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Hockey Prep School in Payson? Or Town funding boondoggle?
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* December 02, 2017, 08:39:21 AM
Hockey in Payson?  Better than hockey!  600 Students paying $50,000.00 a year for private prep plus 100 new jobs and an activity center to boot?  Good golly, sounds almost too good to be true.  You know what they say…… So I did some digging.

Varxity Development provided $125k matched by Town funds.  That is for a study and a promise to waive Town fees for development?  Good thing our Mayor Swartwood found this Developer.  We should also be grateful that Mr. Ploszaj with Community Center Partners LLC convinced Varxity to have such a grand plan and bring it here to Payson. 

Mr. Ploszaj is no stranger to grand plans.  In 2015 Mr. Ploszaj announced other grand plans with apparent local Payson roots. 

“Following the recent announcement regarding the expansion plans in the greater Knoxville, Tennessee area of a brand new 300,000-square-foot global headquarters for Advanced Munitions International LLC, AMI Properties Development LLC has named Lee Ploszaj as President and CEO.”

The name “Advanced Munitions International” may sound familiar.  It is similar to Advanced Tactical Armament Concepts (ATAC).  You know, the ammo place that shut its doors abruptly here in Payson.[ii]  I suspect they are the same company?  It appears the United States District Court, Eastern District at Tennessee, Knoxville thinks so as well.  [iii]

But no worries, Community Center Partners must be a good place right?  They have been in business since 07/27/17. [iv]   Wait, two months?  Well, in any event “Kudos” to them for landing such a large potential client with such ambition in only sixty days of operation.  The managing Member and Partner?  Mr. Ploszaj.

Varxity Development must be solid though right?  Well, the “equity crowd funding” round in 2014 got things going. [v] The reported two (yes, 2) employees must be very busy with all the others campuses. [vi] Maybe that is part of the 100 new jobs?

I would not be surprised if the truth on this grand deal lies behind several layers of LLC’s and out of state corporate entities, maybe Delaware or Nevada corporations? 

Confident the Town Council vetted all of that before they voted to spend $125,000.00 of our tax dollars to fund the project.  Right?  That was all vetted?  I mean, a hunch and 15 minutes with google got me this far….

Curious, has that $125,000 check cleared yet?    ::)

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http://www.theoutdoorwire.com/story/1445540950hz47kev73b6

[ii] http://www.paysonroundup.com/business/ammo-plant-update/article_78e2067c-187a-5d03-a570-32a11453c5a7.html

[iii] http://law.justia.com/cases/federal/district-courts/nevada/nvdce/3:2016cv00542/117557/15/  (Kresser v. Advanced Tactical Armament Concepts, LLC et al, No. 3:2016cv00542)

[iv] http://ecorp.azcc.gov/Details/Corp?corpId=L22058569

[v] https://www.crunchbase.com/organization/varxity-development-corp#/entity

[vi] https://www.equitynet.com/c/varxity-development-corp


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* December 12, 2017, 05:37:38 PM
#1
Great research Jeffrey.

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December 14, 2017, 09:50:02 AM
#2
Thanks Scott,

It is interesting.  The post above was a letter to the editor.  The Round Up chose not to publish it.  No issue there.  Well within their discretion not to publish.  I did however send a blind copy to every member of the Town Council.  The Town Council members are well aware of the concerns?    A jpg of the distribution list is below.



The most recent information on the project is from a Roundup article of 10/24/2017. 

Quote
The town began meeting with Community Center Partners (CCP), including Ron Chambless, chief operating officer and director of operations, in June to discuss revitalizing Rumsey Park, including replacement of Taylor Pool and possibly bringing a prep school to the area.

The consultants will develop a plan for the park and the school over the next six months.

Varxity has put “skin in the game” by agreeing to pay half of CCP’s consulting cost. So far, however, neither side has paid CCP, which will bill the town and Varxity on a monthly basis. i

So, you know, more digging. 

Turns out Mr. Chambless has a history of projects.  He appears qualified to address issues surrounding the community center via his firm “Kanet Productions.”  Mr. Chambless has a long work history with YMCA, etc.  Likely a good choice for a study on our recreation center.   

