Beatrice council hears proposal to serve as conduit issuer for tax-exempt bonds for Lincoln student housing

A proposal to have the city serve as a conduit issuer for tax-exempt bonds to refinance an existing loan on the 5050 student housing project at the University of Nebraska–Lincoln was presented to the Beatrice City Council on June 30, 2025. The presentation was by bond counsel Steven Lykes of the QTA Rock law firm on behalf of the P3 Foundation; the council heard details, asked technical questions and did not take immediate action.

City staff introduced the idea as a way for the P3 Foundation to convert a commercial taxable loan into lower-cost tax-exempt financing so the nonprofit could expand its charitable work tied to the project. Steven Lykes told the council that under the tax code a 501(c)(3) may use tax-exempt financing only if a municipal issuer — a city or county — issues the bonds; he also said “the statute is very clear that the city cannot be liable on this type of debt.”

The nut graf: converting the existing loan to tax-exempt bonds would lower the borrower’s financing costs and free up cash for the borrower’s stated charitable purposes, including a $50,000-per-year scholarship commitment tied to residents of the building. The city would act only as a conduit issuer; Lykes said state law prohibits the city from being held liable for the bonds’ debt service.

Details presented: the project sits on University of Nebraska property and is operated as a public–private partnership. The property has 125 units and about 475 beds, Lykes said, and is currently fully leased and preleased for the coming year. The project’s owner/sponsor structure includes Greystone Housing Impact Investors and the P3 Foundation; P3 capped rent increases for the property at 3% annually and pledged up to $50,000 a year for students living in the facility.

Lykes explained why Beatrice was asked to act: Lancaster County and the city of Lincoln were approached first but could not commit on the timeline or financial structure the borrower needs. Lykes said the county may issue bank-qualified debt this year and could not guarantee availability for this refinancing; Beatrice has already surpassed the $10,000,000 bank-qualified threshold in 2025, so a conduit issuance for this project would not affect the city’s bank-qualified capacity. He added that the city’s standing or bond rating would not be affected because, under accounting rules, conduit debt does not become the city’s liability.

Council members asked about term length, borrower qualification, and potential cost or liability to the city. A council member asked about the bond term; staff said the proposed bond term is 26 years. Lykes said any direct costs to the city would be covered by the foundation and that the city attorney would review bond documents. He described the typical two-step council process: an initial appearance to answer questions, then a return to hold the required public hearing and adopt a bond resolution authorizing an issuance up to an agreed limit (Lykes estimated an upper sizing near $30 million depending on rates and fees).

On risk, Lykes said conduit defaults could prompt lawsuits against issuing entities, but he characterized the risk as unlikely and said state law would typically allow the city to be dismissed from liability claims quickly. City staff reiterated that, under the applicable state statutes and accounting standards, the bonds would not be city debt.

No motion or vote was taken. Council members asked staff to continue work if they were willing to pursue the option: next steps would include drafting engagement letters, working with the city attorney, and scheduling the required public hearing and a subsequent resolution if the council chooses to proceed.

An item of context raised in the discussion: the refinancing’s stated purpose is to convert taxable debt to tax-exempt debt to increase property cash flow and support the foundation’s scholarship and affordability commitments; the city would receive no direct ongoing payment from the project beyond customary fees if it proceeds.