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Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1986 

                        CHAPTER 465-H.F.No. 2287 
           An act relating to local government financing; 
          allocating issuance authority for obligations subject 
          to a federal volume limitation act; authorizing 
          issuance of bonds; giving local governments certain 
          powers; prescribing pollution control agency 
          procedures; providing for wastewater treatment 
          control; amending Minnesota Statutes 1984, sections 
          115.07, subdivision 1; 115A.14, subdivision 4; 
          124.214, by adding a subdivision; 273.1314, by adding 
          a subdivision; 273.73, subdivision 10; 273.75, 
          subdivision 2; 273.77; 298.2211, subdivision 1; 
          412.301; 429.091, subdivision 8; 430.12; 459.35; 
          462.556; 462A.03, subdivision 13; 462C.02, subdivision 
          6; 462C.06; 462C.07, subdivision 1; 471.59, 
          subdivision 11; 472.09, subdivision 8; 474.01, 
          subdivisions 6 and 7b; 474.02, by adding a 
          subdivision; 475.55, subdivision 1, and by adding a 
          subdivision; 475.77; Minnesota Statutes 1985 
          Supplement, sections 273.1314, subdivision 16a; 
          273.75, subdivision 4; 458.1941; 462.445, subdivision 
          13; 475.56; 475.60, subdivision 2; proposing coding 
          for new law in Minnesota Statutes, chapters 115, 116, 
          297A, 340A, and 475; proposing coding for new law as 
          Minnesota Statutes, chapters 471A, 474A; repealing 
          Minnesota Statutes 1984, sections 462C.09, subdivision 
          4; 474.16, subdivisions 1, 2, and 5; 474.21; 474.25; 
          Minnesota Statutes 1985 Supplement, sections 116J.58, 
          subdivision 4; 462C.09, subdivisions 1, 2a, 3, 5, and 
          6; 474.16, subdivisions 3, 6, 7, 8, 9, 10, 11, 12, 13, 
          14, and 15; 474.17; 474.19; 474.20; 474.23; and 474.26.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                               ARTICLE 1 
    Section 1.  Minnesota Statutes 1984, section 273.77, is 
amended to read: 
    273.77 [TAX INCREMENT BONDING.] 
    Any other law, general or special, notwithstanding, after 
August 1, 1979 no bonds, payment for which tax increment is 
pledged, shall be issued in connection with any project for 
which tax increment financing has been undertaken other than as 
is authorized hereby and the proceeds therefrom shall be used 
only in accordance with section 273.75, subdivision 4 as if said 
proceeds were tax increment, except that a tax increment 
financing plan need not be adopted for any project for which tax 
increment financing has been undertaken prior to August 1, 1979, 
pursuant to statutes not requiring a tax increment financing 
plan.  Such bonds shall not be included for purposes of 
computing the net debt of any municipality. 
    (a) A municipality may issue general obligation bonds to 
finance any expenditure by the municipality or an authority the 
jurisdiction of which is wholly or partially within that 
municipality, pursuant to section 273.75, subdivision 4 in the 
same manner and subject only to the same conditions as those 
provided in chapter 475 for bonds financing improvement costs 
reimbursable from special assessments.  Any pledge of tax 
increment, assessments or other revenues for the payment of the 
principal of and interest on general obligation bonds issued 
under this subdivision, except when the authority and the 
municipality are the same, shall be made by written agreement by 
and between the authority and the municipality and filed with 
the county auditor.  When the authority and the municipality are 
the same, the municipality may by covenant pledge tax increment, 
assessments or other revenues for the payment of the principal 
of and interest on general obligation bonds issued under this 
subdivision and thereupon shall file the resolution containing 
such covenant with the county auditor.  When tax increment, 
assessments and other revenues are pledged, the estimated 
collections of said tax increment, assessments and any other 
revenues so pledged may be deducted from the taxes otherwise 
required to be levied before the issuance of the bonds under 
section 475.61, subdivision 1, or the collections thereof may be 
certified annually to reduce or cancel the initial tax levies in 
accordance with section 475.61, subdivision 1 or 3. 
      (b) When the authority and the municipality are not the 
same, an authority may, by resolution, authorize, issue and sell 
its general obligation bonds to finance any expenditure which 
that authority is authorized to make by section 273.75, 
subdivision 4.  Said bonds of the authority shall be authorized 
by its resolution, shall mature as determined by resolution of 
the authority in accordance with Laws 1979, Chapter 322, and may 
be issued in one or more series and shall bear such date or 
dates, bear interest at such rate or rates, be in such 
denomination or denominations, be in such form either coupon or 
registered, carry such conversion or registration privileges, 
have such rank or priority, be executed in such manner, be 
payable in medium of payment at such place or places, and be 
subject to such terms of redemption, with or without premium, as 
such resolution, its trust indenture or mortgage may provide.  
The bonds may be sold at public or private sale at the price or 
prices as the authority by resolution shall determine, and any 
provision of any law to the contrary notwithstanding, the bonds 
shall be fully negotiable.  In any suit, actions, or proceedings 
involving the validity of enforceability of any bonds of the 
authority or the security therefor, any bond reciting in 
substance that it has been issued by the authority to aid in 
financing a project shall be conclusively deemed to have been 
issued for such purpose, and the tax increment financing 
district within the project shall be conclusively deemed to have 
been planned, located, and carried out in accordance with the 
purposes and provisions of Laws 1979, Chapter 322.  Neither the 
authority, nor any director, commissioner, council member, board 
member, officer, employee or agent of the authority nor any 
person executing the bonds shall be liable personally on the 
bonds by reason of the issuance thereof.  The bonds of the 
authority, and such bonds shall so state on their face, shall 
not be a debt of any municipality, the state or any political 
subdivision thereof, and neither the municipality nor the state 
or any political subdivision thereof shall be liable thereon, 
nor in any event shall such bonds be payable out of any funds or 
properties other than those of the authority and any tax 
increment and revenues of a tax increment financing district 
pledged therefor. 
      (c) Notwithstanding any other law general or special, an 
authority may, by resolution, authorize, issue and sell revenue 
bonds payable solely from all or a portion of revenues, 
including but not limited to tax increment revenues and 
assessments, derived from a tax increment financing district 
located wholly or partially within the municipality to finance 
any expenditure which the authority is authorized to make by 
section 273.75, subdivision 4.  The bonds shall mature as 
determined by resolution of the authority in accordance with 
Laws 1979, Chapter 322 and may be issued in one or more series 
and shall bear such date or dates, bear interest at such rate or 
rates, be in such denomination or denominations, be in such form 
either coupon or registered, carry such conversion or 
registration privileges, have such rank or priority, be executed 
in such manner, be payable in medium of payment at such place or 
places, and be subject to such terms of redemption, with or 
without premium, as such resolution, its trust indenture or 
mortgage may provide.  The bonds may be sold at public or 
private sale at the price or prices as the authority by 
resolution shall determine, and any provision of any law to the 
contrary notwithstanding, shall be fully negotiable.  In any 
suit, action, or proceedings involving the validity or 
enforceability of any bonds of the authority or the security 
therefor, any bond reciting in substance that it has been issued 
by the authority to aid in financing a project shall be 
conclusively deemed to have been issued for such purpose, and 
the tax increment financing district within the project shall be 
conclusively deemed to have been planned, located, and carried 
out in accordance with the purposes and provisions of Laws 1979, 
Chapter 322.  Neither the authority, nor any director, 
commissioner, council member, board member, officer, employee or 
agent of the authority nor any person executing the bonds shall 
be liable personally on the bonds by reason of the issuance 
thereof.  The bonds may be further secured by a pledge and 
mortgage of all or any portion of the district in aid of which 
the bonds are issued and such convenants as the authority shall 
deem by such resolution to be necessary and proper to secure 
payment of the bonds.  The bonds, and the bonds shall so state 
on their face, shall not be payable from nor charged upon any 
funds other than the revenues and property pledged or mortgaged 
to the payment thereof, nor shall the issuing authority be 
subject to any liability thereon or have the powers to obligate 
itself to pay or pay the bonds from funds other than the 
revenues and properties pledged and mortgaged and no holder or 
holders of the bonds shall ever have the right to compel any 
exercise of any taxing power of the issuing authority or any 
other public body, other than as is permitted or required under 
Laws 1979, Chapter 322 and pledged therefor hereunder, to pay 
the principal of or interest on any such bonds, nor to enforce 
payment thereof against any property of the authority or other 
public body other than that expressly pledged or mortgaged for 
the payment thereof. 
      (d) (1) In anticipation of the issuance of bonds pursuant 
to either paragraph (a), (b) or (c) of this section, the 
authority or municipality may by resolution issue and sell 
temporary bonds pursuant to paragraph (a), (b) or (c), maturing 
within not more than three years from their date of issue, to 
pay any part or all of the cost of a project.  To the extent 
that the principal of and interest on the temporary bonds cannot 
be paid when due from receipts of tax increment, assessments, or 
other funds appropriated for the purpose, they shall be paid 
from the proceeds of long-term bonds or additional temporary 
bonds which the authority or municipality shall offer for sale 
in advance of the maturity date of the temporary bonds, but the 
indebtedness funded by an issue of temporary bonds shall not be 
extended by the issue of additional temporary bonds for more 
than six years from the date of the first issue.  Long-term 
bonds may be issued pursuant to paragraph (a), (b) or (c) 
without regard to whether the temporary bonds were issued 
pursuant to paragraph (a), (b) or (c).  If general obligation 
temporary bonds are issued pursuant to paragraph (a), proceeds 
of long-term bonds or additional temporary bonds not yet sold 
may be treated as pledged revenues, in reduction of the tax 
otherwise required by section 475.61 to be levied prior to 
delivery of the obligations.  Subject to the six-year maturity 
limitation contained above, but without regard to the 
requirement of section 475.58, if any temporary bonds are not 
paid in full at maturity, in addition to any other remedy 
authorized or permitted by law, the holders may demand, in which 
case the authority or municipality shall, issue pursuant to 
paragraph (a), (b) or (c) as the temporary bonds and in exchange 
for the temporary bonds, at par, replacement temporary bonds 
dated as of the date of the replaced temporary bonds, maturing 
within one year from the date of the replacement temporary bonds 
and earning interest at the rate set forth in the resolution 
authorizing the issuance of the replaced temporary bonds, 
provided that the rate shall not exceed the maximum rate 
permitted by law at the date of issue of the replaced temporary 
bonds.  
     (2) Funds of a municipality may be invested in its 
temporary bonds in accordance with the provisions of section 
471.56, and may be purchased upon their initial issue, but shall 
be purchased only from funds which the governing body of the 
municipality determines will not be required for other purposes 
before the maturity date, and shall be resold before maturity 
only in case of emergency.  If purchased from a debt service 
fund securing other bonds, the holders of those bonds may 
enforce the municipality's obligations on the temporary bonds in 
the same manner as if they held the temporary bonds.  
    (e) Sections 474.16 to 474.23 9 to 29 apply to any issuance 
of obligations under this section which are subject to 
limitation under a federal volume limitation act as defined in 
section 474.16 10, subdivision 5 9, or existing federal tax law 
as defined in section 10, subdivision 8. 
    Sec. 2.  Minnesota Statutes 1984, section 298.2211, 
subdivision 1, is amended to read: 
     Subdivision 1.  [PURPOSE; GRANT OF AUTHORITY.] In order to 
accomplish the legislative purposes specified in chapters 362A, 
462C, and 474, within tax relief areas as defined in section 
273.134, the commissioner of iron range resources and 
rehabilitation may exercise the following powers:  (1) all 
powers conferred upon a rural development financing authority 
under sections 362A.01 to 362A.05; (2) all powers conferred upon 
a city under chapter 462C, subject to compliance with the 
provisions of section 462C.09 15; (3) all powers conferred upon 
a municipality or a redevelopment agency under chapter 474; (4) 
all powers provided by chapter 362A to further any of the 
purposes and objectives of chapters 462C and 474; and (5) all 
powers conferred upon a municipality or an authority under 
sections 273.73 to 273.76, section 273.77, except paragraph (a) 
thereof, and section 273.78, subject to compliance with the 
provisions of section 273.74, subdivisions 1, 2, and 3; provided 
that any tax increments derived by the commissioner from the 
exercise of this authority may be used only to finance or pay 
premiums or fees for insurance, letters of credit, or other 
contracts guaranteeing the payment when due of net rentals under 
a project lease or the payment of principal and interest due on 
or repurchase of bonds issued to finance a project or program, 
to accumulate and maintain reserves securing the payment when 
due on bonds issued to finance a project or program, or to 
provide an interest rate reduction program pursuant to section 
462.445, subdivision 10.  Tax increments and earnings thereon 
remaining in any bond reserve account after payment or discharge 
of any bonds secured thereby shall be used within one year 
thereafter in furtherance of this section or returned to the 
county auditor of the county in which the tax increment 
financing district is located.  If returned to the county 
auditor, the county auditor shall immediately allocate the 
amount among all government units which would have shared 
therein had the amount been received as part of the other ad 
valorem taxes on property in the district most recently paid, in 
the same proportions as other taxes were distributed, and shall 
immediately distribute it to the government units in accordance 
with the allocation.  
    Sec. 3.  Minnesota Statutes 1984, section 429.091, 
subdivision 8, is amended to read: 
    Subd. 8.  [FEDERAL VOLUME LIMITATION ACT.] Sections 474.16 
to 474.23 9 to 29 apply to any issuance of obligations under 
this section which are subject to limitation under a 
federal volume limitation act as defined in section 474.16 10, 
subdivision 5 9, or existing federal tax law as defined in 
section 10, subdivision 8. 
    Sec. 4.  Minnesota Statutes 1984, section 430.12, is 
amended to read: 
     430.12 [BONDS FOR IMPROVEMENTS.] 
     The city council, for the purpose of realizing the funds 
for making an improvement and paying damages may, from time to 
time as may be needed, issue and sell special certificates of 
indebtedness, or special street or parkway improvement bonds, as 
they may decide, which shall entitle the holder thereof to all 
sums realized upon any assessment or, if deemed advisable, a 
series of two or more certificates or bonds against any one 
assessment, or against the assessments in two or more different 
proceedings, the principal and interest being payable at fixed 
dates out of the funds collected from the assessments, including 
interest and penalties, and the whole of the fund or funds is 
hereby pledged for the pro rata payment of the certificates or 
bonds and the interest thereon, as they severally become due.  
These certificates or bonds may be made payable to the bearer, 
with interest coupons attached, and the city council may bind 
the city to make good deficiencies in the collection up to, but 
not exceeding, the principal and interest at the rate fixed, as 
hereinafter provided, and for the time specified in section 
430.06.  If the city, because of this guaranty, shall redeem any 
certificate or bond, it shall thereupon be subrogated to the 
holder's rights.  For the purpose of this guaranty, penalties 
collected shall be credited upon deficiencies of principal and 
interest before the city shall be liable.  These certificates or 
bonds shall be sold at public sale or by sealed proposals at a 
meeting of which at least two weeks' published notice shall be 
given, to the purchaser who will pay the par value thereof at 
the lowest interest rate, and the certificates or bonds shall be 
drawn accordingly, but the rate of interest shall in no case 
exceed seven percent per annum, payable annually or 
semiannually.  The city clerk shall certify to the county 
auditor the rate of interest so determined at the first bond 
sale held for any such improvement, and interest shall be 
computed upon the assessments at this annual rate, in accordance 
with the terms of section 430.06.  In case the rate of interest 
so determined at any subsequent bond sale for the same 
improvement is greater than the rate so determined at the first 
bond sale therefor, the difference between these rates of 
interest shall be a general city charge.  
     In case the proceeds of any special certificates of 
indebtedness or special street or parkway improvement bonds are 
in excess of the amount actually necessary to make the 
improvements for which the same were issued, or in case the 
proceeds are not immediately required for the prosecution or 
completion of the improvement, these proceeds may meanwhile be 
used by the city council for the making of other improvements 
authorized under the provisions of this chapter, and the amount 
of the proceeds so used shall be replaced and made good so far 
as may be necessary from the proceeds of special certificates of 
indebtedness or special bonds issued for the purpose of making 
such other improvements.  
    Sections 474.16 to 474.23 9 to 29 apply to any issuance of 
obligations under this section which are subject to limitation 
under a federal volume limitation act as defined in section 
474.16 10, subdivision 5 9, or existing federal tax law as 
defined in section 10, subdivision 8. 
    Sec. 5.  Minnesota Statutes 1985 Supplement, section 
458.1941, is amended to read: 
     458.1941 [SECTIONS THAT APPLY IF FEDERAL LIMIT APPLIES.] 
    Sections 474.16 to 474.23 9 to 29 apply to obligations 
issued under this chapter that are limited by a federal volume 
limitation act as defined in section 474.16 10, subdivision 5 
9, or existing federal tax law as defined in section 10, 
subdivision 8. 
    Sec. 6.  Minnesota Statutes 1984, section 459.35, is 
amended to read: 
    459.35 [FEDERAL VOLUME LIMITATION ACT.] 
    Sections 474.16 to 474.23 9 to 29 apply to any issuance of 
obligations under chapter 459 which are subject to limitation 
under a federal volume limitation act as defined in section 
474.16 10, subdivision 5 9, or existing federal tax law as 
defined in section 10, subdivision 8. 
    Sec. 7.  Minnesota Statutes 1984, section 462.556, is 
amended to read: 
    462.556 [FEDERAL VOLUME LIMITATION ACT.] 
    Sections 474.16 to 474.23 9 to 29 apply to any issuance of 
obligations under chapter 462 which are subject to limitation 
under a federal volume limitation act as defined in section 
474.16 10, subdivision 5 9, or existing federal tax law as 
defined in section 10, subdivision 8. 
    Sec. 8.  Minnesota Statutes 1984, section 472.09, 
subdivision 8, is amended to read: 
    Subd. 8.  [FEDERAL VOLUME LIMITATION ACT.] Sections 474.16 
to 474.23 9 to 29 apply to any issuance of obligations under 
this section which are subject to limitation under a 
federal volume limitation act as defined in section 474.16 10, 
subdivision 5 9, or existing federal tax law as defined in 
section 10, subdivision 8. 
    Sec. 9.  [474A.01] [CITATION.] 
    Sections 9 to 29 may be cited as the "Minnesota bond 
allocation act." 
    Sec. 10.  [474A.02] [DEFINITIONS.] 
    Subdivision 1.  [TERMS DEFINED.] For the purposes of 
sections 9 to 29, the terms defined in this section shall have 
the following meanings: 
    Subd. 2.  [ANNUAL VOLUME CAP.] "Annual volume cap" means 
the aggregate dollar amount of obligations bearing interest 
excluded from gross income for purposes of federal income 
taxation which, under the provisions of existing federal tax law 
or a federal volume limitation act, may be issued in one year by 
issuers. 
    Subd. 3.  [CERTIFICATE OF ALLOCATION.] "Certificate of 
allocation" means a certificate provided to an issuer by the 
department under section 21. 
    Subd. 4.  [CITY.] "City" means a statutory or home rule 
charter city. 
    Subd. 5.  [COMMERCIAL REDEVELOPMENT PROJECT.] "Commercial 
redevelopment project" means a project as defined in section 
474.02, if it is not a manufacturing project or pollution 
control project and one of the following conditions is met: 
    (a) The project site would qualify as a redevelopment 
district as defined in section 273.73, subdivision 10.  To 
qualify the project need not be included in a tax increment 
financing district. 
    (b) At least 75 percent of the proceeds of the obligations 
will be used to acquire and rehabilitate or replace an existing 
structure which is functionally obsolete or contains structural 
or other defects justifying substantial renovation or clearance. 
    (c) The project will be undertaken and the obligations 
issued pursuant to a written program administered by the local 
issuer and the financing provides for a substantial commitment 
of local public funds. 
    (d) At least 90 percent of the proceeds of the obligations 
will be used to finance facilities with respect to which an 
urban development action grant has been made under section 119 
of the federal Housing and Community Development Act of 1974.  
