Minnesota Session Laws - 1988, Regular Session

  

                         Laws of Minnesota 1988 

                        CHAPTER 546-H.F.No. 2306 
           An act relating to bonds; authorizing the Minnesota 
          public facilities authority to issue revenue bonds and 
          make loans to or purchase the bonds of municipalities 
          for wastewater treatment and water supply systems; 
          amending Minnesota Statutes 1987 Supplement, sections 
          446A.04, by adding subdivisions; 446A.05, subdivision 
          1; and proposing coding for new law in Minnesota 
          Statutes, chapter 446A. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1987 Supplement, section 
446A.04, is amended by adding a subdivision to read: 
    Subd. 6.  [PROPERTY.] The authority may acquire, encumber, 
hold, and convey through lease, purchase, gift, or otherwise, 
any real or personal property. 
    Sec. 2.  Minnesota Statutes 1987 Supplement, section 
446A.04, is amended by adding a subdivision to read: 
    Subd. 7.  [IN GENERAL.] The authority has all the powers 
necessary and convenient to carry out its duties under sections 
3 to 13. 
    Sec. 3.  Minnesota Statutes 1987 Supplement, section 
446A.05, subdivision 1, is amended to read:  
    Subdivision 1.  [LOANS AND LOAN PURCHASES.] The authority 
may make and contract to make loans to governmental units to 
finance projects that the governmental unit may construct or 
acquire or may acquire or contract to acquire notes and bonds 
issued by governmental units to finance those projects.  A loan 
may not be used to pay current expenses or obligations, except 
for temporary financing.  A loan made by the authority must be 
secured by notes or bonds of the borrowing governmental unit. 
    Sec. 4.  [446A.051] [PROJECT FINANCIAL ASSISTANCE.] 
    The authority shall assist eligible governmental units in 
determining what grants or loans under sections 446A.06 and 
446A.07 to apply for to finance projects and the manner in which 
the governmental unit will pay for its portion of the project 
cost.  The authority shall review the proposed financing for 
each project certified by the agency to ascertain whether or 
not:  (1) total financing of a project is assured; and (2) the 
governmental unit's financial plan to pay for its portion of the 
project cost is feasible.  
    Sec. 5.  [446A.12] [ISSUANCE OF BONDS.] 
    Subdivision 1.  [BONDING AUTHORITY.] The authority may 
issue negotiable bonds in a principal amount that the authority 
determines necessary to provide sufficient funds for achieving 
its purposes, including the making of loans and purchase of 
securities, the payment of interest on bonds of the authority, 
the establishment of reserves to secure its bonds, the payment 
of fees to a third party providing credit enhancement, and the 
payment of all other expenditures of the authority incident to 
and necessary or convenient to carry out its corporate purposes 
and powers.  Bonds of the authority may be issued as bonds or 
notes or in any other form authorized by law.  The principal 
amount of bonds issued and outstanding under this section at any 
time may not exceed $100,000,000. 
    Subd. 2.  [REFUNDING OF BONDS.] The authority may issue 
bonds to refund outstanding bonds of the authority, to pay any 
redemption premiums on those bonds, and to pay interest accrued 
or to accrue to the redemption date next succeeding the date of 
delivery of the refunding bonds.  The authority may apply the 
proceeds of any refunding bonds to the purchase or payment at 
maturity of the bonds to be refunded, or to the redemption of 
outstanding bonds on the redemption date next succeeding the 
date of delivery of the refunding bonds and may, pending the 
application, place the proceeds in escrow to be applied to the 
purchase, retirement, or redemption.  Pending use, escrowed 
proceeds may be invested and reinvested in obligations issued or 
guaranteed by the state or the United States or by any agency or 
instrumentality of the state or the United States, or in 
certificates of deposit or time deposits secured in a manner 
determined by the authority, maturing at a time appropriate to 
assure the prompt payment of the principal and interest and 
redemption premiums, if any, on the bonds to be refunded.  The 
income realized on any investment may also be applied to the 
payment of the bonds to be refunded.  After the terms of the 
escrow have been fully satisfied, any balance of the proceeds 
and any investment income may be returned to the authority for 
use by it in any lawful manner.  All refunding bonds issued 
under this subdivision must be issued and secured in the manner 
provided by resolution of the authority. 
    Subd. 3.  [KIND OF BONDS.] Bonds issued under this section 
must be negotiable investment securities within the meaning and 
for all purposes of the uniform commercial code, subject only to 
the provisions of the bonds for registration.  The bonds issued 
may be either general obligations of the authority, secured by 
its full faith and credit and payable out of any money, assets, 
or revenues of the authority, subject to the provisions of 
resolutions or indenture pledging and appropriating particular 
money, assets, or revenues to particular bonds, or limited 
obligations of the authority not secured by its full faith and 
credit and payable solely from specified sources or assets.  
