1.1                          A bill for an act 
  1.2             relating to nonpoint source pollution; modifying the 
  1.3             agriculture best management practices loan program and 
  1.4             the clean water partnership loan program; amending 
  1.5             Minnesota Statutes 1994, sections 17.117, subdivisions 
  1.6             2, 4, 6, 7, 8, 9, 10, 11, 14, 16, and by adding 
  1.7             subdivisions; and 103F.725, subdivision 1a. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1994, section 17.117, 
  1.10  subdivision 2, is amended to read: 
  1.11     Subd. 2.  [AUTHORITY.] The commissioner shall establish, 
  1.12  adopt rules for, and implement a program to work with make loans 
  1.13  to local units of government, federal authorities, lending 
  1.14  institutions, and other appropriate organizations to who will in 
  1.15  turn provide loans to landowners and businesses for facilities, 
  1.16  fixtures, equipment, or other sustainable practices that prevent 
  1.17  or mitigate sources of nonpoint source water pollution.  The 
  1.18  commissioner shall establish pilot projects to develop 
  1.19  procedures for implementing the program.  The commissioner shall 
  1.20  develop administrative guidelines to implement the pilot 
  1.21  projects specifying criteria, standards, and procedures for 
  1.22  making loans. 
  1.23     Sec. 2.  Minnesota Statutes 1994, section 17.117, 
  1.24  subdivision 4, is amended to read: 
  1.25     Subd. 4.  [DEFINITIONS.] For the purposes of this section, 
  1.26  the terms defined in this subdivision have the meanings given 
  2.1   them. 
  2.2      (a) "Applicant" means a county or a local government unit 
  2.3   designated by a county under subdivision 8, paragraph (a).  
  2.4      (b) "Authority" means the Minnesota public facilities 
  2.5   authority as established in section 446A.03. 
  2.6      (c) "Best management practices" has the meaning given in 
  2.7   sections 103F.711, subdivision 3, and 103H.151, subdivision 2. 
  2.8      (d) "Chair" means the chair of the board of water and soil 
  2.9   resources or the designee of the chair. 
  2.10     (e) "Borrower" means an individual farmer, an agriculture 
  2.11  supply business, or rural landowner applying for a low-interest 
  2.12  loan. 
  2.13     (f) "Commissioner" means the commissioner of agriculture or 
  2.14  the designee of the commissioner. 
  2.15     (g) "Comprehensive water management plan" means a state 
  2.16  approved and locally adopted plan authorized under section 
  2.17  103B.231, 103B.255, 103B.311, 103C.331, 103D.401, or 103D.405. 
  2.18     (h) "County Local allocation request" means a loan 
  2.19  allocation request from an applicant to implement agriculturally 
  2.20  related best management practices defined in paragraph (c). 
  2.21     (i) "Lender agreement" means an a loan agreement entered 
  2.22  into between the commissioner and, a local lender, and the 
  2.23  applicant, if different from the local lender.  The agreement 
  2.24  will contain terms and conditions of the loan that will include 
  2.25  but need not be limited to general loan provisions, loan 
  2.26  management requirements, application of payments, loan term 
  2.27  limits, allowable expenses, and fee limitations. 
  2.28     (j) "Local government unit" means a county, soil and water 
  2.29  conservation district, or an organization formed for the joint 
  2.30  exercise of powers under section 471.59. 
  2.31     (k) "Local lender" means a local government unit as defined 
  2.32  in paragraph (j), a state or federally chartered bank, a savings 
  2.33  and loan association, a state or federal credit union, a 
  2.34  nonprofit economic development organization approved by the 
  2.35  commissioner, or Farm Credit Services. 
  2.36     (l) "Nonpoint source" has the meaning given in section 
  3.1   103F.711, subdivision 6. 
  3.2      Sec. 3.  Minnesota Statutes 1994, section 17.117, 
  3.3   subdivision 6, is amended to read: 
  3.4      Subd. 6.  [APPLICATION.] (a) The commissioner must 
  3.5   prescribe forms and establish an application process for 
  3.6   applicants to apply for a county local allocation request.  The 
  3.7   application must include but need not be limited to (1) the 
  3.8   geographic area served; (2) the type and estimated cost of 
  3.9   activities or projects for which they are seeking a loan 
  3.10  allocation; (3) a ranking of proposed activities or projects; 
  3.11  and (4) the designation of the local lender and lending 
  3.12  practices the applicant local lender intends to use to issue the 
  3.13  loans to the borrowers, if a local lender other than the 
  3.14  applicant is to be used. 