    Subd. 6.  [DEPARTMENT; DEPARTMENT OF ENERGY AND ECONOMIC 
DEVELOPMENT.] "Department" or "department of energy and economic 
development" means the department of energy and economic 
development or its successor agency or agencies with respect to 
the duties that the department is to perform under sections 9 to 
29. 
    Subd. 7.  [ENTITLEMENT ISSUER.] "Entitlement issuer" means 
an issuer to which an allocation is made under sections 12, 16, 
or 17. 
    Subd. 8.  [EXISTING FEDERAL TAX LAW.] "Existing federal tax 
law" means those provisions of the Internal Revenue Code of 
1954, as amended through December 31, 1985, that limit the 
aggregate amount of obligations of a specified type or types 
which may be issued by an issuer during a calendar year whose 
interest is exempt from inclusion in gross income for purposes 
of federal income taxation. 
    Subd. 9.  [FEDERAL VOLUME LIMITATION ACT.] "Federal Volume 
Limitation Act" means Title VII of the bill that was adopted by 
the United States House of Representatives on December 17, 1985, 
as H.R. 3838, 99th Congress 1st Session (1985), or any law of 
the United States that is effective after December 31, 1985, and 
that: 
    (1) imposes an annual volume cap; 
    (2) allocates the annual volume cap among various uses for 
which the proceeds of the obligations may be used or among 
various issuers of obligations or both; and 
    (3) allows the governor during a specified interim period 
or the state legislature by law to provide for a different 
allocation of the annual volume cap among uses and among issuers.
    Subd. 10.  [GENERAL OBLIGATION.] "General obligation" means 
any obligation that pledges the full faith and credit of an 
issuer with general taxing powers, other than a state issuer, to 
the payment of the obligation. 
    Subd. 11.  [GOVERNMENTAL VOLUME CAP.] "Governmental volume 
cap" means the annual volume cap less the amount, if any, that a 
federal volume limitation act requires be set aside or reserved, 
without the right to override by state legislation, for 
qualified 501(c)(3) bonds or if a federal volume limitation act 
does not require an amount to be set aside for qualified 
501(c)(3) bonds, the amount set aside pursuant to section 20, 
subdivision 9. 
    Subd. 12.  [ISSUER.] "Issuer" means any entitlement issuer 
or other issuer. 
    Subd. 13.  [LOCAL PUBLIC FUNDS.] "Local public funds" means 
the funds of a governmental unit except the following: 
    (1) the proceeds of an obligation subject to existing 
federal tax law or a federal volume limitation act; 
    (2) payments or property furnished by a nonexempt person to 
repay or secure the loan of proceeds of an obligation subject to 
existing federal tax law or a federal volume limitation act or 
other payments made in consideration of the issuance of an 
obligation subject to existing federal tax law or a federal 
volume limitation act; 
    (3) payments furnished by a nonexempt person for its right 
to use in its trade or business a facility financed with the 
proceeds of obligations subject to existing federal tax law or a 
federal volume limitation act; 
    (4) tax increments, as defined in section 273.76; or 
    (5) tax reductions provided pursuant to sections 273.1312 
to 273.1314. 
    Subd. 14.  [MANUFACTURING PROJECT.] "Manufacturing project" 
means properties, real or personal, used in connection with a 
revenue producing enterprise in connection with assembling, 
fabricating, manufacturing, mixing, or processing any products 
of agriculture, forestry, mining, or manufacture.  Properties 
used for storing, warehousing, or distributing qualify under 
this definition (1) if they are used as part of or in connection 
with an assembly, fabricating, manufacturing, mixing, or 
processing facility, or (2) if they are used for the storing of 
agricultural products and are located outside of the 
metropolitan area, as defined in section 473.121, subdivision 
2.  Manufacturing project includes properties, real or personal, 
used in connection with research and development activity to 
develop or improve products, production processes, or 
materials.  For purposes of this subdivision, "a product of 
manufacture" includes information and directions which dictate 
the functions to be performed by data processing equipment, 
commonly called computer software, regardless of whether they 
are embodied in or recorded on tangible personal property.  A 
project qualifies as a manufacturing project only if 75 percent 
of the proceeds of the proposed obligations will be used for 
construction, acquisition, installation, or addition of 
properties described in this subdivision. 
    Subd. 15.  [MORTGAGE CREDIT CERTIFICATE.] "Mortgage credit 
certificate" means any certificate which satisfies the 
definition of such term as contained in section 25(c)(1) of the 
Internal Revenue Code of 1954, as amended through July 18, 1984. 
    Subd. 16.  [MULTIFAMILY HOUSING PROJECT.] "Multifamily 
housing project" means a development defined in section 462C.02, 
subdivision 5, for which the applicable housing plan and program 
approval requirements of chapter 462C have been met. 
    Subd. 17.  [NONEXEMPT PERSON.] "Nonexempt person" means a 
person or entity other than an exempt person as defined in 
section 103(b)(3) of the Internal Revenue Code of 1954, as 
amended through December 31, 1985.  
    Subd. 18.  [NOTICE OF ENTITLEMENT ALLOCATION.] "Notice of 
entitlement allocation" means a notice provided to an 
entitlement issuer under section 12, subdivision 5, or under 
section 16, subdivision 2. 
    Subd. 19.  [OTHER ISSUER.] "Other issuer" means any entity 
other than an entitlement issuer which may issue obligations 
subject to an annual volume cap, including but not limited to 
the University of Minnesota, any city, any town, any federally 
recognized American Indian tribe or subdivision thereof located 
in Minnesota, any housing and redevelopment authority referred 
to in chapter 462, or any body authorized to exercise the powers 
of a housing and redevelopment authority, any port authority 
referred to in chapter 458, or any body authorized to exercise 
the powers of a port authority, any area or municipal 
redevelopment agency referred to in chapter 472, any county, or 
any other municipal authority or agency established pursuant to 
special law, or any entity issuing on behalf of the foregoing. 
    Subd. 20.  [POLLUTION CONTROL PROJECT.] "Pollution control 
project" means properties, real or personal, used in the 
abatement or control of noise, air, or water pollution, or in 
the disposal of solid waste, in connection with a revenue 
producing enterprise, engaged in or to be engaged in any 
business or industry.  A project qualifies as a pollution 
control project only: 
    (1) if at least 75 percent of the proceeds of the 
obligations will be used for the construction, acquisition, 
installation, or addition of properties described in this 
subdivision; or 
    (2) if it is not a manufacturing project and at least 75 
percent of the proceeds of the obligations will be used for the 
construction, acquisition, installation, or addition of 
properties described in this subdivision and in subdivision 14. 
    Subd. 21.  [PRELIMINARY RESOLUTION.] "Preliminary 
resolution" means a resolution adopted by the governing body of 
the issuer or in the case of the iron range resources and 
rehabilitation board by the commissioner.  The resolution must 
express a preliminary intention of the issuer to issue 
obligations for a specific project and must identify the 
proposed project and the proposed amount of the obligations to 
be issued.  
    Subd. 22.  [QUALIFIED 501(c)(3) BONDS.] "Qualified 
501(c)(3) bonds" mean obligations the proceeds of which are to 
be used by, or loaned or otherwise made available to, an 
organization described in section 501(c)(3) of the Internal 
Revenue Code of 1954, as amended through December 31, 1985, in 
activities directly related and essential to the conduct of the 
charitable activities of the organization and that are not used 
by a nonexempt person in its trade or business or obligations 
with a comparable definition in a federal volume limitation act. 
    Subd. 23.  [QUALIFIED MORTGAGE BONDS.] "Qualified mortgage 
bonds" mean obligations which are qualified mortgage bonds as 
defined by section 103A(c) of existing federal tax law. 
    Subd. 24.  [QUALIFIED MORTGAGE CREDIT CERTIFICATE 
PROGRAM.] "Qualified mortgage credit certificate program" means 
any program which satisfies the definition of such term as 
contained in section 25(c)(2) of the Internal Revenue Code of 
1954, as amended through July 18, 1984. 
    Subd. 25.  [QUALIFIED MULTIFAMILY HOUSING 
PROJECT.] "Qualified multifamily housing project" means a 
multifamily housing project in which at least 50 percent of the 
units will be held for occupancy by families or individuals with 
adjusted gross income not in excess of 80 percent of the median 
family income as estimated by the United States Department of 
Housing and Urban Development for the metropolitan statistical 
area. 
    Subd. 26.  [STATE ISSUER.] "State issuer" means the state 
of Minnesota; the iron range resources and rehabilitation board; 
or other agency, department, board, or commission of the state, 
which is authorized to issue obligations and has statewide 
jurisdiction. 
    Subd. 27.  [SUBSTANTIAL COMMITMENT OF LOCAL PUBLIC 
FUNDS.] "Substantial commitment of local public funds" means 
that either of the following two conditions is satisfied. 
    (a) Under the project financing the governmental unit 
appropriates, pledges, guarantees, or otherwise provides local 
public funds to pay part of the cost of financing the 
obligations, including bond issuance, debt service, loan 
origination, and carrying expenses, or of the facility financed 
with the proceeds of the obligations.  This condition is 
satisfied only if at the time the obligations are issued, the 
issuer reasonably expects that the aggregate value of the local 
public funds will exceed the lesser of $1,000,000 or one percent 
of the face amount of the obligations.  No provision may be made 
for a nonexempt person to reimburse the governmental unit for 
the local public funds. 
    (b) The governmental unit appropriates, pledges, 
guarantees, or otherwise provides a program contribution of 
local public funds or governmental services to the program or a 
facility financed with the proceeds of the obligations.  This 
condition is satisfied only if the issuer reasonably expects at 
the time the obligations are issued that the aggregate value of 
the local public funds will exceed $5,000,000 or five percent of 
the aggregate face amount of the obligations.  The issuer must 
value the services at the reasonable cost of delivering them.  
The program contribution must be used for one or more of the 
following purposes: 
    (i) reducing the cost of financing the obligations, as 
described in clause (a); 
    (ii) securing the payment of debt service on obligations 
issued pursuant to the program; 
    (iii) financing public improvements under a comprehensive 
redevelopment or renewal program, if the costs are reasonably 
allocable to a facility financed with the proceeds of the 
obligations and if the improvements are made no earlier than 
three years prior to issuance of the obligations to which the 
contribution applies or more than one year after issuance; or 
    (iv) other costs reasonably related to the program. 
If the governmental unit is reimbursed by a nonexempt person for 
any part of the program within five years after the contribution 
was made, the reimbursement must be applied for one or more of 
the purposes described in this paragraph. 
    For purposes of this subdivision, "governmental unit" means 
the issuer that issues the obligations for the project or the 
governmental unit that approves the obligations for purposes of 
section 103(k)(2) of the Internal Revenue Code of 1954, as 
amended through December 31, 1985, or both. 
    Subd. 28.  [WASTE MANAGEMENT PROJECT.] "Waste management 
project" means a project which is authorized by chapter 115A or 
400, sections 473.801 to 473.834, or by any other law or home 
rule charter authorizing substantially the same type of project. 
    Subd. 29.  [WRITTEN DEVELOPMENT PROGRAM.] "Written 
development program" or "program" means a written economic 
development plan that contains at least substantially all of the 
following: 
    (1) a description of the area subject to the plan, which 
may not exceed 20 percent of the total acreage of the issuer; 
    (2) a statement of the objectives for the development of 
the area subject to the plan; 
    (3) a statement of the development plan for the area 
subject to the plan, including the property within the area, if 
any, which is to be acquired by a governmental unit; 
    (4) a description of the type of specific development 
reasonably expected to take place within the area subject to the 
plan; and 
    (5) a description of the kind and an estimate of the amount 
of public funds, including local public funds, expected to be 
spent in connection with the development of the area subject to 
the plan. 
    Sec. 11.  [474A.03] [DETERMINATION OF ANNUAL VOLUME CAP.] 
    Subdivision 1.  [ANNUAL VOLUME CAP UNDER EXISTING FEDERAL 
TAX LAW.] At the beginning of each calendar year, the department 
shall determine the aggregate dollar amount of the annual volume 
cap under existing federal tax law for the calendar year, and of 
this amount the department shall determine the following amounts:
    (1) the amount that is allocated to entitlement issuers 
under section 12; 
    (2) the amount initially available for allocation through 
the pool under section 13, which is the annual volume cap 
determined under this subdivision less the amount determined 
under clause (1); and 
    (3) the amount available for issuance of qualified mortgage 
bonds under section 15. 
    Subd. 2.  [ANNUAL VOLUME CAP UNDER FEDERAL VOLUME 
LIMITATION ACT.] At the beginning of each calendar year, the 
department shall determine the aggregate dollar amount of the 
annual volume cap under a federal volume limitation act during 
the calendar year, and of this amount the department shall 
determine the following amounts: 
    (1) the amount, if any, that a federal volume limitation 
act requires be reserved for qualified 501(c)(3) bonds or the 
amount provided by section 20, subdivision 9; 
    (2) the amount of the governmental volume cap allocated to 
entitlement issuers under section 16, stating separately (i) the 
amount available for issuance of "qualified mortgage bonds" or 
obligations with a comparable definition in a federal volume 
limitation act, and (ii) the amount available for issuance of 
any obligations; and 
    (3) the amount initially available for allocation through 
the pool under section 19, which is the amount of the 
governmental volume cap less the aggregate of the amounts 
determined in clause (2). 
    Notwithstanding the foregoing, for the period from and 
including January 1, 1987, to and including June 30, 1987, the 
following limitations shall apply:  (i) one-half of the amount 
determined pursuant to clause (2)(ii) shall be allocated to 
entitlement issuers under section 16; (ii) the entire amount 
determined pursuant to clause (2)(i) shall be allocated to 
entitlement issuers under section 16; (iii) one-half of the 
amount determined pursuant to clause (3) shall be made available 
for allocation under section 19; and (iv) one-half of the 
amount, if any, determined pursuant to clause (1) shall be made 
available for allocation under section 20.  The remaining amount 
of annual volume cap for calendar year 1987 not so allocated, or 
made available for allocation, shall remain unallocated unless 
otherwise provided by law. 
    Subd. 3.  [ADJUSTMENTS FOR CHANGES TO VOLUME CAP IN FEDERAL 
VOLUME LIMITATION ACT.] If the annual volume cap in a federal 
volume limitation act that becomes law is greater than or less 
than the annual volume cap that existed in a federal volume 
limitation act in the form that existed as of January 1, 1986, 
the department shall adjust the calculations made under 
subdivision 2, except for clause (1), and section 16, except as 
provided in section 27.  If the annual volume cap is adjusted, 
the commissioner may withdraw any allocation granted before the 
adjustment was made pursuant to which obligations have been 
issued, only with the written consent of the issuer.  
    Sec. 12.  [474A.04] [ENTITLEMENT ALLOCATIONS UNDER EXISTING 
FEDERAL TAX LAW.] 
    Subdivision 1.  [HIGHER EDUCATION COORDINATING BOARD 
ALLOCATION.] Of the aggregate annual volume cap under existing 
federal tax law, $25,000,000 for each calendar year is allocated 
to the higher education coordinating board for the issuance of 
obligations pursuant to chapter 136A.  On September 1, any 
unused portion of the amount allocated to the higher education 
coordinating board pursuant to this subdivision cancels and the 
authority must be reallocated pursuant to section 13.  
    Subd. 2.  [IRON RANGE RESOURCES AND REHABILITATION 
ALLOCATION.] Of the aggregate annual volume cap under existing 
federal tax law, $30,000,000 for each calendar year is allocated 
to the iron range resources and rehabilitation commissioner.  
After September 1 of each year, the iron range resources and 
rehabilitation commissioner may retain any unused portion of the 
allocation only if the commissioner has submitted to the 
department on or before September 1 a preliminary resolution for 
a specific project and a letter which states (1) the intent to 
issue obligations pursuant to the allocation or a portion of it 
before the end of the calendar year or within the time period 
permitted under existing federal tax law, and (2) a description 
of the specific project or projects for which the obligations 
will be issued, together with an application deposit in the 
amount of one percent of the amount of the unused allocation or 
the portion of it pursuant to which the commissioner intends to 
issue obligations.  The commissioner may subsequently reallocate 
the retained allocation among the projects described in clause 
(2).  On September 1, any unused portion of the amount allocated 
to the iron range resources and rehabilitation commissioner and 
not reserved by a preliminary resolution, a letter of intent, 
and an application deposit is canceled and must be reallocated 
under section 13.  If the iron range resources and 
rehabilitation commissioner returns for reallocation all or a 
part of the allocation on or before October 31, that portion of 
the application deposit equal to one percent of the amount 
returned shall be refunded within 30 days. 
    Upon the request of a statutory city located in the 
taconite tax relief area which received an entitlement 
allocation under Minnesota Statutes 1984, section 474.18, of 
$5,000,000 or more for calendar year 1985, the iron range 
resources and rehabilitation commissioner shall enter into an 
agreement with the city whereby the commissioner issues 
obligations, in an amount requested by the city but not to 
exceed $5,000,000, on behalf of the city. 
    Subd. 3.  [ENERGY AND ECONOMIC DEVELOPMENT AUTHORITY 
ALLOCATION.] Of the aggregate annual volume cap under existing 
federal tax law, $60,000,000 for each calendar year is allocated 
to the energy and economic development authority.  After 
September 1 of each year, the energy and economic development 
authority or any issuer which receives an allocation from the 
energy and economic development authority may retain any unused 
portion of its allocation only if it has submitted to the 
department, on or before September 1 a preliminary resolution 
for a specific project and a letter which states (1) its intent 
to issue obligations pursuant to its allocation or a portion of 
it before the end of the calendar year or within the time period 
permitted under existing federal tax law, and (2) a description 
of the specific project or projects for which the obligations 
will be issued, together with an application deposit in the 
amount of one percent of the amount of its unused allocation or 
the portion of it pursuant to which it intends to issue 
obligations.  The energy and economic development authority may 
subsequently reallocate the retained allocation among the 
projects described in clause (2).  On September 1 any unused 
portion of the amount allocated to the energy and economic 
development authority and not reserved by a preliminary 
resolution, a letter of intent, and an application deposit is 
canceled and must be reallocated under section 13.  If the 
energy and economic development authority or any issuer which 
receives an allocation from the authority returns for 
reallocation all or any part of its allocation on or before 
October 31, that portion of its application deposit equal to one 
percent of the amount returned shall be refunded within 30 days. 
    Subd. 4.  [ENTITLEMENT CITIES.] Of the aggregate annual 
volume cap under existing federal tax law, for each calendar 
year the amount determined pursuant to this subdivision is 
allocated to (1) cities of the first class, and (2) the largest 
Minnesota city located in a metropolitan statistical area that 
does not contain a city of the first class, if the city has a 
population of 25,000 or more.  The amount allocated to a first 
class city shall be an amount equal to $200 multiplied by the 
city's population.  The amount allocated to each city qualifying 
under clause (2) is $5,000,000.  After September 1 of each year, 
an issuer receiving an allocation under this subdivision may 
retain any unused portion of its allocation only if it has 
submitted to the department by September 1 a letter stating its 
intent to issue obligations pursuant to its allocation before 
the end of the calendar year or within the time permitted under 
existing federal tax law and an application deposit equal to one 
percent of the amount of the unused allocation for which it 
intends to issue obligations.  Any unused portion of an 
allocation for which an application deposit and letter of intent 
has not been received by the department by September 1 must be 
canceled and reallocated under section 13.  If an issuer returns 
for reallocation all or part of its allocation under this 
subdivision by October 31, the application deposit equal to one 
percent of the amount returned must be refunded to the issuer.  
    For purposes of this subdivision, "population" means the 
population determined under section 477A.011, subdivision 3. 
    Subd. 5.  [NOTICE OF ENTITLEMENT ALLOCATION.] As soon as 
possible in each calendar year, the department shall provide to 
each entitlement issuer a written notice of the amount of its 
entitlement allocation under this section.  
