SF 3730

1st Engrossment - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to public finance; exempting certain bonds 
  1.3             from the definition of business subsidy; authorizing 
  1.4             certain investments by joint powers investment trusts; 
  1.5             exempting certain airport obligations from the public 
  1.6             sale requirement; providing for state payment of 
  1.7             county debt obligations upon potential default; 
  1.8             extending sunsets for self-executing special service 
  1.9             district and housing improvement district laws; 
  1.10            authorizing special assessments for communications 
  1.11            facilities; modifying interest rate requirements; 
  1.12            increasing bonding authority for the financing of 
  1.13            metropolitan area transit and paratransit capital 
  1.14            expenditures; altering qualifications for residential 
  1.15            rental bonds; providing that the Uniform Commercial 
  1.16            Code does not apply to government security interests; 
  1.17            appropriating money; amending Minnesota Statutes 1998, 
  1.18            sections 118A.05, subdivision 4; 360.036, subdivision 
  1.19            2; 428A.101; 428A.21; 429.021, subdivision 1; 
  1.20            474A.047, subdivision 1; and 475.78; Minnesota 
  1.21            Statutes 1999 Supplement, sections 116J.993, 
  1.22            subdivision 3; 473.39, subdivision 1g; and 475.56; 
  1.23            proposing coding for new law in Minnesota Statutes, 
  1.24            chapter 373. 
  1.25  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.26     Section 1.  Minnesota Statutes 1999 Supplement, section 
  1.27  116J.993, subdivision 3, is amended to read: 
  1.28     Subd. 3.  [BUSINESS SUBSIDY.] "Business subsidy" or 
  1.29  "subsidy" means a state or local government agency grant, 
  1.30  contribution of personal property, real property, 
  1.31  infrastructure, the principal amount of a loan at rates below 
  1.32  those commercially available to the recipient, any reduction or 
  1.33  deferral of any tax or any fee, any guarantee of any payment 
  1.34  under any loan, lease, or other obligation, or any preferential 
  1.35  use of government facilities given to a business. 
  2.1      The following forms of financial assistance are not a 
  2.2   business subsidy: 
  2.3      (1) a business subsidy of less than $25,000; 
  2.4      (2) assistance that is generally available to all 
  2.5   businesses or to a general class of similar businesses, such as 
  2.6   a line of business, size, location, or similar general criteria; 
  2.7      (3) public improvements to buildings or lands owned by the 
  2.8   state or local government that serve a public purpose and do not 
  2.9   principally benefit a single business or defined group of 
  2.10  businesses at the time the improvements are made; 
  2.11     (4) redevelopment property polluted by contaminants as 
  2.12  defined in section 116J.552, subdivision 3; 
  2.13     (5) assistance provided for the sole purpose of renovating 
  2.14  old or decaying building stock or bringing it up to code, 
  2.15  provided that the assistance is equal to or less than 50 percent 
  2.16  of the total cost; 
  2.17     (6) assistance provided to organizations whose primary 
  2.18  mission is to provide job readiness and training services if the 
  2.19  sole purpose of the assistance is to provide those services; 
  2.20     (7) assistance for housing; 
  2.21     (8) assistance for pollution control or abatement; 
  2.22     (9) assistance for energy conservation; 
  2.23     (10) tax reductions resulting from conformity with federal 
  2.24  tax law; 
  2.25     (11) workers' compensation and unemployment compensation; 
  2.26     (12) benefits derived from regulation; 
  2.27     (13) indirect benefits derived from assistance to 
  2.28  educational institutions; 
  2.29     (14) funds from bonds allocated under chapter 474A issued 
  2.30  by government agencies on behalf of entities without actual 
  2.31  direct financial assistance being provided by the issuing 
  2.32  authority; 
  2.33     (15) assistance for a collaboration between a Minnesota 
  2.34  higher education institution and a business; 
  2.35     (16) assistance for a tax increment financing soils 
  2.36  condition district as defined under section 469.174, subdivision 
  3.1   19; 
  3.2      (17) redevelopment when the recipient's investment in the 
  3.3   purchase of the site and in site preparation is 70 percent or 
  3.4   more of the assessor's current year's estimated market value; 
  3.5   and 
  3.6      (18) general changes in tax increment financing law and 
  3.7   other general tax law changes of a principally technical nature. 
