SF 1513

Introduction - 83rd Legislature (2003 - 2004)

Posted on 12/15/2009 12:00 a.m.

  1.1                          A bill for an act 
  1.2             relating to the state agricultural society; 
  1.3             authorizing the society to issue revenue bonds 
  1.4             enhanced by the credit of the state; proposing coding 
  1.5             for new law in Minnesota Statutes, chapter 37. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  [37.31] [ISSUANCE OF BONDS.] 
  1.8      Subdivision 1.  [BONDING AUTHORITY.] The society may issue 
  1.9   negotiable bonds in a principal amount that the society 
  1.10  determines necessary to provide sufficient money for achieving 
  1.11  its purposes, including the payment of interest on bonds of the 
  1.12  society, the establishment of reserves to secure its bonds, the 
  1.13  payment of fees to a third party providing credit enhancement, 
  1.14  and the payment of all other expenditures of the society 
  1.15  incident to and necessary or convenient to carry out its 
  1.16  corporate purposes and powers.  Bonds of the society may be 
  1.17  issued as bonds or notes or in any other form authorized by 
  1.18  law.  The principal amount of bonds issued and outstanding under 
  1.19  this section at any time may not exceed $20,000,000, excluding 
  1.20  bonds for which refunding bonds or crossover refunding bonds 
  1.21  have been issued. 
  1.22     Subd. 2.  [REFUNDING OF BONDS.] The society may issue bonds 
  1.23  to refund outstanding bonds of the society, to pay any 
  1.24  redemption premiums on those bonds, and to pay interest accrued 
  1.25  or to accrue to the redemption date next succeeding the date of 
  2.1   delivery of the refunding bonds.  The society may apply the 
  2.2   proceeds of any refunding bonds to the purchase or payment at 
  2.3   maturity of the bonds to be refunded, or to the redemption of 
  2.4   outstanding bonds on the redemption date next succeeding the 
  2.5   date of delivery of the refunding bonds and may, pending the 
  2.6   application, place the proceeds in escrow to be applied to the 
  2.7   purchase, retirement, or redemption of the bonds.  Pending use, 
  2.8   escrowed proceeds may be invested and reinvested in obligations 
  2.9   issued or guaranteed by the state or the United States or by any 
  2.10  agency or instrumentality of the state or the United States, or 
  2.11  in certificates of deposit or time deposits secured in a manner 
  2.12  determined by the society, maturing at a time appropriate to 
  2.13  assure the prompt payment of the principal and interest and 
  2.14  redemption premiums, if any, on the bonds to be refunded.  The 
  2.15  income realized on any investment may also be applied to the 
  2.16  payment of the bonds to be refunded.  After the terms of the 
  2.17  escrow have been fully satisfied, any balance of the proceeds 
  2.18  and any investment income may be returned to the society for use 
  2.19  by it in any lawful manner.  All refunding bonds issued under 
  2.20  this subdivision must be issued and secured in the manner 
  2.21  provided by resolution of the society. 
  2.22     Subd. 3.  [KIND OF BONDS.] Bonds issued under this section 
  2.23  must be negotiable investment securities within the meaning and 
  2.24  for all purposes of the Uniform Commercial Code, subject only to 
  2.25  the provisions of the bonds for registration.  The bonds issued 
  2.26  must be limited obligations of the society not secured by its 
  2.27  full faith and credit and payable solely from specified sources 
  2.28  or assets.  