  3.15     (b) In an area of the state where a county allocation 
  3.16  request has not been requested or has been rejected, application 
  3.17  forms must be available for a borrower to apply directly to the 
  3.18  commissioner for a loan under this program. 
  3.19     (c) If a county local allocation request is rejected, the 
  3.20  applicant must be notified in writing as to the reasons for the 
  3.21  rejection and given 30 days to submit a revised application.  
  3.22  The revised application shall be reviewed according to the same 
  3.23  procedure used to review the initial application. 
  3.24     Sec. 4.  Minnesota Statutes 1994, section 17.117, 
  3.25  subdivision 7, is amended to read: 
  3.26     Subd. 7.  [PAYMENTS.] (a) Payments made from the water 
  3.27  pollution control revolving fund must be made in accordance with 
  3.28  applicable state and federal laws and rules governing the 
  3.29  payments. 
  3.30     (b) Payments from the commissioner to the local lender must 
  3.31  be disbursed on a cost reimbursement basis.  Local lenders shall 
  3.32  submit payment requests at least quarterly but not more than 
  3.33  monthly.  Payment requests must be reviewed and approved by the 
  3.34  commissioner.  The payment request form must itemize all costs 
  3.35  by major elements and show eligible and ineligible costs. 
  3.36     (c) The commissioner may initiate recision of an allocation 
  4.1   granted in a lender agreement as provided in subdivision 11, 
  4.2   paragraph (d), if the local lender fails to enter into loans 
  4.3   with borrowers equaling the total allocation granted within one 
  4.4   year from the date of the lender agreement or fails to have the 
  4.5   total amount of allocated funds drawn down through payment 
  4.6   requests within two years.  An additional year to draw down the 
  4.7   undisbursed portion of an allocation may be granted by the 
  4.8   commissioner under extenuating circumstances. 
  4.9      Sec. 5.  Minnesota Statutes 1994, section 17.117, 
  4.10  subdivision 8, is amended to read: 
  4.11     Subd. 8.  [APPLICANT; BORROWERS.] (a) A county may submit a 
  4.12  county local allocation request as defined in subdivision 4, 
  4.13  paragraph (h).  A county or a group of counties may designate 
  4.14  another local government unit as defined in subdivision 4, 
  4.15  paragraph (j), to submit a county local allocation request. 
  4.16     (b) If a county does not submit a county local allocation 
  4.17  request, and does not designate another local government unit, a 
  4.18  soil and water conservation district may submit a county local 
  4.19  allocation request.  In all instances, there may be only one 
  4.20  request from a county.  The applicant must coordinate and submit 
  4.21  requests on behalf of other units of government within the 
  4.22  geographic jurisdiction of the applicant. 
  4.23     (c) Borrowers may apply directly to the commissioner if the 
  4.24  commissioner does not receive or approve a county allocation 
  4.25  request from the county, designated local government unit, or 
  4.26  soil and water conservation district in which the proposed 
  4.27  activities would be carried out. 
  4.28     Sec. 6.  Minnesota Statutes 1994, section 17.117, 
  4.29  subdivision 9, is amended to read: 
  4.30     Subd. 9.  [REVIEW AND RANKING OF ALLOCATION REQUESTS.] (a) 
  4.31  The commissioner shall chair the subcommittee established in 
  4.32  section 103F.761, subdivision 2, paragraph (b), for purposes of 
  4.33  reviewing and ranking county local allocation requests.  The 
  4.34  rankings must be in order of priority and shall provide 
  4.35  financial assistance within the limits of the funds available.  
  4.36  In carrying out the review and ranking, the subcommittee must 
  5.1   consist of, at a minimum, the chair, representatives of the 
  5.2   pollution control agency, United States Department of 
  5.3   Agricultural Stabilization and Conservation Service, United 
  5.4   States Department of Agriculture Soil Conservation Service, 
  5.5   Association of Minnesota Counties, and other agencies or 
  5.6   associations as the commissioner, the chair, and agency 
  5.7   determine are appropriate.  The review and ranking shall take 
  5.8   into consideration other related state or federal programs. 