  3.8      Sec. 2.  Minnesota Statutes 1998, section 118A.05, 
  3.9   subdivision 4, is amended to read: 
  3.10     Subd. 4.  [MINNESOTA JOINT POWERS INVESTMENT TRUST.] 
  3.11  Government entities may enter into agreements or contracts for: 
  3.12     (1) shares of a Minnesota joint powers investment trust 
  3.13  whose investments are restricted to securities described in this 
  3.14  subdivision, subdivision 2, section and section 118A.04; 
  3.15     (2) units of a short-term investment fund established and 
  3.16  administered pursuant to regulation 9 of the Office of the 
  3.17  Comptroller of the Currency, in which investments are restricted 
  3.18  to securities described in this section and section 118A.04; 
  3.19     (3) shares of an investment company which is registered 
  3.20  under the Federal Investment Company Act of 1940 and which holds 
  3.21  itself out as a money market fund meeting the conditions of rule 
  3.22  2a-7 of the Securities and Exchange Commission and is rated in 
  3.23  one of the two highest rating categories for money market funds 
  3.24  by at least one nationally recognized statistical rating 
  3.25  organization; or 
  3.26     (4) shares of an investment company which is registered 
  3.27  under the Federal Investment Company Act of 1940, and whose 
  3.28  shares are registered under the Federal Securities Act of 1933, 
  3.29  as long as the investment company's fund receives the highest 
  3.30  credit rating and is rated in one of the two highest risk rating 
  3.31  categories by at least one nationally recognized statistical 
  3.32  rating organization and is invested in financial instruments 
  3.33  with a final maturity no longer than 13 months. 
  3.34     Sec. 3.  Minnesota Statutes 1998, section 360.036, 
  3.35  subdivision 2, is amended to read: 
  3.36     Subd. 2.  [ISSUANCE OF BONDS.] (a) Bonds to be issued by a 
  4.1   municipality under sections 360.011 to 360.076, shall be 
  4.2   authorized and issued in the manner and within the limitation 
  4.3   prescribed by laws or the charter of the municipality for the 
  4.4   issuance and authorization of bonds for public purposes 
  4.5   generally, except as provided in paragraphs (b) and (c). 
  4.6      (b) No election is required to authorize the issuance of 
  4.7   the bonds if: 
  4.8      (1) a board organized under section 360.042 recommends by a 
  4.9   resolution adopted by a vote of not less than 60 percent of its 
  4.10  members the issuance of bonds, and (2) the bonds are authorized 
  4.11  by a resolution of the governing body of each of the 
  4.12  municipalities acting jointly pursuant to section 360.042, 
  4.13  adopted by a vote of not less than 60 percent of its members; or 
  4.14     (2) the bonds are being issued for the purpose of financing 
  4.15  the costs of constructing, enlarging, or improving airports and 
  4.16  other air navigation facilities and the governing body estimates 
  4.17  that passenger facility charges and other revenues pledged to 
  4.18  the payment thereof will be at least 20 percent of the debt 
  4.19  service payable on the bonds in any year. 
  4.20     (c) If the bonds are general obligations of the 
  4.21  municipality, the levy of taxes required by section 475.61 to 
  4.22  pay principal and interest on the bonds is not included in 
  4.23  computing or applying any levy limitation applicable to the 
  4.24  municipality. 
  4.25     Sec. 4.  [373.45] [STATE PAYMENT OF DEBT OBLIGATION UPON 
  4.26  POTENTIAL DEFAULT; REPAYMENT; STATE OBLIGATION NOT DEBT.] 
  4.27     Subdivision 1.  [DEFINITIONS.] (a) As used in this section, 
  4.28  the terms defined in this subdivision have the meanings given. 
  4.29     (b) "Debt obligation" means a general obligation bond 
  4.30  issued to provide funds for the construction of jails, 
  4.31  correctional facilities, law enforcement facilities, social 
  4.32  services and human services facilities, and solid waste 
  4.33  facilities.  
  4.34     (c) "Commissioner" means the commissioner of revenue, 
  4.35  unless the context indicates otherwise.  
