HF 1018

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to state government; changing provisions for state general obligation
bond proceeds; amending Minnesota Statutes 2006, section 16A.695.

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

Section 1.

Minnesota Statutes 2006, section 16A.695, is amended to read:

16A.695 PROPERTY PURCHASED WITH STATE BOND PROCEEDS.

Subdivision 1.

Definitions.

(a) The definitions in this subdivision apply to this
section.

(b) "State bond financed property" means property acquired or bettered in whole or
in part with the proceeds of state general obligation bonds deleted text begin authorized to be issued under
article XI, section 5, clause (a), of the Minnesota Constitution. deleted text end new text begin , including any property
that benefits from predesign or design activities funded in any part by the proceeds of state
general obligation bonds even if no additional proceeds of state general obligation bonds
are used in the acquisition or betterment of the property.
new text end

(c) "Public officer or agency" means a state officer or agency, the University of
Minnesota, the Minnesota Historical Society, and any county, home rule charter or
statutory city, school district, special purpose district, or other public entity, or any
officer or employee thereof new text begin ; but does not include the United States or any agency or
instrumentality of the United States new text end .

(d) "Fair market value" means, with respect to the sale of state bond financed
property, the price that would be paid by a willing and qualified buyer to a willing and
qualified seller as determined by an appraisal of the property new text begin that assumes that all liens or
encumbrances that negatively affect the value of the property will be paid and released new text end ,
or the price bid by a purchaser under a public bid procedure after reasonable public
notice deleted text begin . deleted text end new text begin on the condition that all liens or encumbrances that negatively affect the value
of the property will be paid and released.
new text end

(e) deleted text begin "Outstanding state bonds" deleted text end new text begin "Approved debt" new text end means deleted text begin the dollar amount certified deleted text end new text begin
debt that is consented to, in writing, new text end by the commissioner deleted text begin , upon the request deleted text end new text begin and the
proceeds new text end of deleted text begin a public officer deleted text end new text begin which are used to acquire new text end or deleted text begin agency, to be the principal
amount of state bonds, including any refunding bonds, issued with respect to the deleted text end new text begin better new text end
state bond new text begin - new text end financed property deleted text begin , less the principal amount of state bonds paid or defeased
before the date of the request deleted text end .

new text begin (f) "General obligation grant" means a grant to a public officer or agency that is
funded from the proceeds of state general obligation bonds.
new text end

new text begin (g) "State bond fund" means the fund created under article XI, section 7, of the
Minnesota Constitution.
new text end

new text begin (h) "State general obligation bonds" means general obligation bonds issued by the
state under article XI, section 5, clause (a), of the Minnesota Constitution, or any bonds
issued to refund those state general obligation bonds.
new text end

Subd. 2.

Leases and management contracts.

(a) A public officer or agency that is
authorized by law to lease or enter into a management contract with respect to state bond
financed property shall comply with this subdivision.

(b) The lease or management contract may new text begin only new text end be entered into for the express
purpose of carrying out a governmental program established or authorized by law deleted text begin and deleted text end new text begin ,
must be new text end established by official action of the contracting public officer or agency, new text begin must
be new text end in accordance with orders of the commissioner intended to ensure the legality and
tax-exempt status of new text begin state general obligation new text end bonds issued to finance the property, and
deleted text begin with the approval of the deleted text end new text begin must be approved, in writing, by the new text end commissioner. new text begin A description
of the governmental program, the statutory authority for the creation and operation of
the program, and the purpose of the program must be explicitly set forth in the lease or
contract.
new text end

deleted text begin A lease or management contract, including any renewals that are solely at the option
of the lessee, must be for a term substantially less than the useful life of the property, but
may allow renewal beyond that term upon a determination by the lessor that the use
continues to carry out the governmental program. deleted text end new text begin (c) A lease or management contract for
state bond-financed property that includes buildings or other structures must be for a total
term, including any renewals, that does not exceed 50 percent of the original useful life
of the buildings or structures. A lease or management contract for state bond-financed
property that consists solely of land must be for a total term, including any renewals, that
does not exceed 20 years.
new text end

new text begin (d) new text end A lease or management contract must be terminable by the contracting public
officer or agency if the other contracting party defaults under the new text begin lease or new text end contract or if
the governmental program is terminated or changed, and deleted text begin must deleted text end new text begin may new text end provide for deleted text begin program deleted text end new text begin
notice of default before termination for a specified time that is reasonable under the
circumstances.
new text end

new text begin (e) A lease or management contract must provide for new text end oversight new text begin of the state
bond-financed property and governmental program new text end by the contracting public officer or
agency. new text begin This oversight must require the other contracting party to provide to the public
officer or agency:
new text end

