HF 1236

as introduced - 88th Legislature (2013 - 2014) Posted on 03/04/2013 02:31pm

A bill for an act
relating to public finance; providing an alternative general system to issue state
and local debt obligations; enacting the "Minnesota All-Government Bond Act";
appropriating money; proposing coding for new law as Minnesota Statutes,
chapter 16F.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [16F.01] SHORT TITLE.
new text end

new text begin Sections 16F.01 to 16F.11 may be cited as the "Minnesota All-Government Bond
Act."
new text end

Sec. 2.

new text begin [16F.02] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For the purposes of sections 16F.01 to 16F.11, the following
terms have the meanings given them in this section.
new text end

new text begin Subd. 2. new text end

new text begin Board. new text end

new text begin "Board" means the Minnesota State Board of Investment.
new text end

new text begin Subd. 3. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of management
and budget.
new text end

new text begin Subd. 4. new text end

new text begin Minnesota all-government state bonds. new text end

new text begin "Minnesota all-government state
bonds" means bonds issued by the state pursuant to sections 16F.01 to 16F.11.
new text end

new text begin Subd. 5. new text end

new text begin Political subdivisions. new text end

new text begin "Political subdivisions" means cities, counties,
towns, school districts, special service districts, and any other local units of government in
Minnesota authorized to incur public debt through the issuance of bonds.
new text end

Sec. 3.

new text begin [16F.03] MINNESOTA ALL-GOVERNMENT DEBT FINANCING FUND.
new text end

new text begin For the purpose of providing an alternative financing mechanism for the state
and for political subdivisions in lieu of the direct issuance of bonds by subdivisions,
the Minnesota all-government debt financing fund is established. Proceeds of bonds
issued pursuant to sections 16F.01 to 16F.11 shall be credited to this fund and are annually
appropriated to the commissioner for use at any time. The commissioner shall utilize these
appropriated funds only:
new text end

new text begin (1) for loans to political subdivisions as provided in section 16F.05;
new text end

new text begin (2) for state projects authorized to be financed by state bonds consistent with the
Minnesota Constitution, article XI; and
new text end

new text begin (3) for appropriations made pursuant to this section.
new text end

new text begin Funds appropriated to this fund shall not cancel and remain available for expenditure.
new text end

Sec. 4.

new text begin [16F.04] MINNESOTA ALL-GOVERNMENT STATE BONDS.
new text end

new text begin Subdivision 1. new text end

new text begin Authorization. new text end

new text begin The commissioner shall issue bonds of the state of
Minnesota designated as Minnesota all-government state bonds to finance state projects
authorized by the legislature and to implement the political subdivisions loan program
established by section 16F.05. Proceeds of the bonds are appropriated to the commissioner
for the Minnesota all-government debt fund. The full faith, credit, and taxing powers of
the state are irrevocably pledged for the prompt and full payment of these bonds and their
interest. The proceeds of the bonds shall be credited to the Minnesota all-government debt
fund, except that accrued interest and any premium received on sale of the bonds shall be
credited to the state all-government bond repayment account established in section 16F.08,
together with any additional sum directed to be so credited by each law authorizing an
issue of the bonds. Bonds shall be issued pursuant to this section only as authorized by
section 16F.07 or by other law adopted in accordance with the provisions of the Minnesota
Constitution, article XI, section 7. Any law authorizing the issuance of bonds shall,
together with this section, constitute complete authority for the issue, and the bonds shall
not be subject to restrictions or limitations contained in any other law.
new text end

new text begin Subd. 2. new text end

new text begin Manner of issue. new text end

new text begin Upon issue by the commissioner, the State Board of
Investment, as fiscal agent, shall market Minnesota all-government state bonds as the
board deems appropriate. The board may offer the bonds for sale, either to the public or
on a private placement basis, to individual investors, institutional investors, syndicated
investors, and other investors. The board may also form and market unit tax exempt bond
pools composed of Minnesota all-government state bonds. These units may be sold to any
person to whom the bonds may be offered for sale pursuant to this subdivision. The board
shall determine the sales price and interest rate of the bonds to be sold and may request
the advice of the commissioner, or others, in making this determination. Notwithstanding
the provisions of any law to the contrary, if the board determines to purchase Minnesota
all-government state bonds for its own accounts to aid the marketing of the bonds and not
for long-term investment, standards of prudence required of the board in its investment
decisions are satisfied if any lower investment return realized by the purchase compared
with the return that would otherwise be realized is compensated for by marketing fees
credited to the account whose funds are so invested.
new text end