  2.29     Subd. 4.  [RESOLUTION AND TERMS OF SALE.] The bonds of the 
  2.30  society must be authorized by a resolution or resolutions 
  2.31  adopted by the society.  The bonds must bear the date or dates, 
  2.32  mature at the time or times, bear interest at a fixed or 
  2.33  variable rate, including a rate varying periodically at the time 
  2.34  or times and on the terms determined by the society, or any 
  2.35  combination of fixed and variable rates, be in the 
  2.36  denominations, be in the form, carry the registration 
  3.1   privileges, be executed in the manner, be payable in lawful 
  3.2   money of the United States, at the place or places within or 
  3.3   without the state, and be subject to the terms of redemption or 
  3.4   purchase before maturity as the resolutions or certificates 
  3.5   provide.  If, for any reason existing at the date of issue of 
  3.6   the bonds or existing at the date of making or purchasing any 
  3.7   loan or securities from the proceeds or after that date, the 
  3.8   interest on the bonds is or becomes subject to federal income 
  3.9   taxation, this fact does not affect the validity or the 
  3.10  provisions made for the security of the bonds.  The society may 
  3.11  make covenants and take or have taken actions that are in its 
  3.12  judgment necessary or desirable to comply with conditions 
  3.13  established by federal law or regulations for the exemption of 
  3.14  interest on its obligations.  The society may refrain from 
  3.15  compliance with those conditions if in its judgment this would 
  3.16  serve the purposes and policies set forth in this chapter with 
  3.17  respect to any particular issue of bonds, unless this would 
  3.18  violate covenants made by the society.  The maximum maturity of 
  3.19  a bond, whether or not issued for the purpose of refunding, must 
  3.20  be 30 years from its date.  The bonds of the society may be sold 
  3.21  at public or private sale, at a price or prices determined by 
  3.22  the society; provided that: 
  3.23     (1) the aggregate price at which an issue of bonds is 
  3.24  initially offered by underwriters to investors, as stated in the 
  3.25  authority's official statement with respect to the offering, 
  3.26  must not exceed by more than three percent the aggregate price 
  3.27  paid by the underwriters to the society at the time of delivery; 
  3.28     (2) the commission paid by the society to an underwriter 
  3.29  for placing an issue of bonds with investors must not exceed 
  3.30  three percent of the aggregate price at which the issue is 
  3.31  offered to investors as stated in the society's offering 
  3.32  statement; and 
  3.33     (3) the spread or commission must be an amount determined 
  3.34  by the society to be reasonable in light of the risk assumed and 
  3.35  the expenses of issuance, if any, required to be paid by the 
  3.36  underwriters.  
  4.1      Subd. 5.  [EXEMPTION.] The notes and bonds of the society 
  4.2   are not subject to sections 16C.03, subdivision 4, and 16C.05. 
  4.3      Subd. 6.  [RESERVES; FUNDS; ACCOUNTS.] The society may 
  4.4   establish reserves, funds, or accounts necessary to carry out 
  4.5   the purposes of the society or to comply with any agreement made 
  4.6   by or any resolution passed by the society. 
  4.7      Sec. 2.  [37.32] [TENDER OPTION.] 
  4.8      An obligation may be issued giving its owner the right to 
  4.9   tender or the society to demand tender of the obligation to the 
  4.10  society or another person designated by it, for purchase at a 
  4.11  specified time or times, if the society has first entered into 
  4.12  an agreement with a suitable financial institution obligating 
  4.13  the financial institution to provide funds on a timely basis for 
  4.14  purchase of bonds tendered.  The obligation is not considered to 
  4.15  mature on any tender date and the purchase of a tendered 
  4.16  obligation is not considered a payment or discharge of the 
  4.17  obligation by the society.  Obligations tendered for purchase 
  4.18  may be remarketed by or on behalf of the society or another 
  4.19  purchaser.  The society may enter into agreements it considers 
  4.20  appropriate to provide for the purchase and remarketing of 
  4.21  tendered obligations, including: 
  4.22     (1) provisions under which undelivered obligations may be 
  4.23  considered tendered for purchase and new obligations may be 
  4.24  substituted for them; 
  4.25     (2) provisions for the payment of charges of tender agents, 
  4.26  remarketing agents, and financial institutions extending lines 
  4.27  of credit or letters of credit assuring repurchase; and 
  4.28     (3) provisions for reimbursement of advances under letters 
  4.29  of credit that may be paid from the proceeds of the obligations 
  4.30  or from tax and other revenues appropriated for the payment and 
  4.31  security of the obligations and similar or related provisions. 
  4.32     Sec. 3.  [37.33] [BOND FUND.] 
  4.33     Subdivision 1.  [CREATION AND CONTENTS.] The society may 
  4.34  establish a special fund or funds for the security of one or 
  4.35  more or all series of its bonds.  The funds must be known as 
  4.36  debt service reserve funds.  The society may pay into each debt 
  5.1   service reserve fund: 
  5.2      (1) the proceeds of sale of bonds to the extent provided in 
  5.3   the resolution or indenture authorizing the issuance of them; 
  5.4      (2) money directed to be transferred by the society to the 
  5.5   debt service reserve fund; and 
  5.6      (3) other money made available to the society from any 
  5.7   other source only for the purpose of the fund. 
  5.8      Subd. 2.  [USE OF FUNDS.] Except as provided in this 
  5.9   section, the money credited to each debt service reserve fund 
  5.10  must be used only for the payment of the principal of bonds of 
  5.11  the society as they mature, the purchase of the bonds, the 
  5.12  payment of interest on them, or the payment of any premium 
  5.13  required when the bonds are redeemed before maturity.  Money in 
  5.14  a debt service reserve fund must not be withdrawn at a time and 
  5.15  in an amount that reduces the amount of the fund to less than 
  5.16  the amount the society determines to be reasonably necessary for 
  5.17  the purposes of the fund.  However, money may be withdrawn to 
  5.18  pay principal or interest due on bonds secured by the fund if 
  5.19  other money of the society is not available. 