By way of example, the City of Glendale hired Mr. Chambless to conduct a study and increase enrolment and membership at the Foothills Community Aquatic Center (FRAC).  His firm was engaged for a contract to conduct the study.  ii  It appears based on the recommendations of Kanet Productions, Mr. Chambless had some success and positive impacts with the FRAC recommendations:

Quote
Initial Successes @ FRAC:
The summer 2014 Membership Drive:
785 new members compared to 225 in June 2013
88 new Silver Sneaker members
$38,576 in monthly revenue vs. $16,640 in June 2013
Quality marketing and branding in the community
Staff Teams leading the initiatives and event iii

Good stuff right?  No doubt that sort of improvement has a value to the end user.  So, how much was Kanet paid?  The contract had a value of $15,000.00. iv

That’s right, a comparable study had a total value of $15,000 three years ago at the city of Glendale, AZ.  Three years later?  $250,000.00 to the Town of Payson. ($125k to Town, $125k to Varxity) Chalk it up to inflation and travel time I suppose?

Payson enters into a $250,000.00 contract to study the rec center and the feasibility of a 600 student hockey prep school with students paying $50,000.00 per year.  A pipe dream $30 million a year prep school operation in a town with no infrastructure for it, no airport, and no housing?  Sounds legit. 

By all means, spend $15,000.00 on a study.  Commit to $125,000.00 of a $250,000.00 study with a “co-partner” that has no verifiable assets, and a player who has an apparent history of bad business dealings in the Town of Payson?

It appears P. T. Barnum was right? 

i http://www.paysonroundup.com/news/local/work-on-parks-master-plan-begins/article_1e02c629-08c6-5b51-837c-4953b04c2c2d.html

ii https://www.glendaleaz.com/boardsandcommissions/documents/051214ParksandRecAdvisoryCommission-F.pdf

iii https://www.glendaleaz.com/boardsandcommissions/documents/102014ParksRecreationAdvCommission-F.pdf

iv https://www.glendaleaz.com/clerk/Contracts/9200.pdf

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December 14, 2017, 05:45:46 PM
#3
One thing did strike me as odd.  A contract of this size, one would think there is a procurement process?  One would be right. There is a “Procurement Policy.” 1    Well, let’s see what it says……

Quote
1.1.5 PURCHASES GREATER THAN $25,000
Competitive bids must be sought for all purchases of supplies, materials, equipment, insurance and contractual services, excluding professional services, having an estimated cost of $25,000, or more, per transaction, unless an alternate method as described in Section 1.3 is used. The method for procurement of professional services, including, but not limited to, that of an attorney, an accountant, an appraiser, an architect, a landscape architect, a land surveyor, a geologist, and an engineer is described in Section 1.6

Well, OK, let’s go see 1.6……

Quote
1.6.1 PROFESSIONAL SERVICES OTHER THAN ATTORNEY

The process for engaging professional services from an architect, assayer, engineer, geologist, land surveyor, or landscape architect, is governed by ARS Titles 15, 28, 34 and 41. Engineering projects under $500,000 and architect, landscape architect, assayer, geologist or land surveying projects under $250,000 may be awarded by any of the following processes. For projects exceeding these dollar amounts Section 1.6.1(c) must be used.

Any of the following processes may also be used to engage an accountant, appraiser, or any other professional service not specifically listed above:

a)   Direct Select – The department may directly select the registered professional.*  After the selection is determined, a scope of services with an associated fee is negotiated.

* Emphasis added. 

Well, there you have it.  The Town can’t “buy” anything without an RFP, but it can “direct select” up to $250,000.00 in services without so much as a RFP, resume, application or public notice.  Pretty well good to go up to $250,000.00 as long as you can code it “Professional Services.”  That seems, well..... generous.   :o


Well, wait a minute……  the code requires “Registered Professional.”  That would seem to imply a “registered professional.” You know, anybody that has a state issued license for their craft?  Accountant, Dr., Engineer, Veterinarian, Nail Tech, Hairdresser, Barber,  Teacher, good golly that is a long and incomplete list.  Yerp all that and more.  They would possibly qualify as a "registered professional."     Park adviser with hockey twist?  Hmmmmm…..

How does one register to be a “Park adviser with a hockey twist?”  