new text begin Subd. 3. new text end

new text begin Issuance and marketing expenses. new text end

new text begin All expenses incidental to the sale,
printing, execution, marketing, and delivery of bonds pursuant to this section, including
but not limited to actual and necessary travel and subsistence expenses of state officers
and employees for these purposes, shall be deducted from the Minnesota all-government
financing fund, and are appropriated for expenditure to the state officials or entities
incurring the expense. The amounts necessary for the expenses are appropriated from the
fund, but if any amount is specifically appropriated for this purpose in an act authorizing
the issuance of bonds pursuant to this section, expenses are limited to the amount so
appropriated.
new text end

new text begin Subd. 4. new text end

new text begin Form and nature of bonds. new text end

new text begin The bonds shall be issued and sold at the
times, in the form and denominations, at the maturities, with provision for registration,
conversion, and exchange and for the issuance of notes in anticipation of the sale and
delivery of definitive bonds, and in accordance with further rules, as the commissioner
determines. The bonds shall be issued and sold without option of prior payment or subject
to prepayment upon the notice and at the times and prices, payable at the bank or banks,
within or without the state as the commissioner determines. The bonds shall be subject to
the approval of the attorney general, but not subject to the provisions of the Administrative
Procedure Act. Each bond shall mature not later than 20 years from its date of issue,
shall be sold at not less than par plus accrued interest, and shall be executed by the
commissioner and attested by the secretary of state under their official seals. The signature
of one of these officers on the face of any bond, and their seals, and the signature of both
officers on the interest coupons appurtenant to any bond, may be printed, lithographed,
stamped, or engraved on them. The commissioner may issue uncertificated securities in
accordance with the provisions of Article VIII of the Uniform Commercial Code.
new text end

new text begin Subd. 5. new text end

new text begin Bondholder indemnification. new text end

new text begin The commissioner, subject to the approval
of the attorney general, shall ascertain and certify to the purchasers of the bonds the
performance and existence of all acts, conditions, and things necessary to make them valid
and binding obligations of the state of Minnesota in accordance with their terms. The
state shall be a self-insurer as to errors by any state official affecting the validity or tax
exempt status of Minnesota all-government state bonds. The state shall hold harmless and
indemnify any person suffering loss due to an error as described in this subdivision. There
is annually appropriated to the commissioner from the general fund, as an open, standing
appropriation, amounts sufficient at any time to carry out the provisions of this subdivision.
new text end

new text begin Subd. 6. new text end

new text begin Partial redemption. new text end

new text begin If in any case a portion of the debt underlying an
issue of Minnesota all-government state bonds is defective because it is unauthorized, or
is invalid as a basis for tax-exempt status, or in any way impairs the value or validity of a
Minnesota all-government state bond, the defect shall be allocated by the commissioner to
a portion of the particular bond issue equal to the amount of the defective debt. Without
impairing the rights of any person as provided in subdivision 5, the portion of bonds to
which the defect is allocated under this subdivision shall be redeemed and damages shall
be paid as specified in subdivision 5. Bonds in the remaining portion of the issue shall not
be affected in any way by the redemption nor by the defect which caused the redemption.
new text end

new text begin Subd. 7. new text end

new text begin Purchase by financial institutions. new text end

new text begin Notwithstanding any provision of
law to the contrary, Minnesota all-government state bonds, whether or not rated by a
national rating service, satisfy all rating requirements imposed for its investments on
any financial institution.
new text end

Sec. 5.

new text begin [16F.05] LOAN AUTHORIZATION; APPLICATIONS FROM
POLITICAL SUBDIVISIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Authorization. new text end

new text begin The commissioner, upon timely receipt of a loan
application from a political subdivision, may loan to the political subdivision proceeds
from the issuance of Minnesota all-government state bonds. The commissioner's decision
whether or not to make the loan is discretionary, but the commissioner shall not effect a
loan if the commissioner determines that:
new text end

new text begin (1) the political subdivision lacks legal authority to issue general obligation bonds
for the purpose for which the loan is requested;
new text end

new text begin (2) the political subdivision is currently in default on a loan pursuant to this program;
new text end

new text begin (3) the political subdivision does not appear to be financially able to repay the loan
requested;
new text end

new text begin (4) the political subdivision has not taken reasonable, preliminary steps in
preparation for repayment of the loan;
new text end