    Subd. 4.  [RESOLUTION AND TERMS OF SALE.] The bonds of the 
authority must be authorized by a resolution or resolutions 
adopted by the authority.  The bonds must bear the date or 
dates, mature at the time or times, bear interest at a fixed or 
variable rate, including a rate varying periodically at the time 
or times and on the terms determined by the authority, or any 
combination of fixed and variable rates, be in the 
denominations, be in the form, carry the registration 
privileges, be executed in the manner, be payable in lawful 
money of the United States, at the place or places within or 
without the state, and be subject to the terms of redemption or 
purchase before maturity as the resolutions or certificates 
provide.  If, for any reason existing at the date of issue of 
the bonds or existing at the date of making or purchasing any 
loan or securities from the proceeds or after that date, the 
interest on the bonds is or becomes subject to federal income 
taxation, this fact does not affect the validity or the 
provisions made for the security of the bonds.  The authority 
may make covenants and take or have taken actions that are in 
its judgment necessary or desirable to comply with conditions 
established by federal law or regulations for the exemption of 
interest on its obligations.  The authority may refrain from 
compliance with those conditions if in its judgment this would 
serve the purposes and policies set forth in this chapter with 
respect to any particular issue of bonds, unless this would 
violate covenants made by the authority.  The maximum maturity 
of a bond, whether or not issued for the purpose of refunding, 
must be 30 years from its date.  The bonds of the authority may 
be sold at public or private sale, at a price or prices 
determined by the authority; provided that (i) the aggregate 
price at which an issue of bonds is initially offered by 
underwriters to investors, as stated in the authority's official 
statement with respect to the offering, must not exceed by more 
than three percent the aggregate price paid by the underwriters 
to the authority at the time of delivery; (ii) the commission 
paid by the authority to an underwriter for placing an issue of 
bonds with investors must not exceed three percent of the 
aggregate price at which the issue is offered to investors as 
stated in the authority's offering statement; and (iii) the 
spread or commission must be an amount determined by the 
authority to be reasonable in the light of the risk assumed and 
the expenses of issuance, if any, required to be paid by the 
underwriters.  
    Sec. 6.  [446A.13] [TENDER OPTION.] 
    An obligation may be issued giving its owner the right to 
tender or the authority to demand tender of the obligation to 
the authority or another person designated by it, for purchase 
at a specified time or times, if the authority has first entered 
into an agreement with a suitable financial institution 
obligating the financial institution to provide funds on a 
timely basis for purchase of bonds tendered.  The obligation is 
not considered to mature on any tender date and the purchase of 
a tendered obligation is not considered a payment or discharge 
of the obligation by the authority.  Obligations tendered for 
purchase may be remarketed by or on behalf of the authority or 
another purchaser.  The authority may enter into agreements it 
considers appropriate to provide for the purchase and 
remarketing of tendered obligations, including: 
    (1) provisions under which undelivered obligations may be 
considered tendered for purchase and new obligations may be 
substituted for them; 
    (2) provisions for the payment of charges of tender agents, 
remarketing agents, and financial institutions extending lines 
of credit or letters of credit assuring repurchase; and 
    (3) provisions for reimbursement of advances under letters 
of credit that may be paid from the proceeds of the obligations 
or from tax and other revenues appropriated for the payment and 
security of the obligations and similar or related provisions. 
    Sec. 7.  [446A.14] [INTEREST EXCHANGES.] 
    The authority may enter into an agreement with a third 
party for an exchange of interest rates under this subdivision.  
With respect to outstanding obligations bearing interest at a 
variable rate, the authority may agree to pay sums equal to 
interest at a fixed rate or at a different variable rate 
determined in accordance with a formula set out in the agreement 
on an amount not exceeding the outstanding principal amount of 
the obligations, in exchange for an agreement by the third party 
to pay sums equal to interest on a similar amount at a variable 
rate determined according to a formula set out in the agreement. 
With respect to outstanding obligations bearing interest at a 
fixed rate or rates, the authority may agree to pay sums equal 
to interest at a variable rate determined according to a formula 
set out in the agreement on an amount not exceeding the 
outstanding principal amount of the obligations in exchange for 
an agreement by the third party to pay sums equal to interest on 
a similar amount at a fixed rate or rates set out in the 
agreement.  Subject to any applicable bonds covenants, payments 
required to be made by the municipality under the swap agreement 
may be made from amounts secured to pay debt service on the 
obligations with respect to which the swap agreement was made 
from any other available source of the authority. 
    Sec. 8.  [446A.15] [BOND FUND.] 
    Subdivision 1.  [CREATION AND CONTENTS.] The authority may 
establish a special fund or funds for the security of one or 
more or all series of its bonds.  The funds must be known as 
debt service reserve funds.  The authority may pay into each 
debt service reserve fund: 
    (1) any money appropriated by the state only for the 
purposes of the fund; 
    (2) the proceeds of sale of bonds to the extent provided in 
the resolution or indenture authorizing the issuance of them; 
    (3) funds directed to be transferred by the authority to 
the debt service reserve fund; and 
    (4) other money made available to the authority from any 
other source only for the purpose of the fund. 