  5.9      (b) The subcommittee shall use the criteria listed below in 
  5.10  carrying out the review and ranking: 
  5.11     (1) whether the proposed activities are identified in a 
  5.12  comprehensive water management plan as priorities; 
  5.13     (2) whether the applicant intends to establish a revolving 
  5.14  loan program under subdivision 10, paragraph (b); 
  5.15     (3) the potential that the proposed activities have for 
  5.16  improving or protecting surface and groundwater quality; 
  5.17     (4) the extent that the proposed activities support 
  5.18  areawide or multijurisdictional approaches to protecting water 
  5.19  quality based on defined watershed; 
  5.20     (5) whether the activities are needed for compliance with 
  5.21  existing water related laws or rules; 
  5.22     (6) whether the proposed activities demonstrate 
  5.23  participation, coordination, and cooperation between local units 
  5.24  of government and other public agencies; 
  5.25     (7) whether there is coordination with other public and 
  5.26  private funding sources and programs; and 
  5.27     (8) whether there are off-site public benefits such as 
  5.28  preventing downstream degradation and siltation; and 
  5.29     (9) the proposed interest rate. 
  5.30     Sec. 7.  Minnesota Statutes 1994, section 17.117, is 
  5.31  amended by adding a subdivision to read: 
  5.32     Subd. 9a.  [AUTHORITY OF APPLICANTS.] Applicants may enter 
  5.33  into a lender agreement designating a local lender.  Applicants 
  5.34  designating themselves as the local lender may enter into 
  5.35  contracts for loan review, processing, and servicing. 
  5.36     Sec. 8.  Minnesota Statutes 1994, section 17.117, 
  6.1   subdivision 10, is amended to read: 
  6.2      Subd. 10.  [AUTHORITY OF APPLICANTS LOCAL LENDERS.] (a) 
  6.3   Applicants Local lenders may enter into lender agreements with 
  6.4   borrowers to finance projects under this section the 
  6.5   commissioner. 
  6.6      (b) Applicants Local lenders may establish revolving loan 
  6.7   programs enter into loan agreements with borrowers to finance 
  6.8   projects under this section. 
  6.9      (c) In approving county allocation requests, the 
  6.10  commissioner shall allow applicants to provide loans under 
  6.11  revolving loan programs established under paragraph (b), until 
  6.12  50 percent of the amount appropriated and available under 
  6.13  subdivision 3 has been allocated to applicants establishing 
  6.14  these programs.  In approving any additional county allocation 
  6.15  requests, the commissioner may allow applicants to provide loans 
  6.16  under these programs Local lenders may establish revolving loan 
  6.17  programs to finance projects under this section. 
  6.18     (d) Local lenders may enter into agreements with other 
  6.19  lenders that meet the definition of local lender under this 
  6.20  section for the limited purposes of loan review, processing, and 
  6.21  servicing, or to enter into loan agreements with borrowers.  In 
  6.22  no case may there be more than one local lender per county or 
  6.23  more than one revolving fund per county. 
  6.24     Sec. 9.  Minnesota Statutes 1994, section 17.117, 
  6.25  subdivision 11, is amended to read: 
  6.26     Subd. 11.  [BORROWER ELIGIBILITY; TERMS; REPAYMENT; 
  6.27  RECISION.] (a) Local lenders shall use the following criteria in 
  6.28  addition to other criteria they deem necessary in determining 
  6.29  the eligibility of borrowers for loans: 
  6.30     (1) whether the activity is certified by a local unit of 
  6.31  government as meeting priority needs identified in a 
  6.32  comprehensive water management plan and is in compliance with 
  6.33  accepted standards, specifications, or criteria; 
  6.34     (2) whether the activity is certified as eligible under 
  6.35  Environmental Protection Agency or other applicable guidelines; 
  6.36  and 
  7.1      (3) whether the repayment is assured from the borrower. 
  7.2      (b) Local lenders shall set the terms and conditions of 
  7.3   loans to borrowers, except that no loan to an individual 
  7.4   borrower may exceed $50,000.  In all instances, local lenders 
  7.5   must provide for sufficient collateral or protection for the 
  7.6   loan principal.  They are responsible for collecting repayments 
  7.7   by borrowers.  For direct loans, the borrower must provide 
  7.8   sufficient collateral and repay the loan according to a mutually 
  7.9   prearranged schedule with the commissioner. 