  4.36     Subd. 2.  [NOTIFICATIONS; PAYMENT; APPROPRIATION.] (a) If a 
  5.1   county determines that it may be unable to make a principal or 
  5.2   interest payment on any outstanding debt obligation on the date 
  5.3   that payment is due, it must notify the commissioner of revenue 
  5.4   as soon as possible, but not less than 15 working days before 
  5.5   the date that the principal or interest payment is due.  The 
  5.6   notice must include the name of the county, an identification of 
  5.7   the debt obligation issue in question, the date the payment is 
  5.8   due, the amount of principal and interest due on the payment 
  5.9   date, the amount of principal or interest that the county will 
  5.10  be unable to repay on that date, the paying agent for the debt 
  5.11  obligation, the wire transfer instructions to transfer funds to 
  5.12  that paying agent, and an indication as to whether a payment is 
  5.13  being requested by the county under this section.  If a paying 
  5.14  agent becomes aware of a potential default, it shall inform the 
  5.15  commissioner of that fact.  After receipt of a notice that 
  5.16  requests a payment under this section, and after consultation 
  5.17  with the county, the paying agent, and after verification of the 
  5.18  accuracy of the information provided, the commissioner shall 
  5.19  notify the commissioner of finance of the potential default.  
  5.20  The notice must include a final figure as to the amount due that 
  5.21  the county will be unable to repay on the date due.  
  5.22     (b) Except as provided in subdivision 9, upon receipt of 
  5.23  this notice from the commissioner, the commissioner of finance 
  5.24  shall issue a warrant and authorize the commissioner of revenue 
  5.25  to pay to the paying agent for the debt obligation the specified 
  5.26  amount on or before the date due.  The amounts needed for the 
  5.27  purposes of this subdivision are annually appropriated to the 
  5.28  commissioner of revenue from the state general fund. 
  5.29     (c) The departments of revenue and finance must jointly 
  5.30  develop detailed procedures for counties to notify the state 
  5.31  that they have obligated themselves to be bound by the 
  5.32  provisions of this section, procedures for counties and paying 
  5.33  agents to notify the state of potential defaults and to request 
  5.34  state payment under this section, and procedures for the state 
  5.35  to expedite payments to prevent defaults.  The procedures are 
  5.36  not subject to chapter 14. 
  6.1      Subd. 3.  [COUNTY BOUND; INTEREST RATE ON STATE PAID 
  6.2   AMOUNT.] If, at the request of a county, the state has paid part 
  6.3   or all of the principal or interest due on a county's debt 
  6.4   obligation on a specific date, the county is bound by all 
  6.5   provisions of this section and the amount paid shall bear 
  6.6   taxable interest from the date paid until the date of repayment 
  6.7   at the state treasurer's invested cash rate as it is certified 
  6.8   by the commissioner of finance.  Interest will only accrue on 
  6.9   the amounts paid and outstanding less the reduction in aid under 
  6.10  subdivision 4 and other payments received from the county. 
  6.11     Subd. 4.  [PLEDGE OF COUNTY'S FULL FAITH AND CREDIT.] If, 
  6.12  at the request of a county, the state has paid part or all of 
  6.13  the principal or interest due on a county's debt obligation on a 
  6.14  specific date, the pledge of the full faith and credit and 
  6.15  unlimited taxing powers of the county to repay the principal and 
  6.16  interest due on those debt obligations shall also, without an 
  6.17  election or the requirement of a further authorization, become a 
  6.18  pledge of the full faith and credit and unlimited taxing powers 
  6.19  of the county to repay to the state the amount paid, with 
  6.20  interest.  Amounts paid by the state must be repaid in the order 
  6.21  in which the state payments were made. 
  6.22     Subd. 5.  [AID REDUCTION FOR REPAYMENT.] Except as provided 
  6.23  in this subdivision, the state must reduce the following aids 
  6.24  payable to the county:  homestead and agricultural credit aid 
  6.25  and disparity reduction aid payable under section 273.1398, 
  6.26  county criminal justice aid payable under section 477A.0121, and 
  6.27  family preservation aid payable under section 477A.0122, by the 
  6.28  amount paid by the state under this section on behalf of the 
  6.29  county, plus the interest due on it, and the amount reduced must 
  6.30  revert from the appropriate account to the state general fund.  