    Subd. 6.  [ENTITLEMENT TRANSFERS.] An entitlement issuer 
may enter into an agreement with another entitlement issuer 
whereby the recipient entitlement issuer issues obligations 
pursuant to issuance authority allocated to the original 
entitlement issuer under this section. 
    Sec. 13.  [474A.05] [ALLOCATION OF POOL AMOUNT UNDER 
EXISTING FEDERAL TAX LAW.] 
    Subdivision 1.  [POOL AMOUNT.] Of the aggregate annual 
volume cap under existing federal tax law, the amount determined 
pursuant to section 11, subdivision 1, clause (2), shall be 
allocated among issuers pursuant to this section for each 
calendar year.  An entitlement issuer may apply for an 
allocation pursuant to this section only after August 20.  An 
entitlement issuer may apply for an allocation before November 1 
only if the entitlement issuer has adopted a final resolution 
authorizing the sale of obligations equal to any allocation 
received under section 12 or has returned all of its unused 
allocation for reallocation under this section.  
    Notwithstanding the preceding paragraph, the following 
entitlement issuers may apply for an allocation under this 
section: 
    (a) A city of the first class may apply for an allocation 
for a manufacturing project at any time. 
    (b) State issuers may apply for and receive allocations 
under this section at any time for an aggregate amount not to 
exceed that portion of its entitlement allocation returned for 
reallocation under section 12. 
    Subd. 2.  [APPLICATION.] An issuer may apply for an 
allocation pursuant to this section by submitting to the 
department an application on forms provided by the department, 
accompanied by (1) a preliminary resolution, and (2) an 
application deposit in the amount of one percent of the 
requested allocation.  An issuer may elect not to submit an 
application for an allocation for a project for which the issuer 
previously adopted a preliminary resolution.  
    Subd. 3.  [ALLOCATION CRITERIA.] The department shall rank 
each application received pursuant to this section on the basis 
of the number of points awarded to it, with one point being 
awarded for each of the following criteria satisfied: 
    (a) The current rate of unemployment for the applicant is 
at or above 110 percent of the statewide average unemployment 
rate for the most recently available reporting period, as 
determined by the department of economic security.  The 
unemployment rate for the applicant shall be the greater of (1) 
the most recent estimate available for the smallest jurisdiction 
which wholly includes the jurisdiction of the applicant, as 
reported by the department of economic security, or (2) another 
estimate supplied by the applicant with respect to its 
jurisdiction, which is documented by the applicant. 
    (b) The number of individuals employed in the applicant's 
jurisdiction declined from the second calendar year before the 
application, to the first calendar year before the application. 
The estimate of the number of individuals employed for each year 
must be based on the same source, and must be (1) the most 
recent estimate available for the smallest jurisdiction which 
wholly includes the applicant, as reported by the department of 
economic security, or (2) another estimate supplied by the 
applicant with respect to its jurisdiction, which is documented 
by the applicant.  
    (c) The project will provide additional general tax revenue 
to the taxing jurisdictions in which the project is located 
beginning not later than three years after issuance of the 
obligations. 
    (d) The number of jobs to be created by the project is at 
least two jobs for each $100,000 of issuance authority requested 
for the project.  
    (e) As of the date of application the total market value of 
all taxable property in the applicant's jurisdiction, based on 
the most recent certification of assessed value to the 
commissioner of revenue, has either (1) declined in relation to 
the first calendar year before the certification, or (2) 
increased in relation to the first calendar year before the 
certification at a rate which is less than 90 percent of the 
rate of increase of the state average market value over the same 
period. 
    (f) The total capital expenditures for the project exceed 
by ten percent the amount of the proceeds of the obligations to 
be issued for the project.  
    (g) The project is wholly located in an enterprise zone 
designated pursuant to section 273.1312. 
    (h) The project site meets the criteria necessary to 
qualify as a tax increment redevelopment district as defined in 
section 273.73, subdivision 10.  To qualify under this clause 
the project need not be included in a tax increment financing 
district.  
    (i) The project meets one of the following energy 
conservation criteria:  (1) the project is eligible for the 
additional federal investment tax credits for energy property, 
(2) the project involves construction or expansion of a district 
heating system as defined in section 116J.36, or (3) the project 
involves construction of an energy source as described in 
section 116J.26, clause (a), (b), or (d) or 116M.03, 
subdivisions 22, 23 and 26. 
    (j) The project consists of the renovation, rehabilitation, 
or reconstruction of an existing building which is (1) located 
in a historic district designated under section 138.73, or on a 
site listed in the state registry of historical sites under 
sections 138.53 to 138.5819; or (2) designated in the National 
Register pursuant to United States Code, title 16, section 470a. 
    (k) Service connections to sewer and water systems are 
available to the project at the time the application is 
submitted.  
    (l) As provided by a binding agreement by the principal 
user or users of the project with the applicant, at least ten 
percent of the individuals employed by the principal user or 
users of the project will be minority or low income individuals. 
    (m) When the application is submitted either (1) the 
anticipated owner of the project, or any party of which the 
owner is a controlling partner or shareholder, or which is a 
controlling shareholder or partner of the owner, does not own or 
operate a substantially similar business within the state or (2) 
the project is an expansion of the operations of an existing 
business which is not likely to have the effect of transferring 
existing employment from one or more other municipalities within 
the state to the municipality in which the project is located.  
    (n) A controlling interest in the project will be owned by 
one or more women or minority persons.  
    (o) Seventy-five percent or more of the proceeds of the 
proposed issue will be used to rehabilitate an existing 
structure.  
    Subd. 4.  [ALLOCATION PROCEDURE.] (a) The department shall 
allocate available issuance authority under this section on 
Monday of each week to applications received on or before Monday 
of the preceding week in the following order of priority and 
available issuance authority may not be allocated to any other 
project: 
    (1) applications for manufacturing projects; 
    (2) applications for pollution control projects or waste 
management projects; and 
    (3) applications for commercial redevelopment projects. 
    Within each category of applications available authority 
shall be allocated on the basis of the numerical rank determined 
pursuant to this section.  In the case of an application for 
issuance authority that includes more than one project to be 
financed by one issue of obligations, the points assigned to the 
application shall be computed on the basis of the weighted 
average of points for the projects.  The projects must all be of 
the same category of projects to be submitted as a multiproject 
application.  If two or more applications have the same 
numerical rank, the ranking of the applications must be by lot 
unless otherwise agreed by the respective issuers.  If an 
application is rejected, the department must notify the 
applicant and return the application deposit to the applicant 
within 30 days unless the applicant requests in writing that the 
application be resubmitted. 
    (b)(1) From January 1 through September 30, no more than 20 
percent of the total amount available for allocation during the 
calendar year pursuant to this section may be allocated to 
pollution control and waste management projects. 
    (2) From January 1 to September 30, no more than 35 percent 
of the total amount available for allocation during the calendar 
year pursuant to this section may be allocated to commercial 
redevelopment projects.  This amount is increased to 50 percent 
of the total available authority for the next month's allocation 
if the following two conditions occur:  (i) on or after June 30 
the total amount of issuance authority available under this 
section which has not been allocated or has been allocated to 
but was returned by an issuer exceeds 45 percent of the total 
amount of issuance authority available for allocation under this 
section for the calendar year; and (ii) the entire amount of 
issuance authority available under this subparagraph for 
commercial redevelopment projects has been allocated. 
    Subd. 5.  [LETTER OF INTENT.] After September 1 of each 
year, an issuer which has received an allocation pursuant to 
this section prior to September 1 may retain any unused portion 
of the allocation only if the issuer has submitted to the 
department on or before September 1 a letter stating its intent 
to issue obligations pursuant to the allocation before the end 
of the calendar year or within the time period permitted by 
existing federal tax law.  If the letter of intent is not 
submitted to the department, the one percent application deposit 
must be returned to the issuer, the allocation is canceled, and 
the issuance authority is available for reallocation pursuant to 
this section.  If an issuer returns for reallocation all or any 
part of its allocation on or before October 31, that portion of 
its application deposit equal to one percent of the amount 
returned shall be refunded within 30 days.  
    Subd. 6.  [FINAL ALLOCATION.] From October 1 to December 31 
of each year, the annual volume cap under existing federal tax 
law, which is not both previously allocated and subject to a 
preliminary resolution for a specific project, whether or not 
committed pursuant to a letter of intent, is available for 
allocation or reallocation and shall be allocated among 
issuers.  The iron range resources and rehabilitation 
commissioner, the energy and economic development authority, or 
an entitlement city may reallocate after September 30 its 
retained allocation among projects identified in preliminary 
resolutions filed with the department prior to October 1.  An 
application for an allocation under this subdivision must 
include evidence of passage of a preliminary resolution and 
state that it is the intent of the applicant that the 
obligations will be issued by the end of the year or within the 
time period permitted by existing federal tax law, and must be 
accompanied by an application deposit in the amount of one 
percent of the requested allocation.  Applications must be made 
and allocations shall be awarded in accordance with subdivisions 
3 and 4. 
    After September 30, authority may be allocated under this 
subdivision to any project, notwithstanding the percentage 
limits and other restrictions contained in subdivision 4.  
Applications must be ranked and authority allocated first 
according to the order of priority and ranking of points under 
subdivisions 3 and 4.  The remaining authority must be allocated 
according to the ranking of points under subdivision 3.  If two 
or more applications receive an equal number of points, 
allocations among them must be made by lot unless otherwise 
agreed by the respective applicants.  
    If issuance authority remains or becomes available 
following the last Monday on which allocations are made for any 
calendar year, the department must allocate the available 
authority to the department of finance.  The department of 
finance shall allocate the remaining authority between the 
Minnesota housing finance agency and the higher education 
coordinating board.  Amounts allocated to the Minnesota housing 
finance agency shall be used for the issuance of mortgage credit 
certificates, and amounts allocated to the higher education 
coordinating board shall be used for the issuance of obligations 
under chapter 136A.  
    Subd. 7.  [RETURN OF ALLOCATION.] If on or after November 1 
but prior to December 1 of any year, an issuer determines that 
it will not issue obligations pursuant to an allocation received 
by it pursuant to this section or section 12 by the end of that 
year or within the time period permitted by existing federal tax 
law, the issuer must notify the department and the amount will 
be available for reallocation pursuant to this subdivision.  In 
such case, the department shall refund to the issuer within 30 
days that portion of any application deposit equal to one-third 
of one percent of the amount returned for reallocation.  The 
amounts available for reallocation must be allocated on or 
before December 31 pursuant to subdivision 6.  
    Sec. 14.  [474A.06] [NOTICE OF ISSUE UNDER EXISTING FEDERAL 
TAX LAW.] 
    Issuers that issue obligations subject to existing federal 
tax law shall file with the department within five days after 
the obligations are issued a written notice of issue stating the 
date of issuance of the obligations, the allocation under which 
the obligations are issued, and the principal amount of the 
obligations.  If obligations are to be issued as a series of 
obligations, the notice of issue must be filed for each series 
of obligations that is issued.  If the notice of issue is not 
filed within five days after the obligations are issued, the 
obligations shall be considered not to have received an 
allocation under existing federal tax law.  Within 30 days after 
receipt of the notice, the department shall refund a portion of 
the application deposit required under section 12 or section 13 
equal to one percent of the principal amount of the obligations 
issued. 
    Sec. 15.  [474A.07] [QUALIFIED MORTGAGE BONDS.] 
    Subdivision 1.  [HOUSING FINANCE AGENCY ALLOCATION.] The 
applicable volume limit for qualified mortgage bonds for the 
Minnesota housing finance agency, pursuant to existing federal 
tax law, for a calendar year is 100 percent of the state ceiling 
for qualified mortgage bonds for that year, reduced only by (1) 
any amounts of qualified mortgage bonds which have been or may 
be allocated by law to specified cities, and (2) any amounts of 
qualified mortgage bonds which are allocated to cities pursuant 
to subdivisions 2 and 3.  The aggregate amount allocated to 
cities, under clause (1) or (2), together with the amount of 
qualified mortgage bonds reserved for the agency, shall not 
exceed the limit for the state under existing federal tax law. 
    By August 1 of each year, a city which has received by law 
an allocation of the state ceiling for qualified mortgage bonds 
shall submit its housing programs to the Minnesota housing 
finance agency for approval pursuant to section 462C.04, 
subdivision 2, in an amount of bonds equal to or less than, the 
city's allocation.  If the amount of qualified mortgage bonds, 
for which program approval is granted on or before September 1 
is less than the amount allocated by law to the city, the 
applicable limit for the agency shall be increased by the 
difference between the amount allocated by law to the city, and 
the amount for which program approval has been granted. 
    Subd. 2.  [CITY ALLOCATION.] Unless otherwise authorized by 
law, a city that intends to issue during any calendar year 
qualified mortgage bonds that are subject to existing federal 
tax law, shall by January 2 of that year submit to the Minnesota 
housing finance agency a program that will use a portion of the 
state qualified mortgage bond ceiling.  The total amount of 
qualified mortgage bonds included in all programs submitted 
pursuant to this subdivision by a city may not exceed 
$10,000,000.  Each program shall be accompanied by a certificate 
from the city that states that the qualified mortgage bond issue 
is feasible.  By February 1, the Minnesota housing finance 
agency shall review each program pursuant to section 462C.04, 
subdivision 2.  The Minnesota housing finance agency shall 
approve all programs that the agency determines are consistent 
with chapter 462C, and that meet the following conditions:  
    (1) all of the loans must be reserved for a period of not 
less than six months for persons and families whose adjusted 
family income is below 80 percent of the limits on adjusted 
gross income provided in section 462C.03, subdivision 2; and 
    (2) loans must be made only to finance homes that are 
serviced by municipal water and sewer utilities; provided that 
if the approval of all programs would result in an allocation to 
cities in excess of 27-1/2 percent of the state ceiling for the 
calendar year 1985, reduced by the amount of qualified mortgage 
bonds that are allocated by law to specified cities, the 
Minnesota housing finance agency shall approve programs that are 
submitted by a city which meets any of the following three 
criteria:  (i) a city of the first class, (ii) a city that did 
not receive an allocation under this subdivision or Minnesota 
Statutes 1984, section 462C.09, subdivision 2(a), or Minnesota 
Statutes 1985 Supplement, section 462C.09 subdivision 2(a), 
during the preceding two calendar years, or (iii) a group of 
cities that plan to jointly issue bonds for the program provided 
further that if approval of all of the programs submitted by 
cities that meet one or more of the criteria in (i), (ii), or 
(iii) would result in a total allocation to cities in excess of 
the portion of the state ceiling available for allocation, then 
from among those programs the agency shall select by lot the 
programs to be approved.  If a portion of the state ceiling 
remains unallocated after the agency has approved all programs 
submitted by cities that meet one or more of the criteria in 
(i), (ii), or (iii), the Minnesota housing finance agency shall 
select by lot from among the remaining programs the programs to 
be approved.  The Minnesota housing finance agency shall 
determine if a program meets the conditions in clauses (1) and 
(2) based solely upon the program with accompanying information 
submitted to the agency.  Approval of a program shall constitute 
an allocation of a portion of the state ceiling for qualified 
mortgage bonds equal to the proposed bond issue or issues 
contained in the program, provided that the allocation for the 
last selected program that receives an allocation may be equal 
to or less than the amount of the bond issue or issues proposed 
in the program.  
    If a city which received an allocation pursuant to this 
subdivision, or which has been allocated a portion of the state 
ceiling by law and has received approval of one or more 
programs, has not issued bonds by September 1 in an amount equal 
to the allocation, and the city intends to issue qualified 
mortgage bonds prior to the end of the calendar year, the city 
shall by September 1 submit to the Minnesota housing finance 
agency for each program a letter that states the city's intent 
to issue the qualified mortgage bonds prior to the end of the 
calendar year.  If the Minnesota housing finance agency does not 
receive the letter from the city, then the allocation of the 
state ceiling for that program expires on September 1, and the 
applicable limit for the Minnesota housing finance agency is 
increased by an amount equal to the unused portion of the 
allocation to the city.  A city referred to in subdivision 1, 
clause (1), need not apply under this subdivision with respect 
to bonds allocated by law to the city.  Nothing in this 
subdivision shall prevent any such city from applying for an 
additional allocation of bonds under this subdivision.  
    Subd. 3.  [ADDITIONAL CITY ALLOCATION.] On or before 
September 1 of each year, the Minnesota housing finance agency 
shall identify the amount, if any, of its applicable limit for 
qualified mortgage bonds for that calendar year that it does not 
intend to issue.  A city that intends to issue qualified 
mortgage bonds prior to the end of the calendar year for which 
it has not received an allocation of the state ceiling may 
submit a program for approval on or before September 1 to the 
Minnesota housing finance agency for a portion of the amount of 
the Minnesota housing finance agency's applicable limit as 
provided in subdivision 1 which the agency does not intend to 
issue.  The total amount of qualified mortgage bonds included in 
all programs of any city submitted pursuant to this subdivision 
shall not exceed $10,000,000.  The program shall be accompanied 
by the same certificate required by subdivision 2.  The 
Minnesota housing finance agency shall allocate the amount of 
the state ceiling to be allocated pursuant to this subdivision 
using the same factors listed in subdivision 2, provided that a 
program for a city receiving an allocation pursuant to 
subdivision 2 during the calendar year shall be ranked below all 
other programs if the bonds proposed in the program, when added 
to the bonds included in programs approved pursuant to 
subdivision 2, exceed $10,000,000.  A city that submitted a 
program pursuant to subdivision 2 but that did not receive an 
allocation may renew its application with a letter of intent to 
issue.  Nothing in this subdivision shall prevent a city 
referred to in subdivision 1, clause (1), from applying for an 
additional allocation of bonds under this subdivision.  
    Subd. 4.  [AGENCY REVIEW.] The 30-day review requirement in 
section 462C.04, subdivision 2, does not apply to programs 
submitted to the agency that require an allocation of the state 
ceiling pursuant to this section.  A failure by the agency to 
complete any action by the dates set forth in this section shall 
not result in the approval of any program or the allocation of 
any portion of the applicable limit of the agency.  Approval by 
the agency of programs after the dates provided in this section 
is effective in allocating a portion of the state ceiling.  
Programs approved by the agency may be amended with the approval 
of the agency under section 462C.04, subdivision 2, provided 
that the dollar amount of bonds for the program may not be 
increased.  
    Subd. 5.  [STATE CERTIFICATION.] The executive director of 
the Minnesota housing finance agency is designated as the state 
official to provide the preissuance certification required by 
section 103A(j)(4)(A) of the Internal Revenue Code of 1954, as 
amended through December 31, 1985. 
    Subd. 6.  [CORRECTION AMOUNTS FOR MORTGAGE CREDIT 
CERTIFICATE PROGRAMS.] A reduction in the state ceiling for 
qualified mortgage bonds caused by the failure of a mortgage 
credit certificate program to comply with a federal statute or 
regulation shall be assessed against the amount of qualified 
mortgage bonds allocated by law, other than by way of this 
section, to the city which adopted the program.  If no such 
allocation exists or it is less than the correction amount 
determined by the secretary of the treasury, then the amount of 
the correction amount in excess of the allocation shall be 
assessed against the 27-1/2 percent of the state ceiling 
allocated to the cities under subdivision 2. 
    Subd. 7.  [FEDERAL VOLUME LIMITATION ACT.] Any issuance 
authority received by the agency under section 17 or by a city 
under section 16 or subdivision 3 may be used for the issuance 
of "qualified mortgage bonds" or obligations with a comparable 
definition in a federal volume limitation act, in the same 
manner and subject to the same conditions provided for in this 
section for qualified mortgage bonds. 
    Sec. 16.  [474A.08] [DETERMINATION OF ENTITLEMENT 
ALLOCATIONS UNDER FEDERAL VOLUME LIMITATION ACT.] 