  5.20     Subd. 3.  [INVESTMENT.] Money in a debt service reserve 
  5.21  fund not required for immediate use may be invested in 
  5.22  accordance with section 37.07. 
  5.23     Subd. 4.  [MINIMUM AMOUNT OF RESERVE AT ISSUANCE.] If the 
  5.24  society establishes a debt service reserve fund for the security 
  5.25  of any series of bonds, it shall not issue additional bonds that 
  5.26  are similarly secured if the amount of any of the debt service 
  5.27  reserve funds at the time of issuance does not equal or exceed 
  5.28  the minimum amount required by the resolution creating the fund, 
  5.29  unless the society deposits in each fund at the time of 
  5.30  issuance, from the proceeds of the bonds, or otherwise, an 
  5.31  amount that when added together with the amount then in the fund 
  5.32  will be at least the minimum amount required. 
  5.33     Subd. 5.  [TRANSFER OF EXCESS.] To the extent consistent 
  5.34  with the resolutions and indentures securing outstanding bonds, 
  5.35  the society may at the close of a fiscal year transfer to any 
  5.36  other fund or account from any debt service reserve fund any 
  6.1   excess in that reserve fund over the amount determined by the 
  6.2   society to be reasonably necessary for the purpose of the 
  6.3   reserve fund. 
  6.4      Sec. 4.  [37.34] [MONEY OF THE SOCIETY.] 
  6.5      The society may contract with the holders of any of its 
  6.6   bonds as to the custody, collection, securing, investment, and 
  6.7   payment of money of the society or money held in trust or 
  6.8   otherwise for the payment of bonds, and to carry out the 
  6.9   contract.  Money held in trust or otherwise for the payment of 
  6.10  bonds or in any way to secure bonds and deposits of the money 
  6.11  may be secured in the same manner as money of the society, and 
  6.12  all banks and trust companies are authorized to give security 
  6.13  for the deposits.  
  6.14     Sec. 5.  [37.35] [NONLIABILITY.] 
  6.15     Subdivision 1.  [NONLIABILITY OF INDIVIDUALS.] No member of 
  6.16  the society or other person executing the bonds is liable 
  6.17  personally on the bonds or is subject to any personal liability 
  6.18  or accountability by reason of their issuance.  
  6.19     Subd. 2.  [NONLIABILITY OF STATE.] The state is not liable 
  6.20  on bonds of the society issued under section 37.31 and those 
  6.21  bonds are not a debt of the state.  The bonds must contain on 
  6.22  their face a statement to that effect. 
  6.23     Sec. 6.  [37.36] [PURCHASE AND CANCELLATION BY SOCIETY.] 
  6.24     Subject to agreements with bondholders that may then exist, 
  6.25  the society may purchase out of money available for the purpose, 
  6.26  bonds of the society which shall then be canceled, at a price 
  6.27  not exceeding the following amounts: 
  6.28     (1) if the bonds are then redeemable, the redemption price 
  6.29  then applicable plus accrued interest to the next interest 
  6.30  payment date of the bonds; or 
  6.31     (2) if the bonds are not redeemable, the redemption price 
  6.32  applicable on the first date after the purchase upon which the 
  6.33  bonds become subject to redemption plus accrued interest to that 
  6.34  date. 
  6.35     Sec. 7.  [37.37] [STATE PLEDGE AGAINST IMPAIRMENT OF 
  6.36  CONTRACTS.] 
  7.1      The state pledges and agrees with the holders of bonds 
  7.2   issued under section 37.31 that the state will not limit or 
  7.3   alter the rights vested in the society to fulfill the terms of 
  7.4   any agreements made with the bondholders or in any way impair 
  7.5   the rights and remedies of the holders until the bonds, together 
  7.6   with interest on them, with interest on any unpaid installments 
  7.7   of interest, and all costs and expenses in connection with any 
  7.8   action or proceeding by or on behalf of the bondholders, are 
  7.9   fully met and discharged.  The society may include this pledge 
  7.10  and agreement of the state in any agreement with the holders of 
  7.11  bonds issued under section 37.31. 