  6.31  If, after review of the financial situation of the county, the 
  6.32  commissioner advises the commissioner of finance that a total 
  6.33  reduction of the aids would cause an undue hardship on the 
  6.34  county, the commissioner, with the approval of the commissioner 
  6.35  of finance, may establish a different schedule for reduction of 
  6.36  those aids to repay the state.  The amount of aids to be reduced 
  7.1   are decreased by any amounts repaid to the state by the county 
  7.2   from other revenue sources. 
  7.3      Subd. 6.  [TAX LEVY FOR REPAYMENT.] (a) With the approval 
  7.4   of the commissioner, a county may levy in the year the state 
  7.5   makes a payment under this section an amount up to the amount 
  7.6   necessary to provide funds for the repayment of the amount paid 
  7.7   by the state plus interest through the date of estimated 
  7.8   repayment by the county.  The proceeds of this levy may be used 
  7.9   only for this purpose unless they are in excess of the amount 
  7.10  actually due, in which case the excess must be used to repay 
  7.11  other state payments made under this section or must be 
  7.12  deposited in the debt redemption fund of the county.  The amount 
  7.13  of aids to be reduced to repay the state shall be decreased by 
  7.14  the amount levied. 
  7.15     (b) If the state is not repaid in full for a payment made 
  7.16  under this section by November 30 of the calendar year following 
  7.17  the year in which the state makes the payment, the commissioner 
  7.18  shall require the county to certify a property tax levy in an 
  7.19  amount up to the amount necessary to provide funds for repayment 
  7.20  of the amount paid by the state plus interest through the date 
  7.21  of estimated repayment by the county.  To prevent undue 
  7.22  hardship, the commissioner may allow the county to certify the 
  7.23  levy over a five-year period.  The proceeds of the levy may be 
  7.24  used only for this purpose unless they are in excess of the 
  7.25  amount actually due, in which case the excess shall be used to 
  7.26  repay other state payments made under this section or shall be 
  7.27  deposited in the debt redemption fund of the county.  If the 
  7.28  commissioner orders the county to levy, the amount of aids 
  7.29  reduced to repay the state shall be decreased by the amount 
  7.30  levied.  
  7.31     (c) A levy under this subdivision shall be an increase in 
  7.32  the levy limits of the county for purposes of section 275.065, 
  7.33  subdivision 6, and must be explained as a specific increase at 
  7.34  the meeting required under that provision.  
  7.35     Subd. 7.  [ELECTION AS TO MANDATORY APPLICATION.] A county 
  7.36  may covenant and obligate itself, prior to the issuance of an 
  8.1   issue of debt obligations, to notify the commissioner of a 
  8.2   potential default and to use the provisions of this section to 
  8.3   guarantee payment of the principal and interest on those debt 
  8.4   obligations when due.  If the county obligates itself to be 
  8.5   bound by this section, it must covenant in the resolution that 
  8.6   authorizes the issuance of the debt obligations to deposit with 
  8.7   the paying agent three business days prior to the date on which 
  8.8   a payment is due an amount sufficient to make that payment or to 
  8.9   notify the commissioner under subdivision 1 that it will be 
  8.10  unable to make all or a portion of that payment.  A county that 
  8.11  has obligated itself must include a provision in its agreement 
  8.12  with the paying agent for that issue that requires the paying 
  8.13  agent to inform the commissioner if it becomes aware of a 
  8.14  potential default in the payment of principal or interest on 
  8.15  that issue or if, on the day two business days prior to the date 
  8.16  a payment is due on that issue, there are insufficient funds to 
  8.17  make the payment on deposit with the paying agent.  Funds 
  8.18  invested in a refunding escrow account established under section 
  8.19  475.67 that are to become available to the paying agent on a 
  8.20  principal or interest payment date are deemed to be on deposit 
  8.21  with the paying agent three business days before the payment 
  8.22  date.  If a county either covenants to be bound by this section 
  8.23  or accepts state payments under this section to prevent a 
  8.24  default of a particular issue of debt obligations, the 
  8.25  provisions of this section shall be binding as to that issue as 
  8.26  long as any debt obligation of that issue remains outstanding.  