    Subdivision 1.  [ENTITLEMENT ISSUERS.] The dollar amount of 
the governmental volume cap allocated to entitlement issuers 
under a federal volume limitation act for each calendar year 
must be determined by the department as follows: 
    (1) to the department of finance 24 percent of the 
governmental volume cap to be allocated among state issuers 
under section 17; 
    (2) to each city, a sum equal to 75.6 percent of the amount 
of bond issuance authority allocated to the city under section 
12, subdivision 4, provided that if there is an adjustment to 
the annual volume cap under section 11, subdivision 3, the 
amount of issuance authority allocated by this clause must be 
adjusted so that each city is allocated a percentage of the 
adjusted governmental volume cap that is equal to the percentage 
of the governmental volume cap originally allocated to each city;
    (3) to each city to which bond issuance authority is 
specifically allocated under state law for qualified mortgage 
bonds, a sum equal to the full amount of the bond issuance 
authority, which amount is to be used solely for the issuance of 
"qualified mortgage bonds" or for obligations with a comparable 
definition as used in the federal volume limitation act prior to 
September 1, and thereafter may also be used for the issuance of 
either such mortgage bonds or obligations to finance multifamily 
housing projects;  
    (4) to a city or cities that received an allocation to 
issue qualified mortgage bonds during 1986 under Minnesota 
Statutes 1985 Supplement, section 462C.09, subdivision 2a, an 
amount or amounts for 1986 equal to such allocation, which 
amount may be used prior to September 1 for the issuance of 
"qualified mortgage bonds" or for obligations with a comparable 
definition in a federal volume limitation act, and thereafter 
may also be used for the issuance of obligations to finance 
multifamily housing projects; and 
    (5) to a city or cities determined in accordance with the 
procedure set forth in section 15, subdivision 2, an allocation 
to issue qualified mortgage bonds during 1987, in an amount 
determined in accordance with such procedure contained in 
section 15, subdivision 2, which amount may be used prior to 
September 1 for the issuance of "qualified mortgage bonds" or 
for obligations with a comparable definition in a federal volume 
limitation act, and thereafter may also be used for the issuance 
of obligations to finance multifamily housing projects. 
    For any entitlement issuer that received an allocation for 
a qualified multifamily housing project in 1986 and did not 
issue obligations for the project within the time period 
specified under section 21, subdivision 3, the amount allocated 
to the entitlement issuer under this subdivision for 1987 must 
be reduced by the amount of the unused allocation and the amount 
of any other allocation retained by that issuer after September 
1, 1986, for which obligations have not been issued in 1986.  
The amount of any reduction in allocation must be added to the 
amounts available for pool allocation under section 19.  
    For purposes of this subdivision, "population" means the 
population determined under section 477A.011, subdivision 3. 
    Subd. 2.  [NOTICE OF OF ENTITLEMENT ALLOCATION.] As soon as 
possible in each calendar year, the department shall provide a 
notice of entitlement allocation to each entitlement issuer 
stating separately the amount that may be issued for "qualified 
mortgage bonds" or for obligations with a comparable definition, 
a federal volume limitation act and the amount that may be 
issued for any obligations. 
    Sec. 17.  [474A.09] [ALLOCATION OF STATE ENTITLEMENTS UNDER 
FEDERAL VOLUME LIMITATION ACT.] 
    The amount allocated to the department of finance under 
section 16, subdivision 1, clause (1), may be allocated or 
reallocated by the commissioner of the department of finance 
internally among state issuers at any one time or from time to 
time during the calendar year, provided that 11.5 percent of the 
entitlement allocation is allocated to the iron range resources 
and rehabilitation commissioner.  Upon the request of a 
statutory city located in the taconite tax relief area that 
received an entitlement allocation under Minnesota Statutes 
1984, section 474.18, of $5,000,000 or more for calendar year 
1985, the iron range resources and rehabilitation commissioner 
shall enter into an agreement with the city whereby the 
commissioner issues obligations on behalf of the city, in an 
amount requested by the city but not to exceed 17 percent of the 
amount allocated to the commissioner under this subdivision. 
    Sec. 18.  [474A.10] [ENTITLEMENT ISSUERS UNDER THE FEDERAL 
VOLUME LIMITATION ACT.] 
    Subdivision 1.  [NOTICE OF ISSUE.] Each entitlement issuer 
that issues obligations pursuant to an entitlement allocation 
received under section 16 shall provide a notice of issue to the 
department on forms provided by the department stating (1) the 
date of issuance of the obligations; (2) the title of the issue; 
(3) the principal amount of the obligations; (4) the type or 
types of the obligations that cause them to be subject to the 
annual volume cap; and (5)  the dollar amount of the obligations 
subject to the governmental volume cap of a federal volume 
limitation act.  For obligations that are issued as a part of a 
series of obligations, a notice must be provided for each 
series.  Any issue of obligations for which a notice of issue is 
not provided to the department within five days after issuance 
is deemed not to have received an allocation under a federal 
volume limitation act.  Within 30 days after receipt of the 
notice of issue, the department shall refund a portion of any 
deposit made pursuant to subdivision 3 equal to one percent of 
the principal amount of the allocation authority issued. 
    Subd. 2.  [ENTITLEMENT TRANSFERS.] An entitlement issuer 
may enter into an agreement with another entitlement issuer 
whereby the recipient entitlement issuer issues obligations 
pursuant to issuance authority allocated to the original 
entitlement issuer. 
    Subd. 3.  [RESERVATION OR CANCELLATION OF ENTITLEMENT 
ALLOCATIONS.] After September 1, 1986, an entitlement issuer may 
retain all or a portion of its entitlement allocation under a 
federal volume limitation act only if the department has 
received by September 1 a letter stating the intent of the 
entitlement issuer to issue obligations under its entitlement 
allocation before the end of the calendar year or within the 
time permitted by a federal volume limitation act and an 
application deposit equal to one percent of the unused 
allocation for which it intends to issue obligations, provided 
that there shall be credited against the required deposit, any 
deposit made in accordance with section 12 for a corresponding 
allocation under existing federal tax law.  Any unused portion 
of an allocation for which an application deposit and letter of 
intent have not been received by the department by September 1, 
1986, is canceled and must be reallocated under section 19.  
Notwithstanding the provisions of this subdivision, the 
department of finance may retain $15,000,000 of its entitlement 
allocation for the issuance of obligations.  If any time after 
August 31, 1986, the department of finance determines that part 
or all of the retained allocation will not be required for 
obligations issued by the state, the portion not required shall 
be canceled and shall be reallocated under section 19. 
    If an entitlement issuer returns for reallocation all or 
part of its allocation under this subdivision after August 31, 
but on or before October 31, the application deposit equal to 
one percent of the amount of issuance authority returned must be 
refunded to the issuer.  If all or part of the entitlement 
allocation is returned for reallocation after October 31, but 
before December 1, the application deposit equal to one-third of 
one percent of the amount of issuance authority returned must be 
refunded.  The amount of any refund is reduced by the amount of 
the deposit refunded under section 12. 
    Sec. 19.  [474A.11] [ALLOCATION OF POOL AMOUNT UNDER THE 
FEDERAL VOLUME LIMITATION ACT.] 
    Subdivision 1.  [POOL AMOUNT.] For calendar year 1986 and 
from January 1 to June 30 of calendar year 1987, the portion of 
the governmental volume cap determined under section 11, 
subdivision 2, clause (3), and any allocations canceled or 
returned for reallocation under section 18 or section 20, 
subdivision 9, shall be allocated to issuers, other than state 
issuers, under this section. 
    An entitlement issuer may apply for an allocation under 
this section only after August 20.  If an entitlement issuer 
applies for an allocation prior to November 1, the entitlement 
issuer must have either adopted a final resolution authorizing 
the sale of obligations in an amount equal to any allocation 
received under section 16 or returned any remaining allocation 
for reallocation under this section.  State entitlement issuers, 
other than the iron range resources and rehabilitation 
commissioner, may not apply for an allocation under this section 
except as provided in clause (d). 
    Notwithstanding the preceding paragraph, the following 
entitlement issuers may apply for an allocation under this 
section: 
    (a) Entitlement issuers that received an allocation only 
under section 16, subdivision 1, clause (4) or (5), may apply 
for an allocation at any time. 
    (b) A city of the first class may apply for an allocation 
for a manufacturing project at any time. 
    (c) Any entitlement issuer, other than state issuers, may 
apply for an allocation for a qualified multifamily housing 
project after September 1 if (1) it has adopted a preliminary 
resolution for specific projects for the amount of any of its 
retained entitlement allocation, and (2) the amount of 
allocation applied for does not exceed $10,000,000. 
    (d) State issuers may apply for and receive allocations 
under this section at any time in an aggregate amount not to 
exceed that portion of the state's entitlement allocation 
returned for reallocation under section 18. 
    Subd. 2.  [APPLICATION.] An issuer may apply for an 
allocation pursuant to this section by submitting to the 
department an application on forms provided by the department 
accompanied by (1) a preliminary resolution, and (2) if the 
application is submitted prior to September 1 of any calendar 
year, an application deposit in the amount of one percent of the 
requested allocation, or if the application is submitted after 
August 31, 1986, an application deposit in the amount of two 
percent of the requested allocation, provided that there shall 
be credited against the required deposit any deposit made with 
respect to the same project in accordance with section 13.  An 
application deposit for a qualified multifamily housing project 
must include an additional application deposit in the amount of 
one percent of the requested allocation.  An application 
pursuant to this section may be combined with an application 
under section 13. 
    Subd. 3.  [ALLOCATION CRITERIA.] The department shall rank 
each application received under this section on the basis of the 
number of points awarded to it, with one point being awarded for 
each of the criteria listed in section 13, subdivision 3, that 
are satisfied, and one point being awarded for each of the 
following criteria: 
    (1) the project is a multifamily housing project; and 
    (2) the project is a multifamily housing project designed 
for rental primarily to handicapped persons or to elderly 
persons. 
    An application for an allocation relating to an issue of 
obligations the proceeds of which are to be used to refund 
outstanding obligations shall be assigned a ranking of no points.
    Subd. 4.  [ALLOCATION PROCEDURE.] (a) The department shall 
allocate available issuance authority on Monday of each week to 
applications received by Monday of the preceding week, in the 
following order of priority and available issuance authority may 
not be allocated to any other project prior to October 1, 1986: 
    (1) applications for manufacturing projects; 
    (2) applications for pollution control projects or waste 
management projects; and 
    (3) applications for commercial redevelopment projects or 
multifamily housing projects. 
    Within each category of applications available authority 
must be allocated on the basis of the numerical rank determined 
under this section.  In the case of an application for an 
allocation relating to more than one project to be financed by 
one issue of obligations, the points assigned to the application 
shall be computed on the basis of the weighted average of points 
for the projects.  The projects must all be of the same category 
of projects to be submitted as a multiproject application.  If 
two or more applications have the same numerical rank, the 
ranking of the applications must be by lot unless otherwise 
agreed by the respective issuers.  If an application is 
rejected, the department shall notify the applicant and shall 
return the application deposit to the applicant within 30 days 
unless the applicant requests in writing that the application be 
resubmitted. 
    (b) From January 1 to September 30, no more than 20 percent 
of the total amount of issuance authority available for 
allocation during the calendar year pursuant to this section may 
be allocated to pollution control and waste management projects. 
    (c) From January 1 to September 30, no more than 35 percent 
of the total amount of issuance authority available for 
allocation during the calendar year pursuant to this section may 
be allocated to commercial redevelopment projects and 
multifamily housing projects.  This amount is increased to 50 
percent of the total available authority for the next month's 
allocation if the following two conditions occur:  (1) on or 
after June 30 the total amount of issuance authority available 
under this section which has not been allocated or has been 
allocated to but was returned by an issuer exceeds 45 percent of 
the total amount of issuance authority available for allocation 
under this section for the calendar year; and (2) the entire 
amount of issuance authority available under this clause for 
commercial redevelopment and multifamily housing projects has 
been allocated. 
    From October 1 to December 31 of each year, the annual 
volume cap under a federal volume limitation act, which is not 
both previously allocated and subject to a preliminary 
resolution for a specific project, whether or not committed 
pursuant to a letter of intent, or which is not reserved for 
qualified mortgage bonds, is available for allocation or 
reallocation and shall be allocated among issuers.  An 
entitlement issuer may reallocate after September 30 its 
retained allocation among projects identified in preliminary 
resolutions filed with the department prior to October 1. 
    After September 30, allocations shall be made under this 
subdivision to any project including, without limitation, 
projects for owner-occupied housing, notwithstanding the 
percentage limits and other restrictions contained in this 
subdivision.  Applications must be ranked and allocations made 
first according to the order of priority and ranking of points 
under subdivision 3 and this subdivision.  Any remaining amount 
must be allocated according to the ranking of points under 
subdivision 3.  If two or more applications receive an equal 
number of points, allocations among the applications must be 
made by lot unless otherwise agreed by the respective applicants.
    Subd. 5.  [CERTIFICATE OF ALLOCATION.] The granting of an 
allocation of issuance authority by the department pursuant to 
this section shall be evidenced by issuance of a certificate of 
allocation provided to the applicant in accordance with section 
21. 
    Subd. 6.  [FINAL ALLOCATION.] If issuance remains or 
becomes available following the last Monday on which allocations 
are made during any calendar year, the department must allocate 
the remaining authority to the department of finance, and the 
department of finance shall allocate the remaining authority 
between the Minnesota housing finance agency and the higher 
education coordinating board.  Amounts so allocated to the 
Minnesota housing finance agency must be used for the issuance 
of mortgage credit certificates, and amounts allocated to the 
higher education coordinating board must be used for the 
issuance of obligations under chapter 136A. 
    Sec. 20.  [474A.12] [501(c)(3) POOL; FEDERAL VOLUME 
LIMITATION ACT.] 
    Subdivision 1.  [501(c)(3) POOL.] This section applies only 
to allocations made under a federal volume limitation act.  The 
amount, if any, of the aggregate annual volume cap that must be 
set aside for qualified 501(c)(3) bonds in 1986 or in 1987 or 
pursuant to subdivision 9 shall be allocated under this section. 
    Subd. 2.  [HIGHER EDUCATION FACILITIES AUTHORITY.] Of the 
portion of the annual volume cap allocated under this section, 
$20,000,000 for each calendar year is allocated to the higher 
education facilities authority for the issuance of obligations 
under sections 136A.25 through 136A.42.  After September 1 of 
each year, the higher education facilities authority may retain 
any unused portion of its allocation only if the higher 
education facilities authority submits to the department on or 
before September 1 a letter which states (1) its intent to issue 
obligations pursuant to its allocation or a portion of it before 
the end of the calendar year or within the time period permitted 
under a federal volume limitation act, and (2) a description of 
the specific project or projects for which the obligations will 
be issued, together with an application deposit in the amount of 
one percent of the amount of the unused allocation or the 
portion of it pursuant to which it intends to issue 
obligations.  The authority may subsequently reallocate the 
retained allocation among the projects described in clause (2).  
On September 1 any unused portion of the amount allocated to the 
higher education facilities authority and not reserved by a 
letter of intent and an application deposit is canceled and 
subject to reallocation in accordance with subdivision 3.  If 
the higher education facilities authority returns for 
reallocation all or any part of its allocation on or before 
October 31, that portion of the application deposit equal to one 
percent of the amount returned shall be refunded within 30 days. 
    Subd. 3.  [APPLICATION.] An issuer may apply for an 
allocation of bond issuance authority under this section by 
submitting to the department an application on forms provided by 
the department, accompanied by (1) a preliminary resolution of 
the issuer, and (2) an application deposit in the amount of one 
percent of the requested allocation.  The higher education 
facilities authority may apply for an allocation under 
subdivision 4 or subdivision 6 only if it has adopted a final 
resolution authorizing the sale of obligations in an amount 
equal to the allocation received and not returned for 
reallocation under subdivision 2. 
    Subd. 4.  [ALLOCATION.] As of the 10th and 25th day of each 
month prior to September 1, the department shall allocate 
issuance authority available under this section on the basis of 
applications then on hand, assigning allocations in the order in 
which the applications are received by the department.  If two 
or more applications are filed with the department on the same 
day and if there is insufficient issuance authority for the 
applications, the allocation between or among the applications 
shall be by lot unless otherwise agreed by the respective 
applicants.  Before September 1 the amount allocated to an 
issuer for a 501(c)(3) organization may not exceed $15,000,000 
for the year.  Two or more local issuers may combine their 
allocations in one or more single bond issues which exceed 
$15,000,000 so long as no more than $10,000,000 of the bond 
issue is for facilities located within the geographic boundaries 
of each issuer.  The obligations may be issued jointly by a 
joint powers board or by one issuer on behalf of all the issuers 
to whom the allocation is made. 
    Subd. 5.  [LETTER OF INTENT.] After September 1 of each 
calendar year, an issuer which has received an allocation 
pursuant to this section prior to September 1, may retain an 
unused portion of the allocation only if the issuer has 
submitted to the department on or before September 1 a letter 
stating its intent to issue obligations before the end of the 
calendar year or within the time period permitted by a federal 
volume limitation act.  If the letter of intent is not submitted 
to the department, the one percent application deposit must be 
returned to the issuer and the allocation is canceled and 
available for reallocation pursuant to subdivision 6.  If an 
issuer returns for reallocation all or any part of its 
allocation on or before October 31, that portion of its 
application deposit equal to one percent of the amount returned 
shall be refunded within 30 days.  If it returns the allocation 
after October 31 but before December 1, that portion of the 
application deposit equal to one-third of one percent of the 
amount returned must be refunded within 30 days. 
    Subd. 6.  [ALLOCATION AFTER SEPTEMBER 1.] On September 1 of 
each year the aggregate amount set aside for qualified 501(c)(3) 
bonds, less any amounts previously allocated or reallocated and 
either reserved by an issuer with a letter of intent or with 
respect to which a notice of issue has been filed shall be 
reallocated in accordance with this subdivision. 
    Bond issuance authority subject to reallocation under this 
subdivision on and after September 1 in any year must be 
allocated by the department in the order in which the 
applications were received by the department.  If two or more 
applications are filed with the department on the same day and 
if there is insufficient issuance authority for the 
applications, the allocation between or among such applications 
shall be by lot unless otherwise agreed by the respective 
applicants.  As soon as practicable after September 1, the 
department shall publish in the State Register a notice of the 
aggregate amount available for reallocation pursuant to this 
subdivision.  Within five days after September 10, October 10, 
November 10, December 10, and December 20, the department shall 
allocate available authority under this subdivision.  If 
issuance remains or becomes available following the final 
December 20th allocation, the department must allocate the 
remaining authority to the department of finance, and the 
department of finance shall allocate the remaining authority to 
eligible projects under a federal volume limitation act. 
    Subd. 7.  [NOTICE OF 501(c)(3) ALLOCATION.] The department 
shall issue a notice granting an allocation of issuance 
authority under this section.  No allocation shall be made if 
the sum of the principal amount of proposed allocation and the 
aggregate principal amount of allocations previously made and 
not returned for reallocation exceeds the amount of issuance 
authority set aside, without the right to override by state 
legislation for qualified 501(c)(3) bonds under a federal volume 
limitation act.  If an application is rejected, the department 
must notify the applicant and return the application deposit to 
the applicant within 30 days, unless the applicant requests in 
writing that the application be resubmitted. 
    Subd. 8.  [NOTICE OF ISSUE.] Issuers that issue obligations 
under this section shall provide a notice of issue to the 
department on forms provided by the department stating (1) the 
date of issuance of the obligations; (2) the title of the issue; 
(3) the principal amount of the obligations; and (4) the dollar 
amount of the obligations subject to the annual volume cap of a 
federal volume limitation act.  For obligations issued as a part 
of a series of obligations, a notice must be provided for each 
series.  Any issue of obligations for which a notice of issue is 
not provided to the department within five days after issuance 
is deemed not to have received an allocation under a federal 
volume limitation act.  Within 30 days after receipt of the 
notice of issue, the department shall refund a portion of any 
deposit made pursuant to subdivision 3 equal to one percent of 
the amount of allocation authority issued. 