new text begin (1) the items needed by the public officer or agency to comply with the requirements
in subdivision 5;
new text end

new text begin (2) between 12 and 15 months after the initial date of the lease or management
contract and on approximately the same date of each subsequent calendar year, an annual
operating report describing, in detail, what activities the property was used for during
the immediately preceding 12 months and what activities the property will be used for
during the next 12 months; and
new text end

new text begin (3) any other information the commissioner may require to ensure the legality and
tax-exempt status of the state general obligation bonds.
new text end

new text begin (f) new text end Money received by the public officer or agency under the lease or management
contract that is not needed to pay and not authorized to be used to pay operating costs of
the property, or to pay the principal, interest, redemption premiums, and other expenses
when due on new text begin approved new text end debt deleted text begin related to the property deleted text end other than state new text begin general obligation
new text end bonds, must be:

(1) paid to the commissioner in the same proportion as the state bond financing is
to the total public debt financing for the property, excluding debt issued by a unit of
government for which it has no financial liability;

(2) deposited in the state bond fund; and

(3) used to pay or redeem or defease new text begin state general obligation new text end bonds issued to finance
the property in accordance with the commissioner's order authorizing their issuance.

The money paid to the commissioner is appropriated for this purpose.

deleted text begin (c) deleted text end new text begin (g) new text end With the approval of the commissioner, a lease or management contract
between a city and a nonprofit corporation under section 471.191, subdivision 1, need
not require the lessee to pay rentals sufficient to pay the principal, interest, redemption
premiums, and other expenses when due with respect to state new text begin general obligation new text end bonds
issued to acquire and better the facilities.

new text begin (h) A lease or management contract must require the other contracting party to take
whatever actions and furnish to the commissioner whatever documents and information
the commissioner determines necessary to ensure the legality and tax-exempt status of the
state general obligation bonds.
new text end

new text begin (i) At the end of the term of a lease or management contract or its earlier termination,
the public officer or agency may take over the operation and management of the state
bond-financed property or, upon compliance with this section, enter into a new lease or
management contract with a different contracting party or the same contracting party.
new text end

new text begin (j) A lease or management contract must require the contracting party to pay all
costs of operation and maintenance of the state bond-financed property unless the public
officer or agency is authorized by state law to pay and agrees to pay these costs. A lease or
management contract need not require the contracting party to pay any compensation to
the public officer or agency unless required by a state law other than this section or any
order of the commissioner intended to ensure the legality and tax-exempt status of the
state general obligation bonds.
new text end

new text begin (k) A lease or management contract must comply with this section, the state law
under which it is authorized, and any orders of the commissioner intended to ensure the
legality and tax-exempt status of the state general obligation bonds.
new text end

new text begin (l) The public officer or agency is responsible for the management and operation of
state bond-financed property and operation of the governmental program, and entering
into a lease or management contract does not abolish or alter this responsibility. If a
contracting party fails to properly manage and operate state bond-financed property or
operate the governmental program, the public officer or agency must either enter into
a new lease or management contract or directly manage and operate the property and
program and provide the money necessary to do so.
new text end

new text begin (m) A reference to a lease or management contract in this section includes any
amendments, modifications, or alterations to the referenced lease or management contract.
new text end

Subd. 3.

Sale of property.

A public officer or agency shall not sell any new text begin part of new text end state
bond new text begin - new text end financed property unless the public officer or agency determines by official action
that the property is no longer usable or needed by the public officer or agency to carry
out the governmental program for which it was acquired or deleted text begin constructed deleted text end new text begin bettered new text end , the sale
is made as authorized by new text begin state new text end law, the sale is made for fair market value, and the sale is
approved new text begin in writing new text end by the commissioner. deleted text begin If any state bonds issued to purchase or better
the state bond financed property that is sold remain outstanding on the date of sale, deleted text end The
net proceeds of sale must be applied as follows:

(1) if the state bond new text begin - new text end financed property was acquired deleted text begin and deleted text end new text begin or new text end bettered solely with
state new text begin general obligation new text end bond proceeds, the net proceeds of sale must be paid to the
commissioner deleted text begin , deleted text end new text begin and new text end deposited in the state bond fund, deleted text begin and used to pay or redeem or defease
the outstanding state bonds in accordance with the commissioner's order authorizing their
issuance, deleted text end and the proceeds are appropriated for this purpose; or