  8.27  If the provisions of this section are or become binding for more 
  8.28  than one issue of debt obligations and a county is unable to 
  8.29  make payments on one or more of those issues, the county must 
  8.30  continue to make payments on the remaining issues.  
  8.31     Subd. 8.  [MANDATORY PLAN; TECHNICAL ASSISTANCE.] If the 
  8.32  state makes payments on behalf of a county under this section or 
  8.33  the county defaults in the payment of principal or interest on 
  8.34  an outstanding debt obligation, it must submit a plan to the 
  8.35  commissioner for approval specifying the measures it intends to 
  8.36  implement to resolve the issues which led to its inability to 
  9.1   make the payment and to prevent further defaults.  If the 
  9.2   commissioner determines that a county's plan is not adequate, 
  9.3   the commissioner shall notify the county that the plan has been 
  9.4   disapproved, the reasons for the disapproval, and that the state 
  9.5   shall not make future payments under this section for debt 
  9.6   obligations issued after the date specified in that notice until 
  9.7   its plan is approved.  The commissioner may also notify the 
  9.8   county that until its plan is approved, other aids due the 
  9.9   county will be withheld after a date specified in the notice. 
  9.10     Subd. 9.  [STATE BOND RATING.] If the commissioner of 
  9.11  finance determines that the credit rating of the state would be 
  9.12  adversely affected thereby, the commissioner of finance shall 
  9.13  not issue warrants under subdivision 2 for the payment of 
  9.14  principal or interest on any debt obligations for which a county 
  9.15  did not, prior to their issuance, obligate itself to be bound by 
  9.16  the provisions of this section. 
  9.17     Subd. 10.  [CONTINUING DISCLOSURE AGREEMENTS.] The 
  9.18  commissioner of finance may enter into written agreements or 
  9.19  contracts relating to the continuing disclosure of information 
  9.20  needed to facilitate the ability of counties to issue debt 
  9.21  obligations according to federal securities laws, rules, and 
  9.22  regulations, including securities and exchange commission rules 
  9.23  and regulations, section 240.15c2-12.  The agreements or 
  9.24  contracts may be in any form the commissioner of finance deems 
  9.25  reasonable and in the state's best interests. 
  9.26     Sec. 5.  Minnesota Statutes 1998, section 428A.101, is 
  9.27  amended to read: 
  9.28     428A.101 [SPECIAL SERVICE DISTRICT; SUNSET OF 
  9.29  SELF-EXECUTING PROVISIONS.] 
  9.30     The establishment of a new special service district after 
  9.31  June 30, 2001, must be made pursuant to enabling legislation 
  9.32  under Minnesota Statutes 1994, sections 428A.01 to 428A.10 2005, 
  9.33  requires enactment of a special law authorizing the 
  9.34  establishment. 
  9.35     Sec. 6.  Minnesota Statutes 1998, section 428A.21, is 
  9.36  amended to read: 
 10.1      428A.21 [SUNSET.] 
 10.2      No new housing improvement areas may be established under 
 10.3   sections 428A.11 to 428A.20 after June 30, 2001 2005.  After 
 10.4   June 30, 2001 2005, a city may establish a housing improvement 
 10.5   area, provided that it receives enabling legislation authorizing 
 10.6   the establishment of the area. 
 10.7      Sec. 7.  Minnesota Statutes 1998, section 429.021, 
 10.8   subdivision 1, is amended to read: 
 10.9      Subdivision 1.  [IMPROVEMENTS AUTHORIZED.] The council of a 
 10.10  municipality shall have power to make the following improvements:
 10.11     (1) To acquire, open, and widen any street, and to improve 
 10.12  the same by constructing, reconstructing, and maintaining 
 10.13  sidewalks, pavement, gutters, curbs, and vehicle parking strips 
 10.14  of any material, or by grading, graveling, oiling, or otherwise 
 10.15  improving the same, including the beautification thereof and 
 10.16  including storm sewers or other street drainage and connections 
 10.17  from sewer, water, or similar mains to curb lines. 
 10.18     (2) To acquire, develop, construct, reconstruct, extend, 
 10.19  and maintain storm and sanitary sewers and systems, including 
 10.20  outlets, holding areas and ponds, treatment plants, pumps, lift 
 10.21  stations, service connections, and other appurtenances of a 
 10.22  sewer system, within and without the corporate limits. 