    Subd. 9.  [NO MANDATORY SET-ASIDE; 501(C)(3) POOL.] If a 
federal volume limitation act is enacted that does not require 
that issuance authority be set aside for qualified 501(c)(3) 
bonds, $70,000,000 of issuance authority is available for 
allocation under this section from January 1 through October 31 
of 1986 and $35,000,000 of issuance authority is available for 
allocation under this section from January 1, 1987 through June 
30, 1987.  Notwithstanding the provisions of subdivision 6, if 
issuance authority is available for allocation pursuant to this 
subdivision, no allocation may be made pursuant to this section 
after October 31 for calendar year 1986 and the remaining amount 
of unallocated authority under this section that is or becomes 
available is canceled and must be reallocated pursuant to 
section 19. 
    Sec. 21.  [474A.13] [CERTIFICATE OF ALLOCATION UNDER 
FEDERAL VOLUME LIMITATION ACT.] 
    Subdivision 1.  [ISSUANCE OF CERTIFICATE OF 
ALLOCATION.] The department shall issue a certificate of 
allocation for any allocation granted under section 19, except 
as provided in subdivision 4. 
    Subd. 2.  [ISSUANCE OF CERTIFICATE OF ALLOCATION; GENERAL 
OBLIGATIONS.] The department shall issue a certificate of 
allocation for any general obligation for which an allocation 
request is received upon forms provided by the department, 
except as provided in subdivision 4.  Such forms shall contain: 
    (1) the name and address of the issuer; 
    (2) the address, telephone number, and name of an 
authorized representative of the issuer; 
    (3) the principal amount of general obligations proposed to 
be issued by the issuer; 
    (4) the title of the proposed issue; 
    (5) a statement of the issuer that the proposed issue of 
obligations is expected to be offered for sale on or before the 
expiration date of the certificate of allocation for which the 
request is being made; 
    (6) the amount of the allocation requested; 
    (7) the project or projects to be financed with the general 
obligations; and 
    (8) a certification that the general obligations do not 
constitute "industrial development bonds" as defined in section 
103(b) of the Internal Revenue Code of 1954, as amended through 
December 31, 1985, which certification shall be accompanied by 
an opinion of bond counsel to such effect. 
    An entitlement city may apply for a certificate of 
allocation under this subdivision prior to October 1 only if it 
has adopted a final resolution authorizing the sale of 
obligations in an amount equal to any allocation received under 
section 16 or returned any remaining allocation for reallocation 
under section 19.  No certificate of allocation shall be issued 
pursuant to this authorization in excess of $10,000,000.  The 
aggregate amount of issuance authority that may be allocated to 
an issuer pursuant to this subdivision for the calendar year may 
not exceed $20,000,000.  If submitted on or after September 1 
for calendar year 1986, an allocation request shall be 
accompanied by a deposit in the amount of one percent of the 
amount of allocation requested.  The department shall issue 
certificates of allocation on Monday of each week for 
applications received by Monday of the preceding week and shall 
make the allocations among the applications by lot. 
    Subd. 3.  [NOTICE OF ISSUE.] A certificate of allocation 
expires and is deemed not to have been issued if the department 
has not received a notice of issue on a form provided by the 
department stating that the obligations for which the 
certificate of allocation was provided were issued, or in the 
case of a general obligation, a final resolution providing for 
sale was adopted, within the longest of the following periods: 
    (1) for a certificate of allocation issued on or prior to 
August 15, 1986, or anytime in 1987, within 30 days of the date 
of issuance of the certificate; 
    (2) for a certificate of allocation issued between August 
16 and September 1, 1986, by September 16, 1986; 
    (3) for a certificate of allocation issued on or after 
September 1 and before the second to the last Monday of December 
1986, within 15 days of the date of issuance of the certificate; 
    (4) for a certificate of allocation issued on or after the 
second to the last Monday of December 1986, by the end of that 
year or within the time permitted by a federal volume limitation 
act; and 
    (5) for a certificate of allocation issued to an 
entitlement issuer for a qualified multifamily housing project, 
within 30 days of issuance of the certificate of allocation.  
    Any of the periods specified in clauses (1), (2), or (3) 
may be extended for an additional period of the same number of 
days if an additional deposit in the amount of three percent of 
the amount of the certificate of allocation is provided before 
the end of the initial period.  The period specified in clause 
(5) may be extended for an additional 30 days if an additional 
deposit in the amount of four percent of the amount of the 
certificate of allocation is provided before the end of the 
initial period. 
    The notice of issue must be executed by an officer of the 
issuer or by the bond counsel approving the issue and must state 
the principal amount of the obligations issued or to be issued 
and the difference, if any, between the amount issued or to be 
issued and the amount stated in the certificate of allocation.  
If the notice of issue is not provided to the department by the 
time required, the certificate of allocation expires, the issue 
is deemed not to have received an allocation for the purpose of 
complying with a federal volume limitation act, and the deposit 
required by section 19 or this section is forfeited by the 
issuer.  If the notice is received by the department on or prior 
to the prescribed deadline, then within 30 days after receipt of 
this notice, the department shall refund a portion of any 
application deposit in proportion to the amount of allocation 
authority issued, reduced by any amount refunded under section 
13. 
    Subd. 4.  [LIMITATIONS ON THE ISSUANCE OF CERTIFICATES.] No 
certificate of allocation may be granted under a federal volume 
limitation act under any of the following circumstances: 
    (1) the amount of the allocation requested, when added to 
(i) the aggregate amount of certificates of allocation issued 
and not expired; (ii) amounts remaining available to be 
allocated pursuant to section 19; and (iii) entitlement 
authority allocated pursuant to section 16 and not returned 
pursuant to section 18, subdivision 3, for reallocation would 
cause the governmental volume cap to be exceeded.  If two or 
more applications for a certificate of allocation are filed with 
the department on the same day and there is insufficient 
issuance authority for the applications, certificates shall be 
issued first for applications made pursuant to subdivision 2 and 
thereafter for applications made pursuant to subdivision 1; or 
    (2) the principal amount of the proposed allocation exceeds 
$25,000,000 unless the issuer is the Minnesota housing finance 
agency or the Minnesota higher education coordinating board, or 
unless the issue is a pooled or joint issue or any issue of a 
joint powers board, provided that for joint or pooled issues or 
issues of a joint powers board the aggregate amount of the issue 
cannot exceed $100,000,000. 
    Subd. 5.  [CERTIFICATES ARE NOT TRANSFERABLE.] Certificates 
of allocation are not transferable.  An issuer that receives an 
allocation of issuance authority pursuant to sections 9 to 29 to 
finance a project within the boundaries of the issuer may allow 
another issuer to issue obligations pursuant to the issuance 
authority only if the boundaries of the other issuer are 
coterminous with the boundaries of the issuer that received the 
authority. 
    Sec. 22.  [474A.14] [NOTICE OF AVAILABLE AUTHORITY.] 
    The department shall publish in the State Register at least 
twice monthly, a notice of the amount of issuance authority, if 
any, available for allocation pursuant to sections 13, 19, and 
20. 
    Sec. 23.  [474A.15] [STATE HELD HARMLESS.] 
    The state is not liable in any manner to any issuer, holder 
of obligations, or other person for carrying out the duties 
imposed on it under sections 9 to 29.  
    Sec. 24.  [474A.16] [EXCLUSIVE METHOD OF ALLOCATION.] 
    Sections 9 to 29 shall be the exclusive method for 
allocating authority to issue obligations for the purposes of 
complying with the volume limitation of a federal volume 
limitation act and existing federal tax law.  An issuer of 
obligations may elect to obtain an allocation of authority under 
either existing federal tax law, a federal volume limitation 
act, or both.  
    Sec. 25.  [474A.17] [ADMINISTRATIVE PROCEDURE ACT NOT 
APPLICABLE.] 
    Minnesota Statutes, chapter 14, shall not apply to actions 
taken by any state agency, entity, or the governor under 
sections 9 to 29.  
    Sec. 26.  [474A.18] [PROSPECTIVE OVERRIDE OF FEDERAL VOLUME 
LIMITATION ACT.] 
    Sections 9 to 29 prospectively override and replace the 
method of allocating the authority to issue obligations among 
uses and among issuers as provided in a federal volume 
limitation act to the extent allowed by a federal volume 
limitation act. 
    Sec. 27.  [474A.19] [GOVERNOR'S ACTION.] 
    If at any time before June 30, 1987, a federal volume 
limitation act is enacted into law in a form different from that 
existing as of December 31, 1985, which eliminates or adds any 
requirement that a specific type of obligation is subject to a 
volume limitation that is inconsistent with the allocation 
mechanism provided for in sections 9 to 29, or provides for 
other restrictions on the allocation of issuance authority that 
are inconsistent with the allocation mechanism provided for in 
sections 9 to 29, the governor may, consistent with a federal 
volume limitation act as enacted, by executive order or 
proclamation, establish such revisions to the allocation system 
as may be necessary and appropriate and which the governor, in 
consultation with the legislative advisory commission and the 
attorney general, determines are most consistent with the 
purposes of and the allocation mechanism provided for in 
sections 9 to 29.  An executive order or proclamation made by 
the governor under this section shall not withdraw or impair any 
allocation made if obligations have been issued under such 
allocations unless the obligations are not or will not be 
subject to the volume cap of a federal volume limitation act and 
written notice is provided to the issuer. 
    Any executive order made by the governor under this section 
must, to the extent possible, comply with the following 
requirements: 
    (a) If 501(c)(3) bonds are excluded from the volume cap in 
a federal volume limitation act, any allocation made under 
section 20 must be canceled, the provisions of section 20 will 
no longer be in force and effect, any unrefunded deposit made 
with the department under section 20 shall be refunded to the 
issuer within 30 days of the cancellation and any excess 
issuance authority previously set aside under section 20 for 
501(c)(3) bonds shall, to the extent the exclusion of the 
501(c)(3) bonds increases the amount of the governmental volume 
cap, be added on a pro rata basis to the amount of the 
governmental volume cap allocated to (1) state issuers under 
section 16, subdivision 1, clause (1); (2) entitlement cities 
under section 16, subdivision 1, clause (2); and (3) to the pool 
under section 11, subdivision 2, clause (3). 
    (b) If obligations for multifamily housing projects, or 
certain kinds thereof, are excluded from the volume cap in a 
federal volume limitation act, allocations granted for the 
projects are canceled and the commissioner shall refund any 
deposits for the projects within 30 days of cancellation.  No 
adjustment shall be made in the allocation of the governmental 
volume cap except as provided under section 11, subdivision 3. 
    Sec. 28.  [474A.20] [STATE CERTIFICATION.] 
    The commissioner of the department is designated as the 
state official to provide any pre-issuance or post-issuance 
certification required by a federal volume limitation act.  
    Sec. 29.  [474A.21] [APPROPRIATION; RECEIPTS.] 
    Any fees collected by the department under sections 9 to 29 
must be deposited in the general fund.  The amount necessary to 
refund application deposits is appropriated to the department 
from the general fund for that purpose. 
    Sec. 30.  Minnesota Statutes 1984, section 475.77, is 
amended to read: 
    475.77 [OBLIGATIONS SUBJECT TO FEDERAL VOLUME LIMITATION 
ACT.] 
    Sections 474.16 to 474.23 9 to 29 apply to any issuance of 
obligations which are subject to limitation under a 
federal volume limitation act as defined in section 474.16 10, 
subdivision 5 9, or existing federal tax law as defined in 
section 10, subdivision 8. 
    Sec. 31.  [REPEALER.] 
    Minnesota Statutes 1984, sections 462C.09, subdivision 4; 
474.16, subdivisions 1, 2, and 5; 474.21; and 474.25; and 
Minnesota Statutes 1985 Supplement, sections 116J.58, 
subdivision 4; 462C.09, subdivisions 1, 2a, 3, 5, and 6; 474.16, 
subdivisions 3, 6, 7, 8, 9, 10, 11, 12, 13, 14, and 15; 474.17; 
474.19; 474.20; 474.23; and 474.26 are repealed.  Nothing in 
this section is intended to affect the validity of any 
allocation granted pursuant to the repealed sections prior to 
the effective date of this article, including any allocation 
carried forward for use in a later calendar year.  Nothing in 
this section is intended to affect the validity of any 
allocation granted pursuant to the repealed sections prior to 
the effective date of this article, including any allocation 
carried forward for use in a later calendar year.  If prior to 
the date of enactment of this article, a notice of allocation is 
received pursuant to Minnesota Statutes 1985 Supplement, section 
474.19, and if obligations pursuant to that allocation are not 
issued on or before the date of enactment of this article, the 
issuer may elect within 30 days after enactment of this article 
to either resubmit its application pursuant to the provisions of 
this article and receive a credit for the deposit already made 
or request a refund of the deposit.  If a refund of the deposit 
is requested, the department must refund the deposit within 15 
days. 
    Sec. 32.  [EFFECTIVE DATE; SUNSET.] 
    This article is effective the day following final enactment.
Sections 10, subdivisions 3, 9, 10, 11, 16, 22, and 25; 11, 
subdivisions 2 and 3; 15, subdivision 7; 16 to 21; and 26 to 28 
are repealed effective July 1, 1987. 

                               ARTICLE 2
    Section 1.  Minnesota Statutes 1984, section 124.214, is 
amended by adding a subdivision to read: 
    Subd. 3.  If a return of excess tax 
increment is made to a 
school district pursuant to section 273.75, subdivision 2 or 
upon decertification of a tax increment district, the school 
district's aid entitlements and levy limitations must be 
adjusted for the fiscal year in which the excess tax increment 
is paid under the provisions of this subdivision. 
    (a) An amount must be subtracted from the school district's 
aid for the current fiscal year equal to the product of: 
    (1) the amount of the payment of excess tax increment to 
the school district, times 
    (2) the ratio of: 
    (A) the sum of the amounts of the school district's 
certified levy for the fiscal year in which the excess tax 
increment is paid according to the following: 
    (i) sections 124A.03, subdivision 1, 124A.06, subdivision 
3a, and 124A.08, subdivision 3a, if the school district is 
entitled to basic foundation aid according to section 124A.02; 
    (ii) section 124A.10, subdivision 3a, and section 124A.20, 
subdivision 2, if the school district is entitled to third-tier 
aid according to section 124A.10, subdivision 4; 
    (iii) sections 124A.12, subdivision 3a, and 124A.14, 
subdivision 5a, if the school district is eligible for 
fourth-tier aid according to section 124A.12, subdivision 4; 
    (iv) section 124A.03, subdivision 4, if the school district 
is entitled to summer school aid according to section 124.201; 
and 
    (v) section 275.125, subdivisions 5 and 5c, if the school 
district is entitled to transportation aid according to section 
124.225, subdivision 8a; 
    (B) to the total amount of the school district's certified 
levy for the fiscal year pursuant to sections 124A.03, 124A.06, 
subdivision 3a, 124A.08, subdivision 3a, 124A.10, subdivision 
3a, 124A.12, subdivision 3a, 124A.14, subdivision 5a, 124A.20, 
subdivision 2, and 275.125, plus or minus auditor's adjustments. 
    (b) An amount must be subtracted from the school district's 
levy limitation for the next levy certified equal to the 
difference between: 
    (1) the amount of the distribution of excess increment, and 
    (2) the amount subtracted from aid pursuant to clause (a) 
of this subdivision.  
    If the aid and levy reductions required by this subdivision 
cannot be made to the aid for the fiscal year specified or to 
the levy specified, the reductions must be made from aid for 
subsequent fiscal years, and from subsequent levies.  The school 
district shall use the payment of excess tax increment to 
replace the aid and levy revenue reduced under this subdivision. 
     This subdivision applies only to the total amount of excess 
increments received by a school district for a calendar year 
that exceeds $25,000. 
    Sec. 2.  Minnesota Statutes 1984, section 273.1314, is 
amended by adding a subdivision to read: 
    Subd. 8a.  [ADDITIONAL ENTERPRISE ZONE ALLOCATIONS.] (a) In 
addition to tax reductions authorized in subdivision 8, the 
commissioner may allocate $600,000 for tax reductions pursuant 
to subdivision 9 to enterprise zones designated under section 
273.1312, subdivision 4, paragraph (c), clause (1) or (3).  Of 
this amount, a minimum of $200,000 must be allocated to an area 
added to an enterprise zone pursuant to section 3.  Allocations 
made pursuant to this subdivision may not be used to reduce a 
tax liability, or increase a tax refund, prior to July 1, 1987.  
Limits on the maximum allocation to a zone imposed by 
subdivision 8 do not apply to allocations made under this 
subdivision.  
    (b) A city encompassing an enterprise zone, or portion of 
an enterprise zone, qualifies for an additional allocation under 
this subdivision if the following requirements are met:  
    (1) the city encompassing an enterprise zone, or portion of 
an enterprise zone, has signed contracts with qualifying 
businesses that commit the city's total initial allocation 
received pursuant to subdivision 8. 
    (2) the city encompassing an enterprise zone, or portion of 
an enterprise zone, submits an application to the commissioner 
requesting an additional allocation for tax reductions 
authorized by subdivision 9.  The application must identify a 
specific business expansion project which would not take place 
but for the availability of enterprise zone tax incentives.  
    (c) The commissioner shall use the following criteria when 
determining which qualifying cities shall receive an additional 
allocation under this subdivision and the amount of the 
additional allocation the city is to receive:  
    (1) additional allocations to qualifying cities under this 
subdivision shall be made within 60 days of receipt of an 
application.  
    (2) applications from cities with the highest level of 
economic distress, as determined using criteria listed in 
section 273.1312, subdivision 4, paragraph (c), clauses (A) to 
(E), shall receive priority for an additional allocation under 
this subdivision. 
    (3) if the commissioner determines that two cities 
submitting applications within one week of each other have equal 
levels of economic distress, the application from the city with 
the business prospect which will have the greatest positive 
economic impact shall receive priority for an additional 
allocation.  Criteria used by the commissioner to determine the 
potential economic impact a business would have shall include 
the number of jobs created and retained, the amount of private 
investment which will be made by the business, and the extent to 
which the business would help alleviate the economic distress in 
the immediate community.  
    (4) the commissioner shall determine the amount of any 
additional allocation a city may receive.  The commissioner 
shall base the amount of additional allocations on the 
commissioner's determination of the amount of tax incentives 
which are necessary to ensure the business prospect will expand 
in the city.  No single allocation under this subdivision may 
exceed $100,000.  No city may receive more than $250,000 under 
this subdivision. 
    Sec. 3.  Minnesota Statutes 1985 Supplement, section 
273.1314, subdivision 16a, is amended to read: 
    Subd. 16a.  [ZONE BOUNDARY REALIGNMENT.] The commissioner 
may approve specific applications by a municipality to amend the 
boundaries of a zone or of an area or areas designated pursuant 
to subdivision 9, paragraph (e) at any time.  Boundaries of a 
zone may not be amended to create noncontiguous subdivisions.  
If the commissioner approves the amended boundaries, the change 
is effective on the date of approval.  Notwithstanding the area 
limitation under section 273.1312, subdivision 4, paragraph (b), 
the commissioner may approve a specific application to amend the 
boundaries of an enterprise zone which is located within five 
municipalities and was designated in 1984, to increase its area 
to not more than 800 acres, and may approve an additional 
specific application to amend the boundaries of that enterprise 
zone to include a sixth municipality. 