OK, so we move down to this section….

Quote
a)   Selection Committee – The department may initiate a selection committee to develop a preferential short list based only on demonstrated competence and qualifications. The committee may solicit qualifications from potential firms in order to establish the short list. The short list must contain at least three firms, listed in order of preference. The selection committee shall not request or consider fees, price, man-hours or any other cost information in the selection of the short list or order of preference. The Town shall enter into negotiations with the highest ranked firm taking into consideration contract terms, scope, complexity, compensation, etc. If the parties are not able to negotiate a satisfactory contract, the Town shall terminate negotiations and enter into negotiations with the next firm on the short list. This process is continued until an acceptable agreement is reached.

b)   Request for Qualifications – The department issues a Request for Qualifications (RFQ) and advertises in the newspaper for the project. A selection committee will evaluate the statements of qualifications and performance data submitted in response to the RFQ. The selection committee may also conduct discussions with no more that 3 firms deemed to be the most qualified based on competence and qualifications only. The selection committee shall not request or consider fees, price, man-hours or any other cost information in the selection of the short list or order of preference. The committee shall prepare a short list in order of preference. The Town shall enter into negotiations with the highest ranked firm taking into consideration contract terms, scope, complexity, compensation, etc. If the parties are not able to negotiate a satisfactory contract, the Town shall terminate negotiations and enter into negotiations with the next firm on the short list. This process is continued until an acceptable agreement is reached.


Well, heck, looks like a RFP or RFQ and maybe some articulation of qualifications, is required for the gig? Selection committee maybe?   Anybody remember seeing that RFP / RFQ in the Roundup? Any council member on that selection committee?   

Bueller?  Bueller?

On the bright side, at least the contract for the consulting is on a standard form? That way it precludes Joint and Several?  Nobody signed a $250,000 contract on a joint and several liability basis without an RFP?  Right? 

No worries, if not on a standard form, it has been reviewed by Legal….  Right?   ::)

Quote
1.12 CONTRACTS

1.12.1 GENERAL 

All contracts exceeding a value of $25,000 shall be on the Town’s standard contract form unless otherwise approved by the Town’s Legal Department.

 1 https://www.egovlink.com/public_documents300/payson/published_documents/Fiscal%20Policies/504-Procurement-Policy-replaces-102.pdf


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December 15, 2017, 02:55:27 PM
#4
Figured it would be good to look at the contract.  So, records request it is.....

Walked it in to Town Hall in person.  Don't want it getting lost in the mail....


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December 16, 2017, 08:42:10 AM
#5
The Roundup had an editorial that sheds some additional light on this subject.  We are getting to the heart of it.  A bond for funding!  Oh goody!  A new tax. 
 
http://www.paysonroundup.com/opinion/editorials/prep-school-raises-some-intriguing-questions/article_cce0c75f-b2bc-5712-aa5b-5aadc8fb9b28.html

I applaud the Roundup's naive enthusiasm for this project.  It seems entirely plausible that a 600 student boarding school focused on only Ice Hockey would thrive in Payson.  Every time I type that I just laugh.


So, lets see what the completion is for a prep boarding school dollar.  Quick search, at least 104 in the U.S. and Canada.  Some look fantastic!  100% college admission, traditional history of elite school status.  Here are some sample photos of various campuses:










Wow!  I mean, I want to go!  Here is a better list. 

https://www.boardingschoolreview.com/ice-hockey-boarding-school-sports

And the competition looks fierce.  Lots of information out there on the inter school games.  Really really looking forward to cross country rivalry reporting in the Roundup.  The frequent flyer miles for these students will be off the hook!  Eighty nine of the schools are in the north east! 



Look at all that competition. 

http://www.maxpreps.com/state/ice-hockey/prep-schools.htm

So, mom and dad can swing at $50,000 a year for their pride and joy to go away for hockey.  Something tells me mom and dad are going to lean more towards places like above? 

Well, unless the school has a great salesman.  That must be true, they convinced the town of Payson to spring for their vision?

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December 16, 2017, 09:37:27 AM
#6
Well, that's crazy.  I had commented on the Roundup editorial.  No link to this site, nothing over the top.  Click on refresh, and "poof" no more comments. 

