SF 3374

as introduced - 92nd Legislature (2021 - 2022) Posted on 02/22/2022 09:16am

A bill for an act
relating to economic development; creating the emerging developer fund program;
requiring reports; appropriating money; proposing coding for new law in Minnesota
Statutes, chapter 116J.

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

Section 1.

new text begin [116J.9926] EMERGING DEVELOPER FUND PROGRAM.
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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 employment and economic development.
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new text begin (c) "Eligible project" means a project that is based in Minnesota and meets one or more
of the following criteria:
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new text begin (1) it will stimulate community stabilization or revitalization;
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new text begin (2) it will be located within a census tract identified as a disadvantaged community or
low-income community;
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new text begin (3) it will directly benefit residents of a low-income household;
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new text begin (4) it will increase the supply and improve the condition of affordable housing and
homeownership;
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new text begin (5) it will support the growth needs of new and existing community-based enterprises
that promote economic stability or improve the supply or quality of job opportunities; or
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new text begin (6) it will promote wealth creation, including by being a project in a neighborhood
traditionally not served by real estate developers.
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new text begin (d) "Emerging developer" means a developer who:
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new text begin (1) has limited access to loans from traditional financial institutions; or
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new text begin (2) is a new or smaller developer who has engaged in educational training in real estate
development; and
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new text begin (3) is either a:
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new text begin (i) minority as defined by Minnesota Statutes, section 116M.14, subdivision 6;
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new text begin (ii) woman;
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new text begin (iii) person with a disability, as defined under Minnesota Statutes, section 116M.14,
subdivision 9; or
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new text begin (iv) low-income person.
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new text begin (e) "Low-income person" means a person who:
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new text begin (i) has a household income at or below 200 percent of the federal poverty level; or
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new text begin (ii) has a family income that does not exceed 60 percent of the area median income as
determined by the United States Department of Housing and Urban Development.
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new text begin (f) "Program" means the emerging developer fund program created under this section.
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new text begin Subd. 2. new text end

new text begin Establishment. new text end

new text begin The commissioner shall establish an emerging developer fund
program to make loans to emerging developers for eligible projects that will transform
neighborhoods statewide and promote economic development and the creation and retention
of jobs in Minnesota. The program shall also reduce racial and socioeconomic disparities
by growing the financial capacity of emerging developers.
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new text begin Subd. 3. new text end

new text begin Loan program. new text end

new text begin (a) Through the program, the commissioner shall offer emerging
developers predevelopment, construction, and bridge loans for eligible projects.
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new text begin (b) Predevelopment loans shall be for no more than $50,000. All other types of loans
shall be for no more than $500,000.
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new text begin (c) Loans shall be for a term set by the commissioner of no less than six months and no
more than five years, depending on the use of loan proceeds.
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new text begin (d) Loans shall be for zero interest or a low interest rate, as determined by the
commissioner based on the individual project risk and type of loan sought.
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new text begin (e) Loans shall have flexible collateral requirements, but may require a personal guaranty
from the emerging developer and may be largely unsecured when the appraised value of
the real estate is low.
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new text begin (f) Loans shall have no prepayment penalties and are expected to be repaid from
permanent financing or a conventional loan, once that is secured.
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new text begin (g) Loans shall have the ability to bridge many types of receivables, such as tax credits,
grants, developer fees, and other forms of long-term financing.
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new text begin (h) At the commissioner's discretion, an emerging developer may be required to work
with an experienced developer or professional services consultant who can offer expertise
and advice throughout the development of the project.
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new text begin (i) All loan repayments shall be paid into the emerging developer fund account created
in this section to fund additional loans.
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new text begin Subd. 4. new text end

new text begin Eligible expenses. new text end

new text begin (a) The following shall be eligible expenses for a
predevelopment loan under the program:
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new text begin (1) earnest money or purchase deposit;
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new text begin (2) building inspection fees and environmental reviews;
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new text begin (3) appraisal and surveying;
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new text begin (4) design and tax credit application fees;
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new text begin (5) title and recording fees;
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new text begin (6) site preparation, demolition, and stabilization;
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new text begin (7) interim maintenance and project overhead;
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new text begin (8) property taxes and insurance;
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new text begin (9) construction bonds or letters of credit;
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new text begin (10) market and feasibility studies; and
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new text begin (11) professional fees.
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new text begin (b) The following shall be eligible expenses for a construction or bridge loan under the
program:
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new text begin (1) land or building acquisition;
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new text begin (2) construction-related expenses;
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new text begin (3) developer and contractor fees;
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new text begin (4) site preparation and demolition;
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new text begin (5) financing fees, including title and recording;
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new text begin (6) professional fees;
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new text begin (7) carrying costs;
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new text begin (8) construction period interest;
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new text begin (9) project reserves; and
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new text begin (10) leasehold improvements and equipment purchase.
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new text begin Subd. 5. new text end

new text begin Emerging developer fund account. new text end

new text begin An emerging developer fund account is
created in the special revenue fund in the state treasury. Money in the account is appropriated
to the commissioner for loans under this section.
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new text begin Subd. 6. new text end

new text begin Reports to the legislature. new text end

new text begin By February 15 of each year, beginning in 2024,
the commissioner shall submit a report to the chairs of the house of representatives and
senate committees with jurisdiction over economic development on loans made under the
program.
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Sec. 2. new text begin EMERGING DEVELOPER FUND PROGRAM; APPROPRIATION.
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new text begin $....... in fiscal year 2023 is appropriated from the general fund to the commissioner of
employment and economic development for deposit in the emerging developer fund account
in the special revenue fund. Of this amount, up to five percent is for administration and
monitoring of the emerging developer fund program under Minnesota Statutes, section
116J.9926. This is a onetime appropriation.
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