    Sec. 4.  Minnesota Statutes 1984, section 273.73, 
subdivision 10, is amended to read: 
    Subd. 10.  [REDEVELOPMENT DISTRICT.] (a) "Redevelopment 
district" means a type of tax increment financing district 
consisting of a project, or portions of a project, within which 
the authority finds by resolution that one of the following 
conditions, reasonably distributed throughout the district, 
exists: 
    (1) 70 percent of the parcels in the district are occupied 
by buildings, streets, utilities or other improvements and more 
than 50 percent of the buildings, not including outbuildings, 
are structurally substandard to a degree requiring substantial 
renovation or clearance; or 
    (2) 70 percent of the parcels in the district are occupied 
by buildings, streets, utilities or other improvements and 20 
percent of the buildings are structurally substandard and an 
additional 30 percent of the buildings are found to require 
substantial renovation or clearance in order to remove such 
existing conditions as:  inadequate street layout, incompatible 
uses or land use relationships, overcrowding of buildings on the 
land, excessive dwelling unit density, obsolete buildings not 
suitable for improvement or conversion, or other identified 
hazards to the health, safety and general well being of the 
community; or 
    (3) Less than 70 percent of the parcels in the district are 
occupied by buildings, streets, utilities or other improvements, 
but due to unusual terrain or soil deficiencies requiring 
substantial filling, grading or other physical preparation for 
use at least 80 percent of the total acreage of such land has a 
fair market value upon inclusion in the redevelopment district 
which, when added to the estimated cost of preparing that land 
for development, excluding costs directly related to roads as 
defined in section 160.01 and local improvements as described in 
section 429.021, subdivision 1, clauses 1 to 7, 11 and 12, and 
section 430.01, if any, exceeds its anticipated fair market 
value after completion of said preparation; provided that no 
parcel shall be included within a redevelopment district 
pursuant to this paragraph (3) unless the authority has 
concluded an agreement or agreements for the development of at 
least 50 percent of the acreage having the unusual soil or 
terrain deficiencies, which agreement provides recourse for the 
authority should the development not be completed; or 
    (4) The property consists of underutilized air rights 
existing over a public street, highway or right-of-way; or 
    (5) The property consists of vacant, unused, underused, 
inappropriately used or infrequently used railyards, rail 
storage facilities or excessive or vacated railroad 
rights-of-way; or 
    (6) The district consists of an existing or proposed 
industrial park no greater in size than 250 acres, which 
contains a sewage lagoon contaminated with polychlorinated 
biphenyls.  
    (b) For purposes of this subdivision, "structurally 
substandard" shall mean containing defects in structural 
elements or a combination of deficiencies in essential utilities 
and facilities, light and ventilation, fire protection including 
adequate egress, layout and condition of interior partitions, or 
similar factors, which defects or deficiencies are of sufficient 
total significance to justify substantial renovation or 
clearance.  "Parcel" shall mean a tract or plat of land 
established prior to the certification of the district as a 
single unit for purposes of assessment. 
    Sec. 5.  Minnesota Statutes 1984, section 273.75, 
subdivision 2, is amended to read: 
    Subd. 2.  [EXCESS TAX INCREMENTS.] In any year in which the 
tax increment exceeds the amount necessary to pay the costs 
authorized by the tax increment financing plan, including the 
amount necessary to cancel any tax levy as provided in section 
475.61, subdivision 3, the authority shall use the excess amount 
to do any of the following, in the order determined by the 
authority:  (a) prepay any outstanding bonds, (b) discharge the 
pledge of tax increment therefor, (c) pay into an escrow account 
dedicated to the payment of such bond, or (d) return the excess 
amount to the county auditor who shall distribute the excess 
amount to the municipality, county and school district in which 
the tax increment financing district is located in direct 
proportion to their respective mill rates.  The county auditor 
must report to the commissioner of education the amount of any 
excess tax increment distributed to a school district within 30 
days of the distribution. 
     Sec. 6.  Minnesota Statutes 1985 Supplement, section 
273.75, subdivision 4, is amended to read: 
    Subd. 4.  [LIMITATION ON USE OF TAX INCREMENT.] All 
revenues derived from tax increment shall be used in accordance 
with the tax increment financing plan.  The revenues shall be 
used solely for the following purposes:  (a) to pay the 
principal of and interest on bonds issued to finance a project; 
(b) by a rural development financing authority for the purposes 
stated in section 362A.01, subdivision 2, by a port authority or 
municipality exercising the powers of a port authority to 
finance or otherwise pay the cost of redevelopment pursuant to 
chapter 458, by a housing and redevelopment authority to finance 
or otherwise pay public redevelopment costs pursuant to chapter 
462, by a municipality to finance or otherwise pay the capital 
and administration costs of a development district pursuant to 
chapter 472A, by a municipality or redevelopment agency to 
finance or otherwise pay premiums for insurance or other 
security guaranteeing the payment when due of principal of and 
interest on the bonds pursuant to chapters 462C, 474, or both 
chapters, or to accumulate and maintain a reserve securing the 
payment when due of the principal of and interest on the bonds 
pursuant to chapters 462C, 474, or both chapters, which revenues 
in the reserve shall not exceed, subsequent to the fifth 
anniversary of the date of issue of the first bond issue secured 
by the reserve, an amount equal to 20 percent of the aggregate 
principal amount of the outstanding and nondefeased bonds 
secured by the reserve.  Revenues derived from tax increment may 
be used to finance the costs of an interest reduction program 
operated pursuant to section 462.445, subdivisions 10 to 13, or 
pursuant to other law granting interest reduction authority and 
power by reference to those subdivisions only under the 
following conditions:  (a) tax increments may not be collected 
for a program for a period in excess of 12 years after the date 
of the first interest rate reduction payment for the program, 
(b) tax increments may not be used for an interest reduction 
program, if the proceeds of bonds issued pursuant to section 
273.77 after December 31, 1985, have been or will be used to 
provide financial assistance to the specific project which would 
receive the benefit of the interest reduction program, and (c) 
not more than 50 percent of the estimated tax increment 
increments derived from a project may not be used to finance an 
interest reduction program for owner-occupied single-family 
dwellings unless a project is located either in an area which 
would qualify as a redevelopment district or within a city 
designated as an enterprise zone pursuant to section 273.1312, 
subdivision 4, clause (c)(3).  These revenues shall not be used 
to circumvent existing levy limit law.  No revenues derived from 
tax increment shall be used for the construction or renovation 
of a municipally owned building used primarily and regularly for 
conducting the business of the municipality; this provision 
shall not prohibit the use of revenues derived from tax 
increments for the construction or renovation of a parking 
structure, a commons area used as a public park or a facility 
used for social, recreational or conference purposes and not 
primarily for conducting the business of the municipality.  
    Sec. 7.  [340A.318] [CREDIT EXTENSIONS RESTRICTED.] 
    Subdivision 1.  [RESTRICTION.] Except as provided in this 
section, no retail licensee may accept or receive credit, other 
than merchandising credit in the ordinary course of business for 
a period not to exceed 30 days, from a distiller, manufacturer, 
or wholesaler of distilled spirits or wine, or agent or employee 
thereof.  No distiller, manufacturer or wholesaler may extend 
the prohibited credit to a retail licensee.  No retail licensee 
delinquent beyond the 30 day period shall solicit, accept or 
receive credit or purchase or acquire distilled spirits or wine 
directly or indirectly, and no distiller, manufacturer or 
wholesaler shall knowingly grant or extend credit nor sell, 
furnish or supply distilled spirits or wine to a retail licensee 
who has been posted delinquent under subdivision 3.  No right of 
action shall exist for the collection of any claim based upon 
credit extended contrary to the provisions of this section. 
    Subd. 2.  [REPORTING.] Every distiller, manufacturer or 
wholesaler selling to retailers shall submit to the commissioner 
in triplicate not later than Thursday of each calendar week a 
verified list of the names and addresses of each retail licensee 
purchasing distilled spirits or wine from that distiller, 
manufacturer or wholesaler who, on the first day of that 
calendar week, was delinquent beyond the 30 day period, or a 
verified statement that no delinquencies exist which are 
required to be reported.  If a retail licensee previously 
reported as delinquent cures the delinquency by payment, the 
name and address of that licensee shall be submitted in 
triplicate to the commissioner not later than the close of the 
second full business day following the day the delinquency was 
cured. 
    Subd. 3.  [POSTING; NOTICE.] Verified list or statements 
required by subdivision 2 shall be posted by the commissioner in 
offices of the department in places available for public 
inspection and mailed to each licensed wholesaler not later than 
the day following receipt.  Documents so posted and mailed shall 
constitute notice to every distiller, manufacturer or wholesaler 
of the information posted.  Actual notice, however received, 
also constitutes notice. 
    Subd. 4.  [MISCELLANEOUS PROVISIONS.] The 30 day 
merchandising period allowed by this section shall commence with 
the day immediately following the date of invoice and shall 
include all successive days, including Sundays and holidays, to 
and including the 30th successive day.  In addition to other 
legal methods, payment by check during the period for which 
merchandising credit may be extended shall be considered 
payment.  All checks received in payment for distilled spirits 
or wine shall be deposited promptly for collection.  A postdated 
check or a check dishonored on presentation for payment does not 
constitute payment.  A retail licensee shall not be deemed 
delinquent for any alleged sale in any instance where there 
exists a bona fide dispute between the licensee and the 
distiller, manufacturer or wholesaler as to the amount owing as 
a result of the alleged sale.  A delinquent retail licensee who 
engages in the retail liquor business at two or more locations 
shall be deemed to be delinquent with respect to each location. 
    Subd. 5.  [LICENSE SUSPENSION OR REVOCATION.] The license 
of any retail licensee, distiller, manufacturer or wholesaler 
violating any provision of this section shall be subject to 
suspension or revocation in the manner provided by this chapter. 
    Sec. 8.  Minnesota Statutes 1984, section 412.301, is 
amended to read: 
    412.301 [FINANCING PURCHASE OF CERTAIN EQUIPMENT.] 
    The council may issue certificates of indebtedness within 
existing or capital notes subject to the city debt limits for 
the purpose of purchasing fire or police to purchase public 
safety equipment or, ambulance equipment or street, road 
construction or maintenance equipment, and other capital 
equipment having an expected useful life at least as long as the 
terms of the certificates or notes.  Such certificates or notes 
shall be payable in not more than five years and shall be issued 
on such terms and in such manner as the council may determine.  
If the amount of the certificates or notes to be issued to 
finance any such purchase exceeds one percent of the assessed 
valuation of the city, excluding money and credits, they shall 
not be issued for at least ten days after publication in the 
official newspaper of a council resolution determining to issue 
them; and if before the end of that time, a petition asking for 
an election on the proposition signed by voters equal to ten 
percent of the number of voters at the last regular municipal 
election is filed with the clerk, such certificates or notes 
shall not be issued until the proposition of their issuance has 
been approved by a majority of the votes cast on the question at 
a regular or special election.  A tax levy shall be made for the 
payment of the principal and interest on such certificates or 
notes, in accordance with section 475.61, as in the case of 
bonds.  
    Sec. 9.  Minnesota Statutes 1985 Supplement, section 
462.445, subdivision 13, is amended to read: 
    Subd. 13.  [INTEREST REDUCTION PROGRAM.] The authority to 
authorize payment of interest reduction assistance pursuant to 
subdivisions 10, 11 and 12 shall expire on January 1, 1987 1989. 
Interest reduction assistance payments authorized prior to 
January 1, 1987 1989 may be paid after January 1, 1987 1989.  
    Sec. 10.  Minnesota Statutes 1984, section 462A.03, 
subdivision 13, is amended to read: 
    Subd. 13.  "Eligible mortgagor" means a nonprofit or 
cooperative housing corporation, limited profit entity or a 
builder as defined by the agency in its rules, which sponsors or 
constructs residential housing as defined in subdivision 7, or a 
natural person of low or moderate income, except that the return 
to a limited dividend entity shall not exceed ten percent of the 
capital contribution of the investors or such lesser percentage 
as the agency shall establish in its rules; provided that 
residual receipts funds of a limited dividend entity may be used 
for agency-approved, housing-related investments owned by the 
limited dividend entity without regard to the limitation on 
returns.  Owners of existing residential housing occupied by 
renters shall be eligible for rehabilitation loans, only if, as 
a condition to the issuance of the loan, the owner agrees to 
conditions established by the agency in its rules relating to 
rental or other matters that will insure that the housing will 
be occupied by persons and families of low or moderate income.  
The agency shall require by rules that the owner give preference 
to those persons of low or moderate income who occupied the 
residential housing at the time of application for the loan. 
    Sec. 11.  Minnesota Statutes 1984, section 462C.02, 
subdivision 6, is amended to read: 
    Subd. 6.  "City" means any statutory or home rule charter 
city, a county housing and redevelopment authority created by 
special law or authorized by its county to exercise its powers 
pursuant to section 462.426, or any public body which (a) is the 
housing and redevelopment authority in and for a statutory or 
home rule charter city, or the port authority of a statutory or 
home rule charter city, and (b) is authorized by ordinance to 
exercise, on behalf of a statutory or home rule charter city, 
the powers conferred by sections 462C.01 to 462C.08 462C.10.  
    Sec. 12.  Minnesota Statutes 1984, section 462C.06, is 
amended to read: 
    462C.06 [COUNTY HOUSING AND REDEVELOPMENT AUTHORITY ACTING 
ON BEHALF OF CITY.] 
    A housing and redevelopment authority in and for a county 
may exercise the powers conferred by sections 462C.01 to 462C.07 
462C.10 either (1) on its own behalf or (2) on behalf of a 
city (other than a county housing and redevelopment authority), 
if the city authorizes the housing and redevelopment authority 
in and for the county in which the city is located to exercise 
such powers and the county has authorized its housing and 
redevelopment authority to exercise its powers pursuant to 
section 462.426 or the county housing and redevelopment 
authority has been created by special law; provided, however, 
that any program undertaken pursuant to this section shall be 
included in the limitations provided in section 462C.07, 
subdivision 2, and also shall be is subject to the limitations 
of sections 462C.03 and 462C.04 in the case of a single family 
housing program, and subject to the limitations of section 
462C.05 in the case of a multifamily housing development program.
    Sec. 13.  Minnesota Statutes 1984, section 462C.07, 
subdivision 1, is amended to read: 
    Subdivision 1.  To finance programs or developments 
described in any plan the city may, upon approval of the program 
as provided in section 462C.04, subdivision 2, issue and sell 
revenue bonds or obligations which shall be payable exclusively 
from the revenues of the programs or developments.  In the 
purchase or making of single family housing loans and the 
purchase or making of multifamily housing loans and the issuance 
of revenue bonds or other obligations the city may exercise 
within its corporate limits, any of the powers the Minnesota 
housing finance agency may exercise under chapter 462A, without 
limitation under the provisions of chapter 475.  The proceeds of 
revenue bonds issued to make or purchase single family housing 
loans that are jointly issued by two or more cities pursuant to 
section 471.59 may be used to make or purchase single family 
housing loans secured by homes in any of the cities. 
    Sec. 14.  [471.572] [INFRASTRUCTURE REPLACEMENT RESERVE 
FUND.] 
    Subdivision 1.  [DEFINITIONS.] For purposes of this 
section, the following terms have the meanings given: 
    "Reserve fund" means the infrastructure replacement reserve 
fund. 
    "City" means a statutory or home rule charter city. 
    Subd. 2.  [TAX LEVY.] The governing body of a city may 
establish, by a two-thirds vote of all its members, by ordinance 
or resolution a reserve fund and may annually levy a property 
tax for the support of the fund.  The proceeds of taxes levied 
for its support must be paid into the reserve fund.  Any other 
revenue from a source not required by law to be paid into 
another fund for purposes other than those provided for the use 
of the reserve fund may be paid into the fund.  A tax levied by 
the city in accordance with this section is a special levy 
within the meaning of section 275.50, subdivision 5.  Before a 
tax is levied under this section, the city must publish in the 
official newspaper of the city an initial resolution authorizing 
the tax levy.  If within ten days after the publication a 
petition is filed with the city clerk requesting an election on 
the tax levy signed by a number of qualified voters greater than 
ten percent of the number who voted in the city at the last 
general election, the tax may not be levied until the levy has 
been approved by a majority of the votes cast on it at a regular 
or special election.  
    Subd. 3.  [PURPOSES.] The reserve fund may be used only for 
the replacement of streets, bridges, curbs, gutters and storm 
sewers.  
    Subd. 4.  [USE OF FUND FOR A SPECIFIC PURPOSE.] If the city 
has established a reserve fund, it may submit to the voters at a 
regular or special election the question of whether use of the 
fund should be restricted to a specific improvement or type of 
capital improvement.  If a majority of the votes cast on the 
question are in favor of the limitation on the use of the 
reserve fund, it may be used only for the purpose approved by 
the voters.  
    Subd. 5.  [HEARING; NOTICE.] A reserve fund may not be 
established until after a public hearing is held on the 
question.  Notice of the time, place, and purpose of the hearing 
must be published for two successive weeks in the official 
newspaper of the city.  The second publication must be not later 
than seven days before the date of the hearing.  
    Subd. 6.  [TERMINATION OF FUND.] The city may terminate a 
reserve fund at any time in the same manner as the fund was 
established.  Upon termination of the fund any balance is 
irrevocably appropriated to the debt service fund of the city to 
be used solely to reduce tax levies for or bonded indebtedness 
of the city or, if the city has no bonded indebtedness, for 
capital improvements authorized by this section. 
    Sec. 15.  Minnesota Statutes 1984, section 471.59, 
subdivision 11, is amended to read:  
    Subd. 11.  [JOINT POWERS BOARD.] Two or more governmental 
units, through action of their governing bodies, by adoption of 
a joint powers agreement that complies with the provisions of 
subdivisions 1 through 5, may establish a joint board to issue 
bonds or obligations pursuant to any law by which any of the 
governmental units establishing the joint board may 
independently issue bonds or obligations and may use the 
proceeds of the bonds or obligations to carry out the purposes 
of the law under which the bonds or obligations are issued.  A 
joint board created pursuant to this section may issue 
obligations and other forms of indebtedness only pursuant 
to express authority granted by the action of the governing 
bodies of the governmental units which established the joint 
board.  The joint board established pursuant to this subdivision 
shall be composed solely of members of the governing bodies of 
the governmental unit which established the joint board, and the 
joint board may not pledge the full faith and credit or taxing 
power of any of the governmental units which established the 
joint board.  The obligations or other forms of indebtedness 
shall be obligations of the joint board issued on behalf of the 
governmental units creating the joint board.  The obligations or 
other forms of indebtedness shall be issued in the same manner 
and subject to the same conditions and limitations which would 
apply if the obligations were issued or indebtedness incurred by 
one of the governmental units which established the joint board 
provided that any reference to a governmental unit in the 
statute, law, or charter provision authorizing the issuance of 
the bonds or the incurring of the indebtedness shall be 
considered a reference to the joint board. 
    Sec. 16.  Minnesota Statutes 1984, section 474.01, 
subdivision 6, is amended to read: 
    Subd. 6.  In order to further these purposes and policies 
the department of energy and economic development authority 
shall investigate, shall assist and advise municipalities, and 
shall report to the governor and the legislature concerning the 
operation of sections 474.01 to 474.13 and the projects 
undertaken hereunder, and shall have all of the powers and 
duties in connection therewith which are granted to him by 
chapter 362 with respect to other aspects of business 
development and research. 
    Sec. 17.  Minnesota Statutes 1984, section 474.01, 
subdivision 7b, is amended to read: 
    Subd. 7b.  Prior to submitting an application to the 
department of energy and economic development authority 
requesting approval of a project pursuant to subdivision 7a, the 
governing body or a committee of the governing body of the 
municipality or redevelopment agency shall conduct a public 
hearing on the proposal to undertake and finance the project.  
Notice of the time and place of hearing, and stating the general 
nature of the project and an estimate of the principal amount of 
bonds or other obligations to be issued to finance the project, 
shall be published at least once not less than 15 14 days nor 
more than 30 days prior to the date fixed for the hearing, in 
the official newspaper and a newspaper of general circulation of 
the municipality or redevelopment agency.  The notice shall 
state that a draft copy of the proposed application to 
the department of energy and economic development authority, 
together with all attachments and exhibits thereto, shall be 
available for public inspection following the publication of the 
notice and shall specify the place and times where and when it 
will be so available.  At the time and place fixed for the 
public hearing, the governing body of the municipality or the 
redevelopment agency shall give all parties who appear at the 
hearing an opportunity to express their views with respect to 
the proposal to undertake and finance the project.  Following 
the completion of the public hearing, the governing body of the 
municipality or redevelopment agency shall adopt a resolution 
determining whether or not to proceed with the project and its 
financing and may thereafter apply to the department of energy 
and economic development authority for approval of the project. 