I still had one comment saved.  Read as follows:

Quote
BTW, Resolution No 3065 of the 09/21/17 Council meeting, funding all of this, appears at best suspect as they did not follow the “Procurement Policy” and it appears to fall outside of “Professional Services” designation as Community Center Partners, LLC (CCP) does not appear to be a qualified “registered professional.”  There was no RFQ, RFP or Selection Committee.  How the council can spend $125,000.00 without some of that is beyond me.  But, that is just my take


The other was essentially a copy of this one:

Quote
I applaud the Roundup's naive enthusiasm for this project.  It seems entirely plausible that a 600 student boarding school focused on only Ice Hockey would thrive in Payson.  Every time I type that I just laugh and laugh.

Nothing seems over the top there? Now it is back to Zero comments.   I guess a view that is in disagreement with the narrative gets deleted?   :o





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December 20, 2017, 07:02:40 AM
#7
In case you missed it, the Roundup had a blurb on where your tax money went.  In this case, PickleBall money.  I have no idea what "PickleBall" is but it used to be worth $62,000.00 to the town. 

Quote
Money is also going toward upgrading the town’s server and communication equipment; providing janitorial services at the library; improving the police department’s maintenance building and vehicle repairs. There was money set aside to improve the tennis court and convert one of the courts into a pickleball court, but that money has been “temporally” diverted to help fund a parks master plan of Rumsey Park.

http://www.paysonroundup.com/news/local/town-details-were-sales-tax-increase-is-going/article_dc2cdd1a-e96a-5011-a199-ef25f0485bc7.html

Well, nice they put that in quotes.  It does not appear to be temporary.  It was diverted.  It was reallocated.  It was spent where it was not approved. 

Here you go, from the Town Council minutes of 09/21/17. 

    
Quote
Council Member Sterner asked if there would be ice rinks. Mr. Garrett replied he would not know exactly what would be there until the master planning process which would include a public input component. Council Member Sterner noted there was a budget for the Master Plan, but noted that was not the exact amount and asked where the rest of the funding would come from. Mr. Garrett explained the first $50,000 came from the Parks Master Plan, $62,000 came from re-doing the basket ball courts and working on the tennis courts to put pickle ball courts in, as well as $10,000 the Finance Department found that would not be used this year.

http://payson.granicus.com/MinutesViewer.php?view_id=2&clip_id=2118

So, they removed a tangible benefit to study a less than likely outcome.  Makes perfect sense to me.

Guess the $50,000.00 set aside for the study was not enough?  Wonder why? 

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December 20, 2017, 07:06:41 AM
#8
It appears I am not the only one with concerns?  Thank you to community memeber Ms. Barbara Buntin for taking the time to express her concerns.  It is a good read.

Here is a snip:

Quote
My issue is this project is going on town/public land and the mayor and council has not asked the residents of Payson if they want the use of their park changed in such a substantial way.

The mayor’s plan is to offer the people that he represents a choice between three shiny bobbles and not whether we want any shiny bobbles.

http://www.paysonroundup.com/opinion/letters_to_editor/is-this-a-good-fit/article_742b1e16-6f2f-5582-b030-32b3f8a88e32.html

Again, thank you Ms. Buntin for expressing some concern for the project. 

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December 20, 2017, 07:25:34 AM
#9
The minutes for the Town Council meeting of 11/16/17 are up.  What do we have there?

Quote
LaRon Garrett, Town Manager, gave a brief update on the community center. The planning team had a meeting last Tuesday to work on the Master Plan. The community center would include a new a pool and an activity center as well as tie in with the College Prep Academy. The team was also putting together a communications plan that would include using Face Book, Twitter and Instagram. Other social media would include newspapers and radio. There would be community groups and focus groups. There would be a public meeting in January that the general public would be invited to. The media campaign would kick off with a live Face Book broadcast on December 5, 2017. Mr. Garrett noted Saturday, November 18, 2017, was the Turkey Trot and December 2, 2017, was the Electric Light Parade.


http://payson.granicus.com/MinutesViewer.php?view_id=2&clip_id=2133

A meeting in January?  Guess I will have to clear my calendar?  I sure hope my records request gets honored before that meeting.  Would be good to see the contract.