  7.10     (c) A The local lender is responsible for repaying the 
  7.11  principal of a loan to the commissioner.  The terms of repayment 
  7.12  will be identified in the lender agreement.  If defaults occur, 
  7.13  it is the responsibility of the local lender to obtain repayment 
  7.14  from the borrower.  Default on the part of individual borrowers 
  7.15  shall have no effect on the local lender's responsibility to 
  7.16  repay its loan from the commissioner whether or not the local 
  7.17  lender fully recovers defaulted amounts from individual 
  7.18  borrowers.  For revolving loan programs established under 
  7.19  subdivision 10, paragraph (b) (c), the lender agreement must 
  7.20  provide that: 
  7.21     (1) repayment of principal to the commissioner must 
  7.22  begin no later than ten years after the date of the applicant 
  7.23  receives the allocation lender agreement and must be repaid in 
  7.24  full no later than 20 years after the date of the lender 
  7.25  agreement; and 
  7.26     (2) after the initial ten-year period, the local lender 
  7.27  shall not write any additional loans, and any existing principal 
  7.28  balance held by the local lender shall be immediately repaid to 
  7.29  the commissioner; 
  7.30     (3) after the initial ten-year period, all principal 
  7.31  received by the local lender from borrowers shall be repaid to 
  7.32  the commissioner as it is received; and 
  7.33     (4) the applicant shall report to the commissioner annually 
  7.34  regarding the past and intended uses of the money in the 
  7.35  revolving loan program. 
  7.36     (d) Continued availability of the allocation granted in the 
  8.1   lender agreement is contingent upon commissioner approval of the 
  8.2   annual report.  The commissioner shall review the annual report 
  8.3   to ensure the past and future uses of the funds are consistent 
  8.4   with the comprehensive water management plan and the lender 
  8.5   agreement.  If the commissioner concludes the past or intended 
  8.6   uses of the money are not consistent with the comprehensive 
  8.7   water management plan or the lender agreement, the commissioner 
  8.8   shall rescind the allocation granted under the lender agreement. 
  8.9   Such recision shall result in termination of available 
  8.10  allocation, the immediate repayment of any unencumbered funds 
  8.11  held by the local lender in a revolving loan fund, and the 
  8.12  repayment of the principal portion of loan repayments to the 
  8.13  commissioner as they are received.  The lender agreement shall 
  8.14  reflect the commissioner's rights under this paragraph. 
  8.15     (e) A local lender shall receive certification from local 
  8.16  government unit staff that a project has been satisfactorily 
  8.17  completed prior to releasing the final loan disbursement. 
  8.18     Sec. 10.  Minnesota Statutes 1994, section 17.117, 
  8.19  subdivision 14, is amended to read: 
  8.20     Subd. 14.  [FEES; LOAN SERVICES AND INTEREST.] (a) 
  8.21  Origination fees charged directly to borrowers by local lenders 
  8.22  upon executing a loan shall not exceed one-half of one percent 
  8.23  of the loan amount.  Servicing fees Interest assessed to loan 
  8.24  repayments by the local lender must not exceed two three percent 
  8.25  interest on outstanding principal amounts if the local lender is 
  8.26  a local government unit, or three percent interest on 
  8.27  outstanding principal amounts if the local lender is a state or 
  8.28  federally chartered bank, savings and loan association, a state 
  8.29  or federal credit union, or an entity of Farm Credit Services. 
  8.30     (b) The local lender shall create a principal account to 
  8.31  which the principal portions of individual borrower loan 
  8.32  repayments will be credited. 
  8.33     (c) Any interest earned on outstanding loan balances not 
  8.34  separated before the principal amounts are deposited in the 
  8.35  principal account shall be added to the principal portion of the 
  8.36  loan to the local lender and must be paid to the commissioner 
  9.1   when the principal is due under the lender agreement. 
  9.2      (d) Any interest earned on the principal account must be 
  9.3   added to the principal portion of the loan to the local lender 
  9.4   and must be paid to the commissioner when the principal is due 
  9.5   under the lender agreement. 
  9.6      Sec. 11.  Minnesota Statutes 1994, section 17.117, 
  9.7   subdivision 16, is amended to read: 
  9.8      Subd. 16.  [ASSESSMENT AGAINST REAL PROPERTY LIENS AGAINST 
  9.9   PROPERTY.] A county may assess and charge against real property 
  9.10  amounts loaned and servicing fees for projects funded under this 
  9.11  section.  The auditor of the county where the project is located 
  9.12  shall extend the amounts assessed and charged on the tax roll of 
  9.13  the county against the real property on which the project is 
  9.14  located. (a) Unless a county determines otherwise, at the time 
  9.15  of the disbursement of funds on a loan to a borrower under this 
  9.16  section, the principal balance due plus accrued interest on the 
  9.17  principal balance as provided by this section becomes a lien in 
  9.18  favor of the county making the loan upon the real property on 
  9.19  which the project is located.  The lien must be first and prior 
  9.20  to all other liens against the property, excluding state tax 
  9.21  liens, whether filed before or after the placing of a lien under 
  9.22  this subdivision, except liens for special assessments by the 
  9.23  county under applicable special assessments laws, which liens 
  9.24  shall be of equal rank with the lien created under this 
  9.25  subdivision.  A lien in favor of the county shall be first and 
  9.26  prior as provided in this subdivision only if the county making 
  9.27  the loan gives written notice of the intent to make the loan 
  9.28  under this subdivision to all other persons having a recorded 
  9.29  interest in the real property subject to the lien, no less than 
  9.30  30 days prior to the disbursement of the funds.  If within ten 
  9.31  days of the written notice a lender which has a prior recorded 
  9.32  interest in the real property makes written objection to the 
  9.33  intent to obtain the lien to be established, then the county 
  9.34  shall not make the loan.  No record of the lien created under 
  9.35  this subdivision is necessary to perfect the lien, except that 
  9.36  the auditor of the county in which the project is located shall 
 10.1   reflect the amounts due and the nature of the loan on the tax 
 10.2   roll of the county upon disbursement of the funds on the loan.  