    Sec. 18.  Minnesota Statutes 1984, section 475.55, 
subdivision 1, is amended to read: 
    Subdivision 1.  [INTEREST; FORM.] (1) Interest on 
obligations shall not exceed the greatest of (a) the rate 
determined pursuant to subdivision 4 for the month in which the 
resolution authorizing the obligations was adopted, or (b) the 
rate determined pursuant to subdivision 4 for the month in which 
the obligations are sold, or (c) the rate of ten percent per 
annum. All obligations shall be securities as provided in the 
Uniform Commercial Code, chapter 336, article 8, may be issued 
as certificated securities or as uncertificated securities, and 
if issued as certificated securities may be issued in bearer 
form or in registered form, as defined in section 336.8-102.  
The validity of an obligation shall not be impaired by the fact 
that one or more officers authorized to execute it by the 
governing body of the municipality shall have ceased to be in 
office before delivery to the purchaser or shall not have been 
in office on the formal issue date of the obligation.  Every 
obligation, as to certificated securities, or transaction 
statement, as to uncertificated securities, shall be signed 
manually by one officer of the municipality or by a person 
authorized to act on behalf of a bank or trust company, located 
in or outside of the state, which has been designated by the 
governing body of the municipality to act as authenticating 
agent.  Other signatures and the seal of the issuer may be 
printed, lithographed, stamped or engraved thereon and on any 
interest coupons to be attached thereto.  The seal need not be 
used.  A municipality may do all acts and things which are 
permitted or required of issuers of securities under the Uniform 
Commercial Code, chapter 336, article 8, and may designate a 
corporate registrar to perform on behalf of the municipality the 
duties of a registrar as set forth in those sections.  Any 
registrar shall be an incorporated bank or trust company, 
located in or outside of the state, authorized by the laws of 
the United States or of the state in which it is located to 
perform the duties.  If obligations are issued as uncertificated 
securities, and a law requires or permits the obligations to 
contain a statement or recital, whether on their face or 
otherwise, it shall be sufficient compliance with the law that 
the statement or recital is contained in the transaction 
statement or in an ordinance, resolution, or other instrument 
which is made a part of the obligation by reference in the 
transaction statement as provided in section 336.8-202.  
    (2) Notwithstanding paragraph (1), interest on obligations 
issued after April 1, 1986 and before July 1, 1987 is not 
subject to any limitation on rate or amount.  For purposes of 
this paragraph, obligations issued after April 1, 1986 and 
before July 1, 1987 include reissuing, reselling, remarketing, 
refunding, refinancing or tendering, whether pursuant to section 
475.54, subdivision 5a, or otherwise, of obligations after July 
1, 1987 if the original obligations were issued before July 1, 
1987 and after April 1, 1986. 
    Sec. 19.  Minnesota Statutes 1984, section 475.55, is 
amended by adding a subdivision to read: 
    Subd. 7.  [ASSUMED MAXIMUM INTEREST RATE FOR OTHER 
LAWS.] If an obligation is not subject to a maximum interest 
rate pursuant to subdivision 1, paragraph (1) and another law 
provides for a calculation of a debt service levy, determination 
of a rate of interest on a special assessment, or other factor 
based on an assumption that a maximum interest rate applies to 
the obligation, the governing body of the municipality may 
estimate or determine an assumed maximum interest rate for 
purposes of that law. If the municipality does not determine, 
specify or estimate the maximum interest rate for such purpose, 
then the maximum interest rate for purposes of the other law is 
the maximum interest rate that would apply if subdivision 1, 
paragraph (2) were not in effect.  This subdivision does not 
limit the interest rate that may be paid on obligations under 
subdivision 1. 
    Sec. 20.  Minnesota Statutes 1985 Supplement, section 
475.56, is amended to read: 
    475.56 [INTEREST RATE.] 
    (a) Any municipality issuing obligations under any law may 
issue obligations bearing interest at a single rate or at rates 
varying from year to year which may be lower or higher in later 
years than in earlier years.  Such higher rate for any period 
prior to maturity may be represented in part by separate coupons 
designated as additional coupons, extra coupons, or B coupons, 
but the highest aggregate rate of interest contracted to be so 
paid for any period shall not exceed the maximum rate authorized 
by law.  Such higher rate may also be represented in part by the 
issuance of additional obligations of the same series, over and 
above but not exceeding two percent of the amount otherwise 
authorized to be issued, and the amount of such additional 
obligations shall not be included in the amount required by 
section 475.59 to be stated in any bond resolution, notice, or 
ballot, or in the sale price required by section 475.60 or any 
other law to be paid; but if the principal amount of the entire 
series exceeds its cash sale price, such excess shall not, when 
added to the total amount of interest payable on all obligations 
of the series to their stated maturity dates, cause the average 
annual rate of such interest to exceed the maximum rate 
authorized by law.  This section does not authorize a provision 
in any such obligations for the payment of a higher rate of 
interest after maturity than before. 
    (b) Any obligation of an issue of obligations otherwise 
subject to section 475.55, subdivision 1, may bear interest at a 
rate varying periodically at the time or times and on the terms, 
including convertibility to a fixed rate of interest, determined 
by the governing body of the municipality, but the rate of 
interest for any period shall not exceed the maximum rate of 
interest for the obligations determined in accordance with 
section 475.55, subdivision 1.  For purposes of section 475.61, 
subdivisions 1 and 3, the interest payable on variable rate 
obligations for their term shall be determined as if their rate 
of interest is the maximum rate permitted for the obligations 
under section 475.55, subdivision 1, or the lesser maximum rate 
of interest payable on the obligations in accordance with their 
terms, but if the interest rate is subsequently converted to a 
fixed rate the levy may be modified to provide at least five 
percent in excess of amounts necessary to pay principal of and 
interest at the fixed rate on the obligations when due.  For 
purposes of computing debt service or interest pursuant to 
section 475.67, subdivision 12, interest throughout the term of 
bonds issued pursuant to this subdivision is deemed to accrue at 
the rate of interest first borne by the bonds.  The provisions 
of this paragraph do not apply to obligations issued by a 
statutory or home rule charter city with a population of less 
than 10,000, as defined in section 477A.011, subdivision 3, or 
to obligations that are not rated A or better, or an equivalent 
subsequently established rating, by Standard and Poor's 
Corporation, Moody's Investors Service or other similar 
nationally-recognized rating agency, except that any statutory 
or home rule charter city, regardless of population or bond 
rating, may issue variable rate obligations as a participant in 
a bond pooling program established by the league of Minnesota 
cities that meets this bond rating requirement. 
    Sec. 21.  Minnesota Statutes 1985 Supplement, section 
475.60, subdivision 2, is amended to read: 
    Subd. 2.  [REQUIREMENTS WAIVED.] The requirements as to 
public sale shall not apply to: 
    (1) obligations issued under the provisions of a home rule 
charter or of a law specifically authorizing a different method 
of sale, or authorizing them to be issued in such manner or on 
such terms and conditions as the governing body may determine; 
    (2) obligations sold by an issuer in an amount not 
exceeding the total sum of $300,000 in any three-month period; 
    (3) obligations issued by a governing body other than a 
school board in anticipation of the collection of taxes or other 
revenues appropriated for expenditure in a single year, if sold 
in accordance with the most favorable of two or more proposals 
solicited privately;  
    (4) obligations sold to any board, department, or agency of 
the United States of America or of the state of Minnesota, in 
accordance with rules or regulations promulgated by such board, 
department, or agency; and 
    (5) obligations issued to fund pension and retirement fund 
liabilities under section 475.52, subdivision 6, obligations 
issued with tender options under section 475.54, subdivision 5a, 
crossover refunding obligations referred to in section 475.67, 
subdivision 13, and any issue of obligations comprised in whole 
or in part of obligations bearing interest at a rate or rates 
which vary periodically referred to in section 475.56; and 
    (b) obligations qualifying under section 475.55, 
subdivision 1, paragraph (2), if the governing body of the 
municipality determines that interest on the obligations will be 
includable in gross income for purposes of federal income 
taxation. 
    Sec. 22.  [475.561] [TAXABLE STATUS; SPECIAL PROVISIONS.] 
    Subdivision 1.  [INCREASE OR DECREASE IN INTEREST.] (a) 
Obligations may be issued which provide, if interest on the 
obligations is determined under the terms of the obligations to 
be subject to federal income taxation, for an increase in the 
rate of interest payable on the obligations, from the date of 
issuance or another date, to a rate provided under the terms of 
the obligations. 
    (b) If the municipality issues obligations it intends to be 
exempt from federal income taxation but bond counsel cannot 
provide an opinion that the interest on the obligations will be 
exempt from federal income taxation under pending legislation or 
regulations existing or proposed with retroactive effect or 
otherwise, the municipality may provide for the obligations to 
bear interest at a rate that will decrease, if the obligations 
are subsequently determined to be exempt from federal income 
taxation, to a rate and from a date to be determined under the 
provisions of the obligations. 
    (c) For purposes of section 475.61, subdivisions 1 and 3, 
the increase or decrease in interest rate permitted by this 
subdivision need not be taken into account until the increase or 
decrease occurs.  Upon occurrence of the increase or decrease, 
the levy must be modified to provide at least five percent in 
excess of the amount necessary to pay principal and interest at 
the new rate of interest on the obligations. 
    Subd. 2.  [ARBITRAGE REBATE.] A municipality may, from the 
proceeds of bonds, investment earnings, or any other available 
moneys of the municipality, pay to the United States or an 
officer, department, agency or instrumentality of the United 
States a rebate of excess earnings payment required by federal 
law to maintain the interest as tax exempt.  A covenant to make 
a payment or payments pursuant to this subdivision is not an 
obligation of the municipality as defined in section 475.51, 
subdivision 3. 
    Subd. 3.  [PREPAYMENT OR PURCHASE OF BONDS.] A municipality 
that issues obligations it intends to be exempt from federal 
income taxation may agree to prepay or purchase the obligations 
(a) at the time and in the amount it determines necessary or 
desirable to maintain the obligations as exempt from federal 
income taxation or (b) upon a determination that the obligations 
are taxable.  A municipality may make arrangements to have money 
available with which to purchase or prepay the obligations as 
the municipality determines necessary or desirable.  If 
arrangements are made with a financial institution pursuant to 
section 475.54, subdivision 5a or this subdivision and if the 
municipality owes the financial institution money under the 
arrangement, the agreement to pay the financial institution is 
not an obligation of the municipality as defined in section 
475.51, subdivision 3, unless and until the amount to be paid or 
reimbursed is determined and becomes due and payable, whereupon, 
the obligation is, as provided by the agreement, a general or 
special obligation of the municipality, and may also be paid 
from the proceeds of refunding bonds issued pursuant to this 
chapter.  The agreement may not be or become a general 
obligation of the municipality unless the underlying, originally 
issued obligation was a general obligation of the municipality.  
For purposes of section 475.61, subdivisions 1 and 3, money 
necessary to make the purchase or prepayment are not amounts 
needed to meet when due principal and interest payments on the 
obligations. 
    Subd. 4.  [RATIFICATION.] This section is, in part, 
remedial in nature.  Obligations issued prior to the effective 
date of this section are not invalid or unenforceable for 
providing terms, consequences or remedies that are authorized by 
this section. 
     Sec. 23.  [CITY OF MINNEAPOLIS; PROPERTY TAX FORGIVENESS.] 
     Notwithstanding any other law to the contrary, the 
governing bodies of the city of Minneapolis, Hennepin county, 
Special School District No. 1, and any special taxing district 
may by resolution or ordinance forgive any or all of the 
liability for the tax imposed by section 272.01, subdivision 2, 
relating to property leased by the Minneapolis community 
development agency. 
    Sec. 24.  [REPEALER.] 
    Laws 1963, chapter 728 is repealed. 
    Sec. 25.  [EFFECTIVE DATE.] 
    Sections 18, 19, 21, 22 and 23 are effective the day 
following final enactment. 

                               ARTICLE 3 
    Section 1.  Minnesota Statutes 1984, section 115.07, 
subdivision 1, is amended to read: 
    Subdivision 1.  [OBTAIN PERMIT.] It shall be unlawful for 
any person to construct, install or operate a disposal system, 
or any part thereof, until plans therefor shall have been 
submitted to the agency unless the agency shall have waived the 
submission thereof to it and a written permit therefor shall 
have been granted by the agency.  
    For disposal systems operated on streams with extreme 
seasonal flows, the agency must allow seasonal permit limits 
based on a fixed or variable effluent limit when the 
municipality operating the disposal system requests them and is 
in compliance with agency water quality standards. 
    Sec. 2.  [115.54] [TECHNICAL ADVISORY COMMITTEE.] 
    The agency shall adopt and revise rules governing waste 
water treatment control under chapters 115 or 116 only with the 
advice of a technical advisory committee of nine members.  One 
member of the committee shall be selected by each of the 
following:  the state consulting engineers council, the 
University of Minnesota division of environmental engineering, 
the state association of general contractors, the state 
wastewater treatment plant operators association, the 
metropolitan waste control commission created by section 
473.503, the association of metropolitan municipalities, the 
state association of small cities, and two members from the 
league of Minnesota cities.  The technical advisory committee 
may review and advise the agency on any rule or technical 
requirements governing the wastewater treatment grant or loan 
program and may review the work of other professional persons 
working on a wastewater treatment project and make 
recommendations to those persons, the agency, and the concerned 
municipality, in order for the agency to ensure that water 
quality treatment standards will be met.  The committee shall 
meet at least once a year, or at the call of the chair, and 
shall elect its chairperson.  The agency must provide staff 
support for the committee, prepare committee minutes and provide 
information to the committee it may request.  A quorum is a 
simple majority and official action must be by a majority vote 
of the quorum. 
    Sec. 3.  Minnesota Statutes 1984, section 115A.14, 
subdivision 4, is amended to read: 
    Subd. 4.  [POWERS AND DUTIES.] The commission shall review 
the biennial report of the board, the agency municipal project 
list and municipal needs list reports, and the budget for the 
agency division of water quality.  The commission shall oversee 
the activities of the board under sections 115A.01 to 115A.72 
and the activities of the agency under sections 115A.42 to 
115A.46 and, 115A.49 to 115A.54, and 116.16 to 116.18 and direct 
such changes or additions in the work plan of the board and 
agency as it deems fit.  The commission may conduct public 
hearings and otherwise secure data and expressions of opinion.  
The commission shall make such recommendations as it deems 
proper to assist the legislature in formulating legislation.  
Any data or information compiled by the commission shall be made 
available to any standing or interim committee of the 
legislature upon request of the chairperson of the respective 
committee.  
    Sec. 4.  [116.163] [AGENCY FUNDING APPLICATION REVIEW.] 
    Subdivision 1.  [CONSTRUCTION GRANT AND LOAN APPLICATIONS.] 
The agency shall, pursuant to agency rules and within 90 days of 
receipt of a completed application for a wastewater treatment 
facility construction grant or loan, grant or deny the 
application and notify the municipality of the agency's 
decision.  The time for consideration of the application by the 
agency may be extended up to 180 days if the municipality and 
the agency agree it is necessary. 
    Subd. 2.  [LIMITATION ON MUNICIPAL PLANNING TIME.] A 
municipality shall complete all planning work required by the 
agency for award of a grant or loan, and be ready to advertise 
for bids for construction, within two years of receipt of grant 
or loan funds under subdivision 1.  The planning time may be 
extended automatically by the amount of time the agency exceeds 
its 90-day review under subdivision 1.  
    Subd. 3.  [BID REVIEW.] After a municipality has accepted 
bids for construction of a wastewater treatment project, the 
agency must review the bids within 30 days of receipt. 
    Sec. 5.  [116.165] [INSPECTION RESPONSIBILITY.] 
    When a wastewater treatment plant is constructed with 
federal funds and a federal agency conducts inspections of the 
plant, the owner of the plant or the owner's designee must 
conduct inspections and forward all inspection documents 
required by the agency to the agency for its review. 
    Sec. 6.  [116.167] [REVOLVING LOAN ACCOUNT.] 
    Subdivision 1.  [APPLICATION.] This section is effective 
only if the federal government requires revolving loan accounts 
to be established under the authority of the federal Water 
Pollution Control Act. 
    Subd. 2.  [STATE WATER POLLUTION CONTROL REVOLVING LOAN 
ACCOUNT.] The commissioner of finance shall maintain in the 
state bond fund a separate bookkeeping account which shall be 
designated as the state water pollution control revolving loan 
account to receive any federal money authorized for loans under 
the federal Water Pollution Control Act, and other money 
appropriated by law, for the purpose of providing financial 
assistance to municipalities for wastewater treatment. 
    Subd. 3.  [LOANS.] A loan made to a municipality under this 
section shall be made only after resolutions have been adopted 
by the agency and the governing body of the municipality 
obligating the municipality to repay the loan to the state 
treasurer in annual installments, including both principal and 
interest.  Each installment shall be in an amount sufficient to 
pay the principal amount within 20 years or a shorter time 
interval if the amount of the annual payment will not justify 
the administrative expenses of processing the payment, and shall 
be paid from user charges, taxes, special assessments, or other 
funds available to the municipality.  Interest on loans made to 
municipalities shall be established at a rate the commissioner 
of revenue reasonably determines sufficient to pay interest 
rates on state bonds issued under section 116.17, subdivision 
2.  Loan repayments must be deposited in the revolving loan 
account created by this section.  Each participating 
municipality shall provide the agency with a financial health 
report compiled by the state auditor and the agency shall review 
the report before approving a loan.  Municipalities receiving a 
loan under this section may still be eligible for a wastewater 
treatment grant from the agency. 
    Subd. 4.  [RULES APPLICATION.] The disbursement of loans 
under this section must comply with rules adopted by the agency 
for loans for wastewater treatment facilities under chapter 116. 
    Sec. 7.  [EFFECTIVE DATE.] 
    Article 3 is effective July 1, 1986. 

                               ARTICLE 4
    Section 1.  [297A.258] [PRIVATE SUPPLIERS OF PUBLIC 
SERVICES.] 
    A private vendor that has entered into a service contract 
with a municipality under sections 3 and 4 is a political 
subdivision for purposes of determining the tax imposed under 
this chapter.  This section applies only to the extent that the 
vendor is acting for the purposes of constructing, maintaining, 
or operating related facilities pursuant to the service contract.
    The commissioner may provide for the issuance of a limited 
exemption certificate to a private vendor for purposes of 
administering this section.  The commissioner may further 
require a vendor to obtain a certificate in order to qualify as 
a political subdivision under this section. 
    For purposes of this section, "private vendor," "service 
contract," and "related facilities" have the meanings given in 
sections 3 and 4. 
    Sec. 2.  [471A.01] [PUBLIC PURPOSE FINDINGS.] 
    The legislature finds that the privatization of facilities 
for the prevention, control, and abatement of water pollution, 
and the furnishing of potable water provides municipalities an 
opportunity under appropriate circumstances to provide those 
capital intensive public services in a manner that will speed 
construction and is less costly and more efficient than the 
furnishing of those services through facilities exclusively 
owned and operated by municipalities.  The legislature further 
finds that other law may create unnecessary and costly obstacles 
to the privatization of those capital intensive public services 
and that a comprehensive act is required to permit 
municipalities to enter into appropriate contractual 
arrangements with private parties to facilitate the 
privatization of those capital intensive public services.  
    Sec. 3.  [471A.02] [DEFINITIONS.] 
    Subdivision 1.  [APPLICABILITY.] The definitions in this 
section apply to sections 2 to 13.  