The last public meeting I went to was to discuss the sales tax proposal. I walked out after it became abundantly clear it was not a meeting to discuss tax, but how to spend the money.  What was it? An "imaginering" session?  Good that it was on April Fool's day, cause boy they sure had a lot of fools show up.  Myself included. 

Breakfast was a nice touch. 




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December 20, 2017, 08:11:47 AM
#10
Quote
Moore, with Varxity Development Corporation, knew he wanted to open a college prep school with a hockey focus in the Southwest and initially spent 10 months negotiating with Gilbert, which already has an ice rink. Those negotiations fell through when the city balked at reconfiguring its park to meet Moore’s needs, Chambless said. He looked at Scottsdale briefly. CCP then convinced Moore to give Payson a look.

http://www.paysonroundup.com/news/local/focus-groups-meet-to-discuss-parks-plan-prep-school/article_56c98d40-64e7-53b3-990d-d67c07d87e07.html

I think it is time to do some digging........ 


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December 20, 2017, 12:30:31 PM
#11
Quote
Moore, with Varxity Development Corporation, knew he wanted to open a college prep school with a hockey focus in the Southwest and initially spent 10 months negotiating with Gilbert, which already has an ice rink. Those negotiations fell through when the city balked at reconfiguring its park to meet Moore’s needs, Chambless said. He looked at Scottsdale briefly. CCP then convinced Moore to give Payson a look.

Hmmm.  This is odd.   First thing was a quick search of Gilbert's public records. 



Well, no record in the system of "Varixty."   But, sometimes things happen, so I figured I could follow up.   Maybe a quick email to the Mayor of Gilbert? 



Mayor Daniels was kind enough to respond quickly.  Very kind of her.   



The Mayor and Vice Mayor of Gilbert have no recollection of this?  Ten months of efforts by Varxity and no recall?   

I will let you know if the Parks Director, Mr. Buchanan gets back to us. 


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December 20, 2017, 12:57:36 PM
#12
Something else caught my eye. 

"The town began meeting with Community Center Partners (CCP), including Ron Chambless, chief operating officer and director of operations, in June to discuss revitalizing Rumsey Park, including replacement of Taylor Pool and possibly bringing a prep school to the area."

June?  How is that even possible?  Lest we forget....

"But no worries, Community Center Partners must be a good place right? They have been in business since 07/27/17. [iv]   Wait, two months?  Well, in any event “Kudos” to them for landing such a large potential client with such ambition in only sixty days of operation.  The managing Member and Partner?  Mr. Ploszaj. "

So our Town meets with an entity that is not even formed yet?  Unless I am wrong, June always comes before July. 

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* December 20, 2017, 08:03:48 PM
#13

FYI
January Chamber Lunch to Feature Consultant for
SH Prep Academy and New Community Center
 
Date:  Tuesday, January 9, 2018
Time:   11:00 to 11:30 am networking
11:30 to 12:30 lunch and speakers
Location: The Mazatzal Hotel and Casino
 
The featured speaker will be consultant, Ron Chambless from Community Partners, LLC. Ron will provide an update on the proposed High School Prep Academy for elite athletic training, and the private/public partnership feasibility study for a new Payson Community Center. He will discuss community impact, timelines and other strategic issues related to this project.

The February Luncheon will feature Craig Swartwood talking about what is coming up in 2018.

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December 20, 2017, 08:12:44 PM
#14
Something has been bugging me all day.  The round up reports the following: 

Quote
"CCP has agreed to produce the parks plan in six months, which includes a financing plan that is risk-neutral to the town. Currently, the consultants are in month three of the study." 

"Chambless said they have already secured a backer who would loan the money to build the community center/pool. Membership and use fees would help pay back the loan and they estimate they would need to bring in about $600,000 to $700,000 annually to make the project work."

"Possible funding source includes a private activity bond. Planners say it will be “risk neutral” with town putting out zero capitol."

"Payson Mayor Craig Swartwood said the town would also retain ownership of the entire park and its facilities. The prep school may use the space, but would not own it." (1)

Hmmm....  That just does not add up.  A "risk neutral" loan.  Experience tells me somebody has some risk?