 10.23     (3) To construct, reconstruct, extend, and maintain steam 
 10.24  heating mains. 
 10.25     (4) To install, replace, extend, and maintain street lights 
 10.26  and street lighting systems and special lighting systems. 
 10.27     (5) To acquire, improve, construct, reconstruct, extend, 
 10.28  and maintain water works systems, including mains, valves, 
 10.29  hydrants, service connections, wells, pumps, reservoirs, tanks, 
 10.30  treatment plants, and other appurtenances of a water works 
 10.31  system, within and without the corporate limits. 
 10.32     (6) To acquire, improve and equip parks, open space areas, 
 10.33  playgrounds, and recreational facilities within or without the 
 10.34  corporate limits. 
 10.35     (7) To plant trees on streets and provide for their 
 10.36  trimming, care, and removal. 
 11.1      (8) To abate nuisances and to drain swamps, marshes, and 
 11.2   ponds on public or private property and to fill the same. 
 11.3      (9) To construct, reconstruct, extend, and maintain dikes 
 11.4   and other flood control works. 
 11.5      (10) To construct, reconstruct, extend, and maintain 
 11.6   retaining walls and area walls. 
 11.7      (11) To acquire, construct, reconstruct, improve, alter, 
 11.8   extend, operate, maintain, and promote a pedestrian skyway 
 11.9   system.  Such improvement may be made upon a petition pursuant 
 11.10  to section 429.031, subdivision 3.  
 11.11     (12) To acquire, construct, reconstruct, extend, operate, 
 11.12  maintain, and promote underground pedestrian concourses. 
 11.13     (13) To acquire, construct, improve, alter, extend, 
 11.14  operate, maintain, and promote public malls, plazas or 
 11.15  courtyards. 
 11.16     (14) To construct, reconstruct, extend, and maintain 
 11.17  district heating systems.  
 11.18     (15) To construct, reconstruct, alter, extend, operate, 
 11.19  maintain, and promote fire protection systems in existing 
 11.20  buildings, but only upon a petition pursuant to section 429.031, 
 11.21  subdivision 3.  
 11.22     (16) To acquire, construct, reconstruct, improve, alter, 
 11.23  extend, and maintain highway sound barriers. 
 11.24     (17) To improve, construct, reconstruct, extend, and 
 11.25  maintain gas and electric distribution facilities owned by a 
 11.26  municipal gas or electric utility. 
 11.27     (18) To improve, construct, extend, and maintain facilities 
 11.28  for Internet access and other communications purposes. 
 11.29     Sec. 8.  Minnesota Statutes 1999 Supplement, section 
 11.30  473.39, subdivision 1g, is amended to read: 
 11.31     Subd. 1g.  [OBLIGATIONS; 2000-2002.] In addition to the 
 11.32  authority in subdivisions 1a, 1b, 1c, 1d, and 1e, the council 
 11.33  may issue certificates of indebtedness, bonds, or other 
 11.34  obligations under this section in an amount not exceeding 
 11.35  $36,000,000 $55,400,000, which may be used for capital 
 11.36  expenditures, other than for construction, maintenance, or 
 12.1   operation of light rail transit, as prescribed in the council's 
 12.2   transit capital improvement program and for related costs, 
 12.3   including the costs of issuance and sale of the obligations.  
 12.4   The funds must be proportionally spent on capital improvement 
 12.5   projects as recommended by the regional transit capital 
 12.6   evaluation committee. 