(2) if the state bond new text begin - new text end financed property was acquired or bettered partly with state
new text begin general obligation new text end bond proceeds and partly with other money, the net proceeds of sale
must be used: first, to pay to the state the amount of state new text begin general obligation new text end bond proceeds
used to acquire or better the property; second, to pay in full any outstanding public or
private new text begin approved new text end debt incurred to acquire or better the property; and third, any excess
over the amount needed for those purposes must be divided in proportion to the shares
contributed to the acquisition or betterment of the property and paid to the interested
public and private entities, other than any private lender already paid in full, and the
proceeds are appropriated for this purpose. deleted text begin In calculating the share contributed by each
entity, deleted text end new text begin In those instances where state general obligation bonds were used to better property
already owned by the recipient of the general obligation grant, new text end the amount to be attributed
to the owner of the property shall deleted text begin be deleted text end new text begin include new text end the fair market value of the property deleted text begin that was
bettered by state bond proceeds deleted text end at the time the betterment began.

deleted text begin When all of the net proceeds of sale have been applied as provided in this
subdivision, this section no longer applies to the property.
deleted text end

new text begin This subdivision does not authorize any public officer or agency to sell any state
bond-financed property and only regulates those sales. All sales of state bond-financed
property must comply with this subdivision, the state law that authorizes the sale, and any
orders of the commissioner intended to ensure the legality and tax-exempt status of the
state general obligation bonds.
new text end

Subd. 3a.

Involuntary sale of property.

Notwithstanding subdivision 3, this
subdivision applies to the sale of state bond new text begin - new text end financed property by a lender that has
provided money to acquire or better the property. Purchase by the lender in a foreclosure
sale, acceptance of a deed in lieu of foreclosure, or enforcement of a security interest in
personal property, by the lender, is not a sale. Following purchase by the lender, the lender
shall not operate the property in a manner inconsistent with the governmental program
established as provided in subdivision 2, paragraph (b). The lender shall exercise its
best efforts to sell the property to a third party as soon as feasible following acquisition
of marketable title to the property by the lender. A sale by the lender must be made as
authorized by law deleted text begin and deleted text end new text begin , new text end must be made for fair market value deleted text begin . deleted text end new text begin , and the proceeds must be
applied as specified in subdivision 3.
new text end

Subd. 4.

Relation to other laws.

This section applies to all state bond financed
property unless otherwise provided by law.

Subd. 5.

Program new text begin and property new text end funding.

Recipients of new text begin general obligation
new text end grants deleted text begin from money appropriated from the bond proceeds fund deleted text end must demonstrate to the
commissioner of the agency making the grant that the recipient has the ability and a plan
to fund the new text begin operation of the state bond-financed property and the new text end program intended for
deleted text begin the facility. A private nonprofit organization that leases or manages deleted text end new text begin state bond-financed
property, and must, before receipt of new text end a deleted text begin facility acquired or bettered with deleted text end new text begin general obligation
new text end grant deleted text begin money appropriated from the bond proceeds fund must demonstrate deleted text end new text begin , provide new text end to the
commissioner of the agency making the grant new text begin an initial program implementation plan
that establishes new text end that deleted text begin the organization has the ability and deleted text end new text begin there will be sufficient money
to cover the cost of operation of the property and the program for new text end a deleted text begin plan to fund the
program intended for the facility. deleted text end new text begin three-year period either from revenues generated by
the state bond-financed property and the program or from other sources. Between 12 and
15 months after the receipt of a general obligation grant and on approximately the same
date of each subsequent calendar year, the recipient of the general obligation grant must
provide to the commissioner of the agency making the grant:
new text end

new text begin (1) a financial report and budget showing actual revenues and expenses associated
with the operation of the property and program for the immediately preceding 12 months;
and
new text end

new text begin (2) a projected budget for the next 12 months that shows that projected revenues will
exceed projected expenses for the operation of the property and program during this period.
new text end

new text begin Subd. 6. new text end

new text begin General applicability. new text end

new text begin This section establishes requirements for the
receipt and use of general obligation grants and the ownership and operation of state
bond-financed property. General obligation grants may only be issued and used to
finance the acquisition and betterment of public lands and buildings and other public
improvements of a capital nature that are used to operate a governmental program, and
for predesign and design activities for specifically identified projects that involve the
operation of a governmental program or activity. A general obligation grant may not be
used for general operating expenses, staffing, or general master planning. A public officer
or agency that is the recipient of a general obligation grant must comply with this section
in its use of the general obligation grant and operation, management, lease, and sale
of state bond-financed property. A public officer or agency that uses the proceeds of a
general obligation grant for any unauthorized purpose or in violation of this section must
immediately repay the outstanding balance of the grant to the commissioner, and a failure
to comply authorizes the commissioner to recover the outstanding balance as a setoff
against any state aid provided to the public officer or agency.
new text end

new text begin This section does not create any new authority regarding the ownership, construction,
rehabilitation, use, operation, lease, management, or sale of state bond-financed property,
or the operation of the governmental program that will be operated on the property. Any
authority that is needed to enter into a management contract or lease of property, to sell
property, or to operate a governmental program or carry out any activity contained in
the law that appropriates money for a general obligation grant must be provided by and
contained in some other law.
new text end