So, what exactly is a "Private Activity Bond?"  The short answer appears to be a bond issued by the Town of Payson, with the debt repaid by the private entity.  In this case, the entity would be "Varxity Development."  I will remind you that Varxity has no apparent verifiable resources as shown way back at the first post.  Crowd funding?  That would make the bond issuance "risk neutral" on paper assuming Varxity could cover the note.   But what happens if they don't?  Who gets stuck then? Taxpayers?   

A typical default would have the bond holder take the loss.  About 60% on a high yield bond default. (2)  So, as the issuer does the Town of Payson then become the guarantor? We need some information on the Private Activty Bond (PAB).

Here is the definition:

Quote
A municipal security of which the proceeds are used by one or more private entities. A municipal security is considered a private activity bond if it meets two sets of conditions set out in Section 141 of the Internal Revenue Code. A municipal security is a private activity bond if, with certain exceptions, more than 10 percent of the proceeds of the issue are used for any private business use (the “private business use test”) and the payment of the principal of or interest on more than 10 percent of the proceeds of such issue is secured by or payable from property used for a private business use (the “private security or payment test”). A municipal security also is a private activity bond if, with certain exceptions, the amount of proceeds of the issue used to make loans to non-governmental borrowers exceeds the lesser of 5 percent of the proceeds or $5 million (the “private loan financing test”). Interest on private activity bonds is not excluded from gross income for federal income tax purposes unless the bonds fall within certain defined categories (“qualified bonds” or “qualified private activity bonds”), as described below. Most categories of qualified private activity bonds are subject to the alternative minimum tax. The following categories of private activity bonds are qualified bonds under current federal tax laws (3)

Quote
Private Activity Bonds (“PABs”) are a type of municipal bond.  A large segment of municipal bonds are issued to support infrastructure projects that serve public purposes.  While PABs similarly concern infrastructure projects, offer some public benefit, and are issued by a governmental entity, PABs’ distinguishing feature is that their proceeds chiefly benefit a private business. (4)

So in a nut shell, a PAB is a high quality loan, at a lower rate as it may be a tax free municipal bond, for private development.  In a best case, this is a subsidy for developers.  Lower rates, lower costs.  Lean on the credit of the Town.  Yes, that is a subsidy for development no matter how you look at it.    Mot of the PAB's appear to be used for low income housing development. 

Quote
Like the broader category of municipal bonds, interest income from PABs is generally exempt from federal and often state income tax. Historically, this income tax exclusion allowed housing bond issuing agencies to sell bonds to investors at lower interest rates, which in turn led to housing bond-financed mortgages, both single family and multifamily, to be at a lower rate than comparable market-rate mortgages. (5)

Their application / use is limited by caps imposed by the Federal Government. (6) In Arizona that cap, and the available pool of money is adminstered by the Arizona Commerce Authority (7) as authorized via Arizona Revised Statue. ( 8 )

But why the focus on Varxity?  The School?  Well, assuming the PAB cap is reached, it may be that qualified public educational facilities are not subject to the cap. (9)

Clearly much more research to be done, but the central question remains, who is liable for the bond if Varxity defaults? Will the bond include a Credit Default Swap if / when Varxity deafults? 

 
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(1) http://www.paysonroundup.com/news/local/focus-groups-meet-to-discuss-parks-plan-prep-school/article_56c98d40-64e7-53b3-990d-d67c07d87e07.html

(2) https://www.thebalance.com/bond-default-definition-and-explanation-416900

(3) http://www.msrb.org/Glossary/Definition/PRIVATE-ACTIVITY-BOND-_PAB_.aspx

(4) https://watttieder.com/resources/articles/private-activity-bonds

(5) https://www.novoco.com/notes-from-novogradac/how-unleash-underutilized-private-activity-bonds-build-more-affordable-rental-housing

(6) https://www.irs.gov/pub/irs-pdf/p4078.pdf - Also in pdf attachment

(7) http://www.azcommerce.com/financing/business-and-project-financing/private-activity-bond-volume-cap

( 8 ) https://law.justia.com/codes/arizona/2016/title-35/section-35-901/

(9) https://www.irs.gov/pub/irs-pdf/p4078.pdf


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