 10.3   The county may bill amounts due on the loan on the tax statement 
 10.4   for the property.  Enforcement of the lien created by this 
 10.5   subdivision shall, at the county's option, be in the manner set 
 10.6   forth in chapter 550 or in the same manner as a county enforces 
 10.7   real estate tax liens.  When the amount due plus interest has 
 10.8   been paid, the county shall file a satisfaction of the lien 
 10.9   created under this subdivision. 
 10.10     (b) A county may also secure amounts due on a loan under 
 10.11  this section by taking a purchase money security interest in 
 10.12  equipment in accordance with chapter 336, article 9, and may 
 10.13  enforce the purchase money security interest in accordance with 
 10.14  chapters 336, article 9, and 565. 
 10.15     Sec. 12.  Minnesota Statutes 1994, section 17.117, is 
 10.16  amended by adding a subdivision to read: 
 10.17     Subd. 17.  [REFERENDUM EXEMPTION.] For the purpose of 
 10.18  obtaining a loan from the commissioner, a local government unit 
 10.19  may provide to the commissioner its general obligation note.  
 10.20  All obligations incurred by a local government unit in obtaining 
 10.21  a loan from the commissioner must be in accordance with chapter 
 10.22  475, except that so long as the obligations are issued to 
 10.23  evidence a loan from the commissioner to the local government 
 10.24  unit, an election is not required to authorize the obligations 
 10.25  issued, and the amount of the obligations shall not be included 
 10.26  in determining the net indebtedness of the local government unit 
 10.27  under the provisions of any law or chapter limiting the 
 10.28  indebtedness. 
 10.29     Sec. 13.  Minnesota Statutes 1994, section 103F.725, 
 10.30  subdivision 1a, is amended to read: 
 10.31     Subd. 1a.  [FINANCIAL ASSISTANCE; LOANS.] (a) Up to 
 10.32  $10,000,000 of the balance in the water pollution control 
 10.33  revolving fund in section 446A.07, as determined by the public 
 10.34  facilities authority shall be appropriated to the commissioner 
 10.35  for the establishment of a clean water partnership loan program. 
 10.36     (b) The agency may award loans for up to 100 percent of the 
 11.1   costs associated with activities identified by the agency as 
 11.2   best management practices pursuant to section 319 and section 
 11.3   320 of the federal Water Quality Act of 1987, as amended, 
 11.4   including associated administrative costs. 
 11.5      (c) Loans may be used to finance clean water partnership 
 11.6   grant project eligible costs not funded by grant assistance. 
 11.7      (d) The interest rate, at or below market rate, and the 
 11.8   term, not to exceed 20 years, shall be determined by the agency 
 11.9   in consultation with the public facilities authority. 
 11.10     (e) The repayment must be deposited in the water pollution 
 11.11  control revolving fund under section 446A.07. 
 11.12     (f) The local unit of government receiving the loan is 
 11.13  responsible for repayment of the loan. 
 11.14     (g) For the purpose of obtaining a loan from the agency, a 
 11.15  local government unit may provide to the agency its general 
 11.16  obligation note.  All obligations incurred by a local government 
 11.17  unit in obtaining a loan from the agency must be in accordance 
 11.18  with chapter 475, except that so long as the obligations are 
 11.19  issued to evidence a loan from the agency to the local 
 11.20  government unit, an election is not required to authorize the 
 11.21  obligations issued, and the amount of the obligations shall not 
 11.22  be included in determining the net indebtedness of the local 
 11.23  government unit under the provisions of any law or chapter 
 11.24  limiting the indebtedness.