new text begin (5) the issuance of Minnesota all-government state bonds in connection with the
loan would violate the Minnesota Constitution; or
new text end

new text begin (6) it would not be financially feasible or wise for the state to make the requested loan.
new text end

new text begin Subd. 2. new text end

new text begin Authorization; conditions. new text end

new text begin The commissioner, on behalf of the state and
the authorized representatives of the political subdivision, shall enter into an agreement
providing:
new text end

new text begin (1) the political subdivision is irrevocably bound to repay the loan in full;
new text end

new text begin (2) the political subdivision shall hold the state and its officers and employees
harmless from any claim, cause of action, or damages arising from the political
subdivision's misapplication of loaned funds;
new text end

new text begin (3) the books, records, and accounts of the political subdivision shall be available
during business hours at any time for inspection by either the commissioner or state
auditor; and
new text end

new text begin (4) other conditions as may be required by the commissioner.
new text end

new text begin Subd. 3. new text end

new text begin Withholding by commissioner. new text end

new text begin When making a loan to a political
subdivision, the commissioner shall deduct an amount sufficient, when added to the
balance on hand in the portion of the bond account dedicated to debt service for the subject
loan, to pay all principal and interest due and to become due on the portion of the bonds
issued for the particular loan to and including July 1 in the second ensuing year. The funds
so withheld shall be placed in the Minnesota all-government repayment bond account in
the state bond fund and are appropriated for expenditure at any time for debt service
on Minnesota all-government state bonds.
new text end

new text begin Subd. 4. new text end

new text begin Repayment by political subdivisions. new text end

new text begin Political subdivisions receiving
loans pursuant to this section shall obtain repayment funds and transmit those funds to the
state in the same manner as if the political subdivisions had themselves issued bonds for
the purposes for which they obtained loans from the Minnesota all-government financing
fund. In addition to the initial withholding undertaken by the commissioner pursuant to
subdivision 3, each loan recipient shall, not later than October 15 of each year, transmit to
the commissioner a loan repayment sum sufficient in amount, when added to the balance
on hand in the bond account, to pay all principal and interest due and to become due on
the portion of the bonds issued for the subject loan to and including July 1 in the second
ensuing year. The funds so transmitted shall be placed in the Minnesota all-government
repayment bond account in the state bond fund and are appropriated for expenditure at any
time for debt service on Minnesota all-government state bonds.
new text end

new text begin Subd. 5. new text end

new text begin Loan rules. new text end

new text begin The commissioner shall promulgate and adopt rules necessary
regarding loan applications, the granting of loans, and administration of this program.
new text end

Sec. 6.

new text begin [16F.06] STATE PROJECTS.
new text end

new text begin The commissioner may issue Minnesota all-government state bonds pursuant to the
provisions of sections 16F.01 to 16F.11 to finance state projects if the commissioner
determines that the project has been authorized by the legislature in accordance with the
Minnesota Constitution, article XI, section 7. The proceeds of the bonds are annually
appropriated to the commissioner to be disbursed for the purposes of sections 16F.01
to 16F.11.
new text end

Sec. 7.

new text begin [16F.07] BOND AUTHORIZATION.
new text end

new text begin For the purpose of providing funds to the commissioner for establishment and
implementation of the political subdivision loan programs established by section 16F.05,
and state projects as authorized by section 16F.06 and other law, the commissioner is
authorized to sell and issue Minnesota all-government state bonds in the manner and upon
the conditions provided in sections 16F.01 to 16F.11 and in the Minnesota Constitution,
article XI, section 7. The proceeds of the bonds, except premium and accrued interest,
are appropriated to the Minnesota all-government state debt fund in the general fund, for
expenditure by the commissioner for the purpose for which the bonds are authorized in
accordance with the provisions of section 16F.03. In order to reduce the amount of taxes
otherwise required by the Minnesota Constitution and by section 16F.09 to be levied for
the payment of interest and principal on Minnesota all-government state bonds, there is
also appropriated annually to the Minnesota all-government state bond repayment account
in the state bond fund from the general fund a sum of money sufficient in amount, when
added to the balance on hand on November 1 in each year in the bond repayment account,
to pay all principal and interest due and to become due on the bonds to and including July
1 in the second ensuing year. The money received and on hand pursuant to this annual
appropriation is available in the state bond fund prior to the levy of the tax in any year
required by the Minnesota Constitution and by section 16F.09 and shall be used to reduce
the amount of the tax otherwise required to be levied.
new text end