    Subd. 2.  [ADMINISTRATOR.] "Administrator" means the 
pollution control agency or any other agency, instrumentality, 
or political subdivision of the state responsible for 
administering the loan or grant program described in section 8. 
    Subd. 3.  [CAPITAL COST COMPONENT.] "Capital cost component"
means that part of the service fee that the municipality 
determines is intended to reimburse the private vendor for the 
capital cost, including debt service expense, of the related 
facilities. 
    Subd. 4.  [CAPITAL COST COMPONENT GRANT.] "Capital cost 
component grant" means any grant made to the municipality by the 
pollution control agency over a term of at least ten years to 
pay or reimburse the municipality for the payment of all or part 
of the capital cost component of the service fee. 
    Subd. 5.  [CAPITAL COST COMPONENT LOAN.] "Capital cost 
component loan" means any loan made to the municipality by the 
pollution control agency over a term of at least ten years to 
pay or reimburse the municipality for the payment of all or part 
of the capital cost component of the service fee. 
    Subd. 6.  [CAPITAL INTENSIVE PUBLIC SERVICES.] "Capital 
intensive public services" means the prevention, control, and 
abatement of water pollution through wastewater treatment 
facilities as defined by section 115.71, subdivision 8, and the 
furnishing of potable water.  Capital intensive public services 
may be limited to the acquisition, construction, and ownership 
by the private vendor of related facilities, but does not 
include the furnishing of heating or cooling energy. 
    Subd. 7.  [CONTROLLING INTEREST.] "Controlling interest" 
means either (1) the power, by ownership interest, contract, or 
otherwise, to direct the management of the private vendor or to 
designate or elect at least a majority of the private vendor's 
governing body or board, or (2) having more than a 50 percent 
ownership interest in the private vendor. 
    Subd. 8.  [MUNICIPALITY.] "Municipality" means a home rule 
charter or statutory city, county, sanitary district, or other 
governmental subdivision or public corporation, including the 
metropolitan council and the metropolitan waste control 
commission. 
    Subd. 9.  [PERMITTED OBLIGATION.] "Permitted obligation" 
means the obligation of the municipality under the service 
contract to pay a service fee or perform any other obligation 
under the service contract except an obligation to pay, in a 
future fiscal year of the municipality from a revenue source 
other than funds on hand, a stated amount of money for money 
borrowed or for related facilities purchased by the municipality 
under the service contract. 
    Subd. 10.  [PRIVATE VENDOR.] "Private vendor" means one or 
more persons who are not a municipality and in which no 
governmental entity or group of governmental entities has a 
controlling interest. 
    Subd. 11.  [RELATED FACILITIES.] "Related facilities" means 
all real and personal property used by the private vendor in 
furnishing capital intensive public services, excluding any 
product of the related facilities, such as drinking water, 
furnished under the service contract. 
    Subd. 12.  [SERVICE CONTRACT.] "Service contract" means any 
agreement or agreements between a municipality and a private 
vendor under which: 
     (1) the private vendor agrees to furnish to the 
municipality or any other user capital intensive public services 
in accordance with performance standards set forth in the 
agreement or agreements and the municipality agrees to pay or 
cause to be paid to the private vendor a service fee for the 
services, and 
     (2) other covenants incident to clause (1) are made. 
    Subd. 13.  [SERVICE FEE.] "Service fee" means the payments 
the municipality is required under the service contract to make, 
or cause to be made, to the private vendor, including payments 
made by third parties to the private vendor for products or 
services and credited against payments the municipality would 
otherwise have to make, or cause to be made, under the service 
contract.  
    Subd. 14.  [USEFUL LIFE OF THE RELATED FACILITIES.] "Useful 
life of the related facilities" means the economic useful life 
of the related facilities as determined by the municipality. 
    Subd. 15.  [UNRESTRICTED FUNDS.] "Unrestricted funds" means 
any funds other than funds granted to the state or administrator 
by the federal government or any agency of the federal 
government and unavailable under federal law for the purposes 
set forth in section 8. 
    Subd. 16.  [USER.] "User" means the municipality and all 
other persons which use the capital intensive public services 
furnished by the private vendor. 
    Sec. 4.  [471A.03] [BASIC AUTHORIZATION AND RELATED 
POWERS.] 
    Subdivision 1.  [BASIC AUTHORIZATION.] A municipality may 
contract with a private vendor to furnish in accordance with a 
service contract any capital intensive public services the 
municipality is authorized by law to furnish, and for that 
purpose a municipality may exercise any and all of the powers 
provided in this section. 
    Subd. 2.  [SERVICE CONTRACT.] Subject to the provisions of 
section 10, a municipality may enter into a service contract for 
a term of not more than 30 years.  However, the service contract 
may permit the municipality to either extend or renew the term 
of the service contract so long as the municipality is not bound 
under the service contract for an extended or renewal period of 
more than 30 years.  Under the service contract the municipality 
may, under terms and conditions agreed to by the municipality 
and the private vendor: 
    (1) obligate itself to pay or cause to be paid a service 
fee for the availability and use of the capital intensive public 
services to be furnished under the service contract; 
    (2) enter into other agreements relating to the service to 
be provided and which the municipality considers appropriate 
that are not otherwise contrary to law; and 
    (3) either pledge its full faith and credit or obligate a 
specific source of payment for the payment of the service fee 
and the performance of other obligations under the service 
contract and the payment of damages for failure to perform the 
obligations. 
    The obligation of the municipality to pay the service fee 
and perform any other permitted obligations under the service 
contract are not considered a debt within the meaning of any 
statutory or charter limitation, and no election is required as 
a precondition to the municipality entering into any permitted 
obligation or undertaking a project under a service contract. 
    Subd. 3.  [PROCUREMENT PROCEDURES.] The municipality may 
agree under the service contract that the private vendor will 
acquire and construct any and all related facilities without 
compliance with any competitive bidding requirements, provided 
(1) the municipality, or municipalities if the related 
facilities furnish capital intensive public services to more 
than one municipality, has in the aggregate either no or no more 
than a 50 percent ownership interest in the related facilities, 
and (2) the municipality enters into the service contract only 
after requesting from two or more private vendors proposals for 
the furnishing of the capital intensive public services, under 
terms and conditions the municipality determines to be fair and 
reasonable.  After making the request and receiving any 
proposals in response to the request, the municipality may 
negotiate the service contract with any private vendor that 
meets the requirements specified in the request for proposals. 
    Subd. 4.  [SOURCES OF PAYMENT; COLLECTION PROCEDURE.] (a) 
For the payment of a service fee or other monetary obligation 
under an existing service contract or in anticipation of need 
under a future service contract, the municipality may: 
    (1) levy property taxes, impose rates and charges, levy 
special assessments, and exercise any other revenue producing 
authority granted to it and apply public funds for the payment 
of the service fee and any other monetary obligations under the 
service contract in the same manner, and subject to the same 
conditions and limitations, except as provided in section 5, 
that would apply if the related facilities were acquired, 
constructed, owned, and operated exclusively by the municipality;
and 
    (2) establish by ordinance, revise when considered 
advisable, and collect just and reasonable rates and charges for 
the capital intensive public services provided under the service 
contract.  The ordinance may obligate the owners, lessees, or 
occupants of property, or any or all of them, to pay charges for 
the capital intensive public services available for their 
properties and may obligate the user of a related facility to 
pay a reasonable charge for the use of the related facility.  
Rates and charges may take into account the character, kind, and 
quality of the capital intensive public service and all other 
factors that enter into the cost of the capital intensive public 
service, including but not limited to the service fee payable 
with respect to it, depreciation, and payment of principal and 
interest on money borrowed for the acquisition or betterment of 
related facilities.  
     (b) The rates and charges may be billed and collected in a 
manner the municipality shall determine consistent with this 
paragraph and other applicable law.  On or before October 15 in 
each year, the municipality shall certify to the county auditor 
all unpaid outstanding charges for services provided under the 
service contract and a statement of the description of the lands 
against which the charges arose.  It is the duty of the county 
auditor, upon order of the governing body of the municipality, 
to extend the rates and charges with interest as provided for by 
ordinance upon the tax rolls of the county for the taxes of the 
year in which the rate or charge is filed.  For each year ending 
October 15 the rates and charges with interest shall be carried 
into the tax becoming due and payable in January of the 
following year, and shall be enforced and collected in the 
manner provided for the enforcement and collection of real 
property taxes in accordance with the provisions of the laws of 
the state.  The rates and charges, if not paid, shall become 
delinquent and be subject to the same penalties and the same 
rate of interest as the taxes under the general laws of the 
state.  All rates and charges shall be uniform in their 
application to use and service of the same character or quantity.
    (c) An ordinance establishing rates and charges shall also 
establish a procedure by which a person obligated to pay the 
rates and charges may, each year at a public hearing held before 
August 1 of each year, protest the payment of the rates and 
charges on the grounds that services to be provided under the 
service contract are not available to the person.  The services 
shall be deemed available for the property of the person if the 
vendor agrees, and the related facilities have the capacity, to 
provide the services to the person as soon as the municipality 
or any other entity provides the property of the person with 
access to the services.  Notice of the hearing shall be 
published at least 30 days prior to the hearing in an official 
newspaper in general circulation in the municipality.  A person 
protesting the assessment of rates and charges under this 
paragraph shall file the objection in writing with the 
municipality at least five days prior to the hearing.  Within 
ten days after the hearing, the municipality shall determine 
whether the rates and charges were properly assessed.  A person 
protesting the assessment of rates and charges may appeal the 
assessment, and a private vendor may appeal a reduction in rates 
and charges for any person, to the district court in the same 
manner as appeal of other civil cases.  Rates and charges 
erroneously collected shall be refunded with the same rate of 
interest as taxes refunded with interest under the general laws 
of this state. 
    (d) A public hearing on the proposed ordinance shall be 
held prior to the meeting at which it is to be considered by the 
governing body of the municipality and after notice of the 
hearing has been published in the official newspaper of the 
municipality not less than ten days prior to the hearing.  The 
notice shall state the subject matter and the general purpose of 
the proposed ordinance. 
    Subd. 5.  [SALE OR LEASE OF EXISTING FACILITIES.] For 
purposes of carrying out the service contract, the municipality 
may, in compliance with subdivision 3, sell or lease to the 
private vendor or any other municipality on terms and conditions 
as the municipality considers appropriate any existing related 
facilities, including land, owned by the municipality.  
     Subd. 6.  [REMEDIES.] The municipality may provide that 
title to the facilities shall vest in or revert to the 
municipality if the private vendor defaults under any specified 
provisions in the service contract. The municipality may acquire 
or reacquire any facilities and terminate the service contract 
in accordance with its terms notwithstanding that the service 
contract may constitute an equitable mortgage.  No lease of 
facilities by the municipality to the private vendor is subject 
to the provisions of section 504.02, unless expressly so 
provided in the service contract. 
    Subd. 7.  [INTEREST IN THE RELATED FACILITIES.] The 
municipality may retain or acquire, on terms and conditions it 
considers appropriate, a present or future interest in all or 
part of the related facilities and grant a mortgage or security 
interest in its interest in the related facilities. 
    Subd. 8.  [INTEREST IN THE PRIVATE VENDOR.] The 
municipality may, on terms and conditions it considers 
appropriate, acquire an interest in the private vendor as a 
joint venturer, including a share in the revenues derived from 
the related facilities, and grant a security interest in its 
interest in the private vendor and such revenues. However, no 
municipality or group of municipalities may have a controlling 
interest in the private vendor. 
    Subd. 9.  [USE OF BOND PROCEEDS.] The municipality may 
issue bonds and other obligations and apply their proceeds 
toward the payment of the costs of the related facilities in the 
same manner and subject to the same conditions and limitations 
that would apply if the related facilities were acquired, 
constructed, owned, and operated exclusively by the municipality 
and for these purposes, related facilities shall be considered 
to be a project within the meaning of section 474.02, 
subdivision 1a. 
    Subd. 10.  [REQUIRED PUBLIC USE.] The municipality may 
agree, subject to any applicable state statutory requirements as 
to designated use of the related facilities, that the sole and 
exclusive right to provide the capital intensive public services 
within its jurisdiction be assumed by the private vendor under 
the service contract and may require that any and all members of 
the public within its jurisdiction use the services provided 
under the service contract in the same manner and subject to the 
same limitations and conditions that would apply if the related 
facilities were acquired, constructed, owned, and operated 
exclusively by the municipality. 
    Subd. 11.  [CONDEMNATION POWERS.] The municipality may 
exercise the right of eminent domain in the manner provided by 
chapter 117, for the purpose of acquiring for itself or the 
private vendor any and all related facilities.  If the related 
facilities are acquired for the private vendor, the service 
contract shall be for a term of at least five years. 
    Subd. 12.  [CONTRACTOR'S BOND AND MECHANICS' LIENS.] The 
municipality may waive or require the furnishing of a 
contractor's payment and performance bond of the kind described 
in section 574.26 in connection with the installation and 
construction of any related facilities.  If the bond is 
required, the provisions of chapter 514 relating to liens for 
labor and materials are not applicable with respect to work done 
or labor or materials supplied for the related facilities.  If 
the bond is waived, the provisions of chapter 514 apply with 
respect to work done or labor or materials supplied for the 
related facilities. 
    Sec. 5.  [471A.04] [LEVY LIMITS.] 
    For purposes of applying sections 275.50 to 275.56, any 
property taxes levied for the payment of the service fee shall 
be treated as a special levy under the provisions of section 
275.50, to the same extent and subject to the same limitations 
that would apply if the capital cost component of the service 
fee represented principal and interest payments on bonded 
indebtedness of the municipality within the meaning of section 
275.50, subdivision 5, clause (e), and if the balance of the 
service fee represented operation and maintenance expenses for 
related facilities owned and operated exclusively by the 
municipality.  The provisions of section 275.11 and any levy 
limits imposed by home rule charter do not apply to taxes levied 
to pay the service fee. 
    Sec. 6.  [471A.05] [EXEMPTION FROM PROPERTY TAXES.] 
    If the service contract provides that property taxes 
imposed with respect to the related facilities are to be 
included in the service fee as pass-through costs, the 
municipality may apply to the commissioner of revenue for an 
exemption from property taxation of the related facilities.  The 
property is exempt from ad valorem taxation, if the commissioner 
of revenue determines that the related facilities serve the 
general public and that similar municipally-owned facilities are 
exempt from ad valorem property taxation.  The commissioner of 
revenue must notify the assessor that the property is exempt 
from taxation.  The exemption is only effective during the term 
of the service contract from and after the date of filing the 
certificate in the case of property taxes.  The exemption is not 
effective with respect to any property taxes levied or imposed 
but not collected prior to the date of approval of the exemption 
by the commissioner of revenue. 
    Sec. 7.  [471A.06] [JOINT POWERS AGREEMENT.] 
    Two or more municipalities may enter into joint powers 
agreements they consider appropriate under the provisions of 
section 471.59 for purposes of exercising the powers granted in 
sections 2 to 13. 
    Sec. 8.  [471A.07] [STATE GRANTS AND LOANS.] 
    On or before January 1, 1987, the pollution control agency 
shall submit to the legislature proposed legislation and draft 
implementing regulations providing for (1) the use by the 
administrator of unrestricted funds to provide grants and loans 
for related facilities that constitute wastewater treatment 
facilities as defined by section 115.71, subdivision 8, and (2) 
the use of such funding as a means of speeding construction of 
wastewater treatment facilities and better targeting scarce 
unrestricted funds to help finance wastewater treatment 
facilities (including reimbursement of municipalities for a 
portion of the capital cost component in service contracts under 
capital cost component loans and capital cost component grants). 
    Sec. 9.  [471A.08] [HEARING.] 
    Subdivision 1.  [PUBLIC HEARING REQUIRED.] Except as 
provided in subdivision 2, a municipality shall, before entering 
into a service contract under sections 2 to 13, conduct a public 
hearing on the proposal to provide specified capital intensive 
public services under sections 2 to 13.  The hearing may be 
conducted either before or after the date on which any request 
for proposals is made under section 4, subdivision 3, clause 
(2).  A notice of the hearing shall be published in the local 
official newspaper of the municipality no less than 15 and no 
more than 45 days prior to the date set for hearing and shall 
describe the general nature of the proposal.  Any written 
information developed for the proposal prior to the hearing 
shall be available to the public for inspection prior to the 
hearing.  The hearing on the proposal shall be sufficient even 
though the site of the related facilities, the name of the 
private vendor, and the specific structure of the contractual 
arrangements with the private vendor are not known at the time 
of the hearing. 
    Subd. 2.  [EXISTING CONTRACTS.] A municipality that entered 
into a service contract prior to the effective date of sections 
2 to 13 may exercise any of the powers authorized by those 
sections without complying with subdivision 1. 
    Sec. 10.  [471A.09] [INVESTMENT OF FUNDS.] 
    Any sums paid to the private vendor under the service 
contract are not considered public funds and may be invested in 
any securities in which the private vendor is authorized by law 
to invest. 
    Sec. 11.  [471A.10] [PUBLIC EMPLOYEE LAWS; SALE OR LEASE OF 
EXISTING FACILITY.] 
    (a) Unless expressly provided therein, and except as 
provided in this section, no state law, charter provision, or 
ordinance of a municipality relating to public employees shall 
apply to a person solely by reason of that person's employment 
by a private vendor in connection with services rendered under a 
service contract. 
    (b) A private vendor purchasing or leasing existing related 
facilities from a municipality shall recognize all exclusive 
bargaining representatives and existing labor agreements and 
those agreements shall remain in force until they expire by 
their terms.  Persons who are not employed by a municipality in 
a related facility at the time of a lease or purchase of the 
facility by the private vendor are not "public employees" within 
the meaning of the public employees retirement act, chapter 
353.  Persons employed by a municipality in a related facility 
at the time of a lease or purchase of the facility by a private 
vendor shall continue to be considered to be "public employees" 
within the meaning of the public employees retirement act, 
chapter 353, but may elect to terminate their participation in 
the public employees retirement association as provided in this 
section.  Each such employee may exercise the election annually 
on the anniversary of the person's initial employment by the 
municipality.  An employee electing to terminate participation 
in the association is entitled to benefits that the employee 
would be entitled to if terminating public employment and may 
participate in a retirement program established by the private 
vendor.  
    Sec. 12.  [471A.11] [REGULATION OF RATES AND CHARGES AND 
PUBLIC UTILITY LAWS.] 
    A municipality may regulate by ordinance, contract, or 
otherwise the rates and charges imposed by the private vendor 
with respect to any capital intensive public services provided 
to the public under the service contract.  Whether or not the 
imposition of such rates and charges is so regulated, no capital 
intensive public services provided under the service contract 
are subject to regulation under the provisions of chapter 216B, 
unless the municipality elects to subject the services to 
regulation under that chapter.  An election for regulation may 
be affected by resolution of the governing body of the 
municipality requesting regulation and filing the resolution 
with the state public utilities commission. 
    Sec. 13.  [471A.12] [POWERS; ADDITIONAL AND SUPPLEMENTAL.] 
    The powers conferred by sections 2 to 13 shall be liberally 
construed in order to accomplish their purposes and shall be in 
addition and supplemental to the powers conferred by any other 
law or charter.  If any other law or charter is inconsistent 
with sections 2 to 13, these sections are controlling as to 
service contracts entered into under sections 2 to 13.  However, 
nothing in sections 2 to 13 limits or qualifies (1) any other 
law that a municipality must comply with to obtain any permit in 
connection with related facilities, (2) any performance standard 
or effluent limitations applicable to related facilities, or (3) 
the provisions of any law relating to conflict of interest. 
    Sec. 14.  Minnesota Statutes 1984, section 474.02, is 
amended by adding a subdivision to read: 
    Subd. 1h.  The term "project" shall also include related 
facilities as defined by section 3, subdivision 11. 
    Sec. 15.  [EFFECTIVE DATE.] 
    Article 4 is effective the day following final enactment. 
    Approved March 25, 1986