  7.12     Sec. 8.  [37.38] [CREDIT ENHANCEMENT.] 
  7.13     Subdivision 1.  [APPLICATION.] Before the issuance of an 
  7.14  issue of debt obligations under section 37.31, the society may 
  7.15  covenant with the commissioner of finance to be bound by this 
  7.16  section and obligate itself to notify the commissioner of 
  7.17  finance of a potential default and to use this section to 
  7.18  guarantee payment of the principal and interest on those debt 
  7.19  obligations when due.  If the society obligates itself to be 
  7.20  bound by this section, it must covenant in the resolution that 
  7.21  authorizes the issuance of the debt obligations to deposit with 
  7.22  the paying agent three business days before the date on which a 
  7.23  payment is due an amount sufficient to make that payment or to 
  7.24  notify the commissioner under subdivision 2 that it will be 
  7.25  unable to make all or a portion of that payment.  The society 
  7.26  must include a provision in its agreement with the paying agent 
  7.27  for that issue that requires the paying agent to inform the 
  7.28  commissioner if it becomes aware of a potential default in the 
  7.29  payment of principal or interest on that issue or if, on the day 
  7.30  two business days before the date a payment is due on that 
  7.31  issue, there are insufficient funds to make the payment on 
  7.32  deposit with the paying agent.  If the society covenants to be 
  7.33  bound by this section, this section is binding as to that issue 
  7.34  as long as any debt obligation of that issue remains 
  7.35  outstanding.  If this section is or becomes binding for more 
  7.36  than one issue of debt obligations and the society is unable to 
  8.1   make payments on one or more of those issues, the society must 
  8.2   continue to make payments on the remaining issues.  
  8.3      Subd. 2.  [NOTIFICATION; PAYMENT; APPROPRIATION.] (a) If 
  8.4   the society believes that it may be unable to make a principal 
  8.5   or interest payment on any outstanding debt obligations subject 
  8.6   to a covenant under subdivision 1 on the date that payment is 
  8.7   due, it must notify the commissioner of finance as soon as 
  8.8   possible, but not less than 15 working days before the date that 
  8.9   principal or interest payment is due.  The notice must specify 
  8.10  the debt obligation issue in question, the date the payment is 
  8.11  due, the amount of principal and interest due on the payment 
  8.12  date, the amount of principal or interest that the society will 
  8.13  be unable to repay on that date, the paying agent for the debt 
  8.14  obligation, the wire transfer instructions to transfer funds to 
  8.15  that paying agent, and whether a payment is being requested by 
  8.16  the society under this section.  If a paying agent becomes aware 
  8.17  of a potential default, it shall inform the commissioner of that 
  8.18  fact.  
  8.19     (b) Upon receipt of the notice, the commissioner of finance 
  8.20  shall issue to the paying agent for the debt obligation a 
  8.21  warrant for the specified amount on or before the date due.  The 
  8.22  amount needed to redeem the warrant is appropriated to the 
  8.23  commissioner of finance from the state general fund. 
  8.24     Subd. 3.  [INTEREST RATE.] If, at the request of the 
  8.25  society, the state has paid part or all of the principal or 
  8.26  interest due on the society's debt obligation on a specific 
  8.27  date, the amount paid bears taxable interest from the date paid 
  8.28  until the date of repayment at the state's invested cash rate as 
  8.29  it is certified by the commissioner of finance.  Interest only 
  8.30  accrues on the amount paid and outstanding. 
  8.31     Subd. 4.  [CAPITAL IMPROVEMENT MONEY.] If, at the request 
  8.32  of the society, the state has paid part or all of the principal 
  8.33  or interest due on the society's debt obligation on a specific 
  8.34  date, the society must devote all the capital improvement money 
  8.35  available to it under section 37.13, subdivision 2, to repaying 
  8.36  the state for the amounts advanced by the state under 
  9.1   subdivision 2. 
  9.2      Subd. 5.  [MANDATORY PLAN; TECHNICAL ASSISTANCE.] If the 
  9.3   state makes payments on behalf of the society under this section 
  9.4   or the society defaults in the payment of principal or interest 
  9.5   on an outstanding debt obligation, it must submit to the 
  9.6   commissioner of finance for approval a plan specifying the 
  9.7   measures it intends to implement to resolve the issues that led 
  9.8   to its inability to make the payment and to prevent further 
  9.9   defaults.  The commissioner must provide technical assistance to 
  9.10  the society in preparing its plan.  If the commissioner 
  9.11  determines that the society's plan is not adequate, the 
  9.12  commissioner shall notify the society that the plan has been 
  9.13  disapproved, the reasons for the disapproval, and that the state 
  9.14  will not make future payments under this section for debt 
  9.15  obligations issued after the date specified in that notice until 
  9.16  its plan is approved.  
  9.17     Subd. 6.  [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 society issuing debt obligations 
  9.21  according to federal securities laws, rules, and regulations, 
  9.22  including Securities and Exchange Commission Rules and 
  9.23  Regulations, section 240.15c2-12.  The agreements or contracts 
  9.24  may be in any form the commissioner of finance deems reasonable 
  9.25  and in the state's best interest.