 12.7      Sec. 9.  Minnesota Statutes 1998, section 474A.047, 
 12.8   subdivision 1, is amended to read: 
 12.9      Subdivision 1.  [ELIGIBILITY.] (a) An issuer may only use 
 12.10  the proceeds from residential rental bonds if the proposed 
 12.11  project meets one of the following: 
 12.12     (1) the proposed project is a single room occupancy project 
 12.13  and all the units of the project will be occupied by individuals 
 12.14  whose incomes at the time of their initial residency in the 
 12.15  project are 50 percent or less of the greater of the statewide 
 12.16  or county median income adjusted for household size as 
 12.17  determined by the federal Department of Housing and Urban 
 12.18  Development; 
 12.19     (2) the proposed project is a multifamily project where at 
 12.20  least 75 percent of the units have two or more bedrooms and at 
 12.21  least one-third of the 75 percent have three or more bedrooms; 
 12.22  or 
 12.23     (3) the proposed project is a multifamily project that 
 12.24  meets the following requirements: 
 12.25     (i) the proposed project is the rehabilitation of an 
 12.26  existing multifamily building which meets the requirements for 
 12.27  minimum rehabilitation expenditures in sections 42(e)(2) and 
 12.28  42(e)(3)(A) of the Internal Revenue Code; 
 12.29     (ii) the proposed project involves participation by the 
 12.30  Minnesota housing finance agency or a local unit of government 
 12.31  in the financing of the acquisition or rehabilitation of the 
 12.32  project.  For purposes of this subdivision, "participation" 
 12.33  means an activity other than the issuance of the bonds; and 
 12.34     (iii) the proposed project must be occupied by individuals 
 12.35  or families whose incomes at the time of their initial residency 
 12.36  in the project meet the requirements of section 42(g) of the 
 13.1   Internal Revenue Code. 
 13.2      (b) The maximum rent for a proposed single room occupancy 
 13.3   unit under paragraph (a), clause (1), is 30 percent of the 
 13.4   amount equal to 30 percent of the greater of the statewide or 
 13.5   county median income for a one-member household as determined by 
 13.6   the federal Department of Housing and Urban Development.  The 
 13.7   maximum rent for at least 75 percent of the units of a 
 13.8   multifamily project under paragraph (a), clause (2), is 30 
 13.9   percent of the amount equal to 50 percent of the greater of the 
 13.10  statewide or county median income as determined by the federal 
 13.11  Department of Housing and Urban Development based on a household 
 13.12  size with 1.5 persons per bedroom. 
 13.13     (c) The proceeds from residential rental bonds may be used 
 13.14  for a project for which project-based federal rental assistance 
 13.15  payments are made only if: 
 13.16     (1) the owner of the project enters into a binding 
 13.17  agreement with the Minnesota housing finance agency under which 
 13.18  the owner is obligated to extend any existing low-income 
 13.19  affordability restrictions and any contract or agreement for 
 13.20  rental assistance payments for the maximum term permitted, 
 13.21  including any renewals thereof; and 
 13.22     (2) the Minnesota housing finance agency certifies that 
 13.23  project reserves will be maintained at closing of the bond issue 
 13.24  and budgeted in future years at the lesser of: 
 13.25     (i) the level described in Minnesota Rules, part 4900.0010, 
 13.26  subpart 7, item A, subitem (2), effective May 1, 1997; or 
 13.27     (ii) the level of project reserves available prior to the 
 13.28  bond issue, provided that additional money is available to 
 13.29  accomplish repairs and replacements needed at the time of bond 
 13.30  issue. 
 13.31     Sec. 10.  Minnesota Statutes 1999 Supplement, section 
 13.32  475.56, is amended to read: 
 13.33     475.56 [INTEREST RATE.] 
 13.34     (a) Any municipality issuing obligations under any law may 
 13.35  issue obligations bearing interest at a single rate or at rates 
 13.36  varying from year to year which may be lower or higher in later 
 14.1   years than in earlier years.  Such higher rate for any period 
 14.2   prior to maturity may be represented in part by separate coupons 
 14.3   designated as additional coupons, extra coupons, or B coupons, 
 14.4   but the highest aggregate rate of interest contracted to be so 
 14.5   paid for any period shall not exceed the maximum rate authorized 
 14.6   by law.  Such higher rate may also be represented in part by the 
 14.7   issuance of additional obligations of the same series, over and 
 14.8   above but not exceeding two percent of the amount otherwise 
 14.9   authorized to be issued, and the amount of such additional 
 14.10  obligations shall not be included in the amount required by 
 14.11  section 475.59 to be stated in any bond resolution, notice, or 
 14.12  ballot, or in the sale price required by section 475.60 or any 
 14.13  other law to be paid; but if the principal amount of the entire 
 14.14  series exceeds its cash sale price, such excess shall not, when 
 14.15  added to the total amount of interest payable on all obligations 
 14.16  of the series to their stated maturity dates, cause the average 
 14.17  annual rate of such interest to exceed the maximum rate 
 14.18  authorized by law.  This section does not authorize a provision 
 14.19  in any such obligations for the payment of a higher rate of 
 14.20  interest after maturity than before. 
