale and leaseback in order to achieve
such a substantial reduction in its minimum annual basic rent
obligation.
There were three significant hurdles that petitioner faced
in achieving its objective of modifying the 1985 sale and
leaseback in order to reduce substantially its minimum annual
basic rent obligation. First, pursuant to the terms of the 1984
tax-exempt bonds, such bonds were not redeemable before December
30, 1994. Second, the 1985 sale and leaseback did not allow
petitioner to require Mercer County to redeem the 1984 tax-exempt
bonds. Third, although each owner participant had the right
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