new text begin This section applies to transactions involving state bond-financed property
regardless of when acquired or bettered, unless otherwise provided by state law or unless
the application would impair a legal obligation that was in effect on the effective date of
this section as amended.
new text end

new text begin Subd. 7. new text end

new text begin Grant agreement. new text end

new text begin All general obligation grants must be evidenced by
a grant agreement that specifies:
new text end

new text begin (1) how the general obligation grant will be used;
new text end

new text begin (2) the governmental program that will be operated on the state bond-financed
property; and
new text end

new text begin (3) that the state bond-financed property must be operated in compliance with this
section, all state and federal laws, and in a manner that will not cause the interest on the
state general obligation bonds to be or become subject to federal income taxation for any
reason. A grant agreement must comply with this section, the Minnesota Constitution,
and all commissioner's orders, and also contain other provisions the commissioner of the
agency making the grant deems appropriate. The commissioner shall draft and make
available forms of grant agreements that satisfy the requirements of this subdivision.
new text end

new text begin Subd. 8. new text end

new text begin Title records. new text end

new text begin Every public officer or agency that is the recipient of a
general obligation grant must promptly cause to be recorded in the official real estate
title records maintained by the county recorder for the county or counties in which the
state bond-financed property is located a declaration or other appropriate instrument
in a form prescribed by the commissioner. Upon request and full compliance with this
section and the applicable grant agreement, the commissioner and the commissioner of
the agency making the grant shall execute and deliver to the requesting party a written
release evidencing the release of the state bond-financed property from the provisions of
this section, the grant agreement, and the declaration or other appropriate instrument.
new text end

new text begin Subd. 9. new text end

new text begin Fund availability. new text end

new text begin A general obligation grant is not available until there
has been full compliance with section 16A.502, any other applicable state and federal
laws, and any additional requirements in the law that appropriates money for the grant.
new text end

new text begin Subd. 10. new text end

new text begin Match. new text end

new text begin Where an appropriation of state bond proceeds requires that it be
matched, the match must be in the form of proceeds of general obligation bonds issued by
the public officer or agency, cash money that is not the proceeds of a borrowing, or in-kind
contributions approved by the commissioner, unless otherwise specifically authorized by
law, including the law that appropriates money for the general obligation grant.
new text end

new text begin Subd. 11. new text end

new text begin Transfer between public officers and agencies. new text end

new text begin (a) Where authorized by
state law, other than this section, and notwithstanding anything to the contrary contained in
this section, upon compliance with the following paragraphs, state bond-financed property
may be transferred between public officers and agencies for a nominal consideration.
new text end

new text begin (b) The transferor public officer or agency must determine by official action that the
state bond-financed property to be transferred is no longer useable or needed to carry out
the governmental program for which it was acquired or constructed.
new text end

new text begin (c) The transferee public officer or agency must determine by official action that the
property is needed or useful for a governmental program of the transferee.
new text end

new text begin (d) The transferee public officer or agency must enter into a new grant agreement
that will control the operation, management, and sale of the state bond-financed property
and the operation of the new public program that the transferee public officer or agency
will operate on the state bond-financed property.
new text end

new text begin (e) The new grant agreement and the official actions of the transferor public officer
or agency and the transferee public officer or agency must be filed with the commissioner.
new text end

new text begin (f) The transferee public officer or agency must execute a document in recordable
form in which the public officer or agency acknowledges that the use, operation,
management, lease, and sale of the state bond-financed property by the transferee public
officer or agency is subject to this section and the new grant agreement.
new text end

new text begin (g) The transfer must be consented to, in writing, by the commissioner and the
commissioner of the agency making the grant.
new text end

new text begin Subd. 12. new text end

new text begin Termination. new text end

new text begin State bond-financed property is subject to this section
and the applicable grant agreement until a sale occurs that complies with subdivision
3, after which the state bond-financed property is no longer subject to this section or
the applicable grant agreement.
new text end

new text begin Subd. 13. new text end

new text begin Documentation. new text end

new text begin A public officer or agency shall supply to the
commissioner whatever information and documentation the commissioner requests
in order to determine compliance with this section, any state or federal laws, and any
additional requirements in the law that appropriated money for the grant used to acquire or
better state bond-financed property, and to ensure the legality and tax-exempt status of the
state general obligation bonds.
new text end

new text begin Subd. 14. new text end

new text begin Actions by public officer or agency. new text end

new text begin Any action or determination that
a public officer or agency is required to take or make under this section must be taken
or made by the body that establishes and votes on policy matters for the public officer
or agency. The public officer or agency may not delegate this responsibility to any other
entity or body.
new text end