Bet most if not 99% know why the loophole exists now anyways!  

It was to allow neighboring counties to share costs of aviation resources that Part 91 and public operations prevented.

For instance, one county had a mosquito control helicotper they didn't use 100% of the time.  The neighboring county asked if the first county would spray for mosquitoes too.   Problem was, they couldn't legally get compensatated for the aerial application.   So, they lobbied for a change in the definition of "public aircraft" and got it.

Suddenly, the loophole was created that now allows the county flying mosquito control to have a Part 135 certificate and compete as a commercial operator in air commerce with their public aircraft, simply because they don't call it public aircraft anymore.

Taxpayers fund the entire operating costs, an advantage the operator has over legitimate commercial operators, and now they have an ability to charge third party insurance companies for costs that float over their tax revenues.

It went from a cost sharing endeavor with an adjacent government entity to being a mon0polized commercial air ambulance authority using public aircraft!