 14.21     (b) Any municipality issuing obligations under any law may 
 14.22  sell original issue discount obligations having a stated 
 14.23  principal amount in excess of the authorized amount and the sale 
 14.24  price, provided that: 
 14.25     (1) the sale price does not exceed by more than two percent 
 14.26  the amount of obligations otherwise authorized to be issued; 
 14.27     (2) the underwriting fee, discount, or other sales or 
 14.28  underwriting commission does not exceed two percent of the sale 
 14.29  price; and 
 14.30     (3) the discount rate necessary to present value total 
 14.31  principal and interest payments over the term of the issue to 
 14.32  the sale price does not exceed the lesser of the maximum rate 
 14.33  permitted by law for municipal obligations or ten percent. 
 14.34     (c) Any obligation of an issue of obligations otherwise 
 14.35  subject to section 475.55, subdivision 1, may bear interest at a 
 14.36  rate varying periodically at the time or times and on the terms, 
 15.1   including convertibility to a fixed rate of interest, determined 
 15.2   by the governing body of the municipality, but the rate of 
 15.3   interest for any period shall not exceed the any maximum rate of 
 15.4   interest for the obligations determined in accordance with 
 15.5   section 475.55, subdivision 1 established by law.  For purposes 
 15.6   of section 475.61, subdivisions 1 and 3, the interest payable on 
 15.7   variable rate obligations for their term shall be determined as 
 15.8   if their rate of interest is the maximum rate permitted for the 
 15.9   obligations under section 475.55, subdivision 1, or the lesser 
 15.10  of the maximum rate of interest payable on the obligations in 
 15.11  accordance with their terms or the rate estimated for such 
 15.12  purpose by the governing body, but if the interest rate is 
 15.13  subsequently converted to a fixed rate the levy may be modified 
 15.14  to provide at least five percent in excess of amounts necessary 
 15.15  to pay principal of and interest at the fixed rate on the 
 15.16  obligations when due.  For purposes of computing debt service or 
 15.17  interest pursuant to section 475.67, subdivision 12, interest 
 15.18  throughout the term of bonds issued pursuant to this subdivision 
 15.19  is deemed to accrue at the rate of interest first borne by the 
 15.20  bonds.  The provisions of this paragraph do not apply to general 
 15.21  obligations issued by a statutory or home rule charter city with 
 15.22  a population of less than 7,500, as defined in section 477A.011, 
 15.23  subdivision 3, or to general obligations that are not rated A or 
 15.24  better, or an equivalent subsequently established rating, by 
 15.25  Standard and Poor's Corporation, Moody's Investors Service or 
 15.26  other similar nationally recognized rating agency, except that 
 15.27  any statutory or home rule charter city, regardless of 
 15.28  population or bond rating, may issue variable rate obligations 
 15.29  as a participant in a bond pooling program established by the 
 15.30  league of Minnesota cities that meets this bond rating 
 15.31  requirement. 
 15.32     Sec. 11.  Minnesota Statutes 1998, section 475.78, is 
 15.33  amended to read: 
 15.34     475.78 [PERFECTION OF PLEDGE; SECURITY INTERESTS.] 
 15.35     Neither filing nor possession is required to perfect the 
 15.36  security interest created by any pledge or appropriation of 
 16.1   revenues or funds of the municipality, including any of its 
 16.2   investments, to the payment of bonds issued by the municipality. 
 16.3   Notwithstanding any contrary provision of law, article 9 of the 
 16.4   Uniform Commercial Code does not apply to security interests 
 16.5   created by a municipality or the state, except security 
 16.6   interests in equipment and fixtures. 
 16.7      Sec. 12.  [APPLICATION.] 
 16.8      Section 8 applies in the counties of Anoka, Carver, Dakota, 
 16.9   Hennepin, Ramsey, Scott, and Washington. 
 16.10     Sec. 13.  [EFFECTIVE DATE.] 
 16.11     Section 2 is effective the day following final enactment.  
 16.12  Section 3 is effective for obligations issued after June 30, 
 16.13  2001.