Sec. 8.

new text begin [16F.08] MINNESOTA ALL-GOVERNMENT BOND REPAYMENT
ACCOUNT.
new text end

new text begin The commissioner of management and budget shall maintain in the state bond fund a
separate bookkeeping account which shall be designated as the Minnesota all-government
state bond repayment account, to record receipts and disbursements of money transferred
to the fund to pay Minnesota all-government state bonds and to record income from the
investment of the money, which income shall be credited to the account in each fiscal year.
The amounts directed to be transferred to this bond repayment account are appropriated to
it, and the legislature may also appropriate to the bond repayment account any other money
in the state treasury not otherwise appropriated. On November 1 of each year there shall
be transferred to the bond repayment account all of the money then available under any
appropriation or a lesser sum as will be sufficient, with all money previously transferred to
the bond repayment account and all income from the investment of the money, and all
payments by political subdivisions, to pay all principal and interest then and theretofore
due and all principal and interest to become due to and including July 1 in the second
ensuing year on Minnesota all-government state bonds. All money so transferred and all
income from the investment of it shall be available to pay the bonds and interest on them,
and so much thereof as may be necessary is appropriated for these payments. The state
auditor is directed to make the appropriate entries in the accounts of the respective funds.
new text end

Sec. 9.

new text begin [16F.09] TAX LEVY.
new text end

new text begin On or before December 1 in each year, the state auditor shall levy on all taxable
property within the state whatever tax may be necessary to produce an amount sufficient,
with all money then and theretofore credited to the Minnesota all-government state
bond repayment account, to pay the entire amount of principal and interest then and
theretofore due and principal and interest to become due on or before July 1 in the second
year thereafter on Minnesota all-government state bonds. This tax shall be levied upon
all real property used for the purposes of a homestead, as well as other taxable property,
notwithstanding the provisions of other law, and shall be subject to no limitation of rate
or amount until all these bonds and interest on them are fully paid. The proceeds of this
tax are appropriated and shall be credited to the state bond fund, and the principal of and
interest on the bonds are payable from the proceeds, and the whole of the proceeds, or
so much as may be necessary, is appropriated for the payments. If at any time there is
insufficient money from the proceeds of taxes to pay the principal and interest when due
on Minnesota all-government state bonds, the principal and interest shall be paid out of
the general fund in the state treasury, and the amount necessary is annually appropriated,
with the sums from tax levies and the general fund subject to future reimbursement to the
bond fund by the Minnesota all-government state bond repayment account.
new text end

Sec. 10.

new text begin [16F.10] CERTIFICATES OF INDEBTEDNESS.
new text end

new text begin Whenever the state auditor would otherwise be required to levy a property tax to pay
obligations incurred under sections 16F.01 to 16F.11, and there is a reasonable expectation
that the obligations will be paid from appropriations or payments by political subdivisions
pursuant to section 16F.07, the commissioner may issue certificates of indebtedness as
authorized by the Minnesota Constitution, article XI, section 6, in an amount sufficient to
avoid the necessity of a levy pursuant to the Minnesota Constitution, article XI, section 7.
new text end

Sec. 11.

new text begin [16F.11] DEFAULT.
new text end

new text begin If a political subdivision defaults on repayment of any loan financed through
Minnesota all-government state bonds, the state auditor shall cause taxes to be levied on
the real property of the defaulting political subdivision in an amount sufficient to make
overdue payments plus interest at a reasonable rate not greater than one percent more than
the average annual rate of interest on Minnesota all-government state bonds issued during
the preceding calendar year and to make future loan payments as they become due. The
interest rate shall be calculated to yield an amount sufficient to discharge the costs to the
state of the default. All funds generated from this levy shall be transmitted to the state,
placed in the Minnesota all-government state bond repayment account in the state bond
fund, and are appropriated for expenditure at any time for debt service on Minnesota
all-government state bonds.
new text end

Sec. 12. new text begin APPROPRIATION.
new text end

new text begin $150,000 is appropriated to the commissioner as a revolving fund to cover the initial
cost of issuance of Minnesota all-government state bonds.
new text end

Sec. 13. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 12 are effective the day following final enactment. To facilitate the
prompt implementation of this loan program, the commissioner is authorized to promulgate
temporary rules pursuant to the provisions of the Administrative Procedure Act.
new text end