SF 2321

Introduction - 94th Legislature (2025 - 2026)

Posted on 03/11/2025 09:29 a.m.

A bill for an act
relating to capital investment; requiring local governments to establish replacement
accounts to maintain and replace capital projects that receive state funding;
proposing coding for new law in Minnesota Statutes, chapter 16A.

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

Section 1.

new text begin [16A.865] CAPITAL PROJECT REPLACEMENT ACCOUNTS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the following terms have
the meanings given.
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new text begin (b) "Commissioner" means the commissioner of administration.
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new text begin (c) "Preservation" means improvements and betterments of a capital nature consistent
with those described in section 16B.307, subdivision 1, paragraph (d).
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new text begin Subd. 2. new text end

new text begin Replacement account establishment. new text end

new text begin (a) A grantee that receives a direct
appropriation or grant from an appropriation of state money for a capital project subject to
section 16A.642, 16A.695, or 16A.86, must establish a capital project replacement fund for
major rehabilitation, expansion, replacement, or preservation of the capital project once the
project has reached its useful life, or for another use as permitted under this section. Money
must remain in the account for the useful life of the capital project, as determined by the
grant agreement with the granting state agency, unless use of the fund is approved in writing
by the granting state agency for major rehabilitation, expansion, replacement, or preservation
of the capital project funded with state money, or to address a capital project for a different
capital asset owned by the grantee.
new text end

new text begin (b) A grantee must adopt a capital project replacement policy that specifies the following
for the capital project replacement fund:
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new text begin (1) the risks to be mitigated or managed by the fund;
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new text begin (2) the intended use of the replacement fund, including, but not limited to, how the fund
will be used for major rehabilitation, expansion, replacement, or preservation of the capital
project; and
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new text begin (3) criteria for the use of the fund to address other capital improvement needs of the
grantee, including safety and security, maintenance and utility costs, availability of repair
parts and materials, sustainability, and any other criteria the grantee deems relevant.
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new text begin (c) For the purposes of this section, "grantee" does not include a state agency or state
official.
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new text begin Subd. 3. new text end

new text begin Minimum deposits; fund balance. new text end

new text begin (a) The commissioner must determine the
annual minimum deposit amounts to be deposited into capital project replacement funds by
capital project type. The commissioner must take into account depreciation, construction
cost inflation, and other relevant factors when determining the minimum deposit amounts.
new text end

new text begin (b) A grantee must not be required to maintain a capital project replacement fund balance
greater than the amount of the direct appropriation or grant from an appropriation of state
money for the capital project.
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new text begin Subd. 4. new text end

new text begin Account auditing. new text end

new text begin The state auditor may audit capital project replacement
accounts as part of the regular audits of local governments.
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new text begin Subd. 5. new text end

new text begin Exceptions. new text end

new text begin Capital projects that already require a replacement fund under
section 446A.072, subdivision 12, or any other law, rule, or ordinance, are exempt from the
requirements under this section, so long as the deposits into the replacement fund are at
least as large as the minimum deposits established by the commissioner under subdivision
3.
new text end

new text begin Subd. 6. new text end

new text begin Penalty. new text end

new text begin Failure of a grantee to comply with the requirements of this section
shall result in the granting state agency assessing a penalty fee to the grantee equal to one
percent of the appropriation of state money for the capital project for each year of
noncompliance. Penalty fees shall be remitted by the granting state agency to the
commissioner of management and budget for deposit into the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for capital projects funded through state
capital project grant agreements entered into on or after July 1, 2025.
new text end