    Subd. 2.  [USE OF FUNDS.] Except as provided in this 
section, the money credited to each debt service reserve fund 
must be used only for the payment of the principal of bonds of 
the authority as they mature, the purchase of the bonds, the 
payment of interest on them, or the payment of any premium 
required when the bonds are redeemed before maturity.  Money in 
a debt service reserve fund must not be withdrawn at a time and 
in an amount that reduces the amount of the fund to less than 
the amount the authority determines to be reasonably necessary 
for the purposes of the fund.  However, money may be withdrawn 
to pay principal or interest due on bonds secured by the fund if 
other money of the authority is not available. 
    Subd. 3.  [INVESTMENT.] Money in a debt service reserve 
fund not required for immediate use may be invested in 
accordance with section 446A.11, subdivision 9, paragraph (b). 
    Subd. 4.  [MINIMUM AMOUNT OF RESERVE AT ISSUANCE.] If the 
authority establishes a debt service reserve fund for the 
security of any series of bonds, it shall not issue additional 
bonds that are similarly secured if the amount of any of the 
debt service reserve funds at the time of issuance does not 
equal or exceed the minimum amount required by the resolution 
creating the fund, unless the authority deposits in each fund at 
the time of issuance, from the proceeds of the bonds, or 
otherwise, an amount that when added together with the amount 
then in the fund will be at least the minimum amount required. 
    Subd. 5.  [TRANSFER OF EXCESS.] To the extent consistent 
with the resolutions and indentures securing outstanding bonds, 
the authority may at the close of a fiscal year transfer to any 
other fund or account from any debt service reserve fund any 
excess in that reserve fund over the amount determined by the 
authority to be reasonably necessary for the purpose of the 
reserve fund. 
    Subd. 6.  [CERTIFICATION AND BUDGET REQUEST.] To assure the 
payment of the principal of and interest on bonds of the 
authority and the continued maintenance of all debt service 
reserve funds created and established for that payment, the 
authority shall annually determine and certify to the governor, 
on or before December 1, the following amounts: 
    (1) the amount then needed to restore each debt service 
reserve fund to the minimum amount required by the resolution or 
indenture establishing the fund, but not exceeding the maximum 
amount of principal and interest to become due and payable in 
any later year on all bonds that are then outstanding and 
secured by the fund; and 
    (2) the amount determined by the authority to be needed in 
the immediately ensuing fiscal year, with other funds pledged 
and estimated to be received during that year, for the payment 
of the principal and interest due and payable in that year on 
all then outstanding bonds secured by a debt service reserve 
fund the amount of which is then less than the minimum amount 
agreed. 
    The governor shall include in the proposed biennial budget 
for the following fiscal year, or in a supplemental budget if 
the biennial budget has previously been approved, the amounts 
certified by the authority in accordance with this subdivision. 
    Sec. 9.  [446A.16] [MONEY OF THE AUTHORITY.] 
    Subdivision 1.  [FUNCTIONS OF STATE TREASURER.] Except as 
otherwise provided in this section, money of the authority must 
be paid to the state treasurer as agent of the authority and the 
treasurer shall not commingle the money with other money.  The 
money in the accounts of the authority must be paid out only on 
warrants drawn by the commissioner of finance on requisition of 
the chair of the authority or of another officer or employee as 
the authority authorizes.  Deposits of the authority's money 
must, if required by the state treasurer or the authority, be 
secured by obligations of the United States or of the state of a 
market value equal at all times to the amount of the deposit and 
all banks and trust companies are authorized to give security 
for the deposits. 
    Subd. 2.  [CONTRACTS AND SECURITY.] Notwithstanding the 
provisions of this section, the authority may, with the approval 
of the state treasurer, contract with the holders of any of its 
bonds as to the custody, collection, securing, investment, and 
payment of money of the authority or money held in trust or 
otherwise for the payment of bonds, and to carry out the 
contract.  Money held in trust or otherwise for the payment of 
bonds or in any way to secure bonds and deposits of the money 
may be secured in the same manner as money of the authority, and 
all banks and trust companies are authorized to give security 
for the deposits.  All money paid to the state treasurer as 
agent of the authority is appropriated to the authority. 
    Subd. 3.  [SYSTEM OF ACCOUNTS.] Subject to agreements with 
bondholders, the commissioner of finance shall prescribe a 
system of accounts. 
    Sec. 10.  [446A.17] [NONLIABILITY.] 
    Subdivision 1.  [NONLIABILITY OF INDIVIDUALS.] No member of 
the authority or other person executing the bonds is liable 
personally on the bonds or is subject to any personal liability 
or accountability by reason of their issuance.  
    Subd. 2.  [NONLIABILITY OF STATE.] The state is not liable 
on bonds of the authority issued under this chapter and those 
bonds are not a debt of the state.  The bonds must contain on 
their face a statement to that effect. 
    Sec. 11.  [446A.18] [PURCHASE AND CANCELLATION BY 
AUTHORITY.] 
    Subject to agreements with bondholders that may then exist, 
the authority may purchase out of funds available for the 
purpose, bonds of the authority which shall then be canceled, at 
a price not exceeding the following amounts: 
    (1) if the bonds are then redeemable, the redemption price 
then applicable plus accrued interest to the next interest 
payment date of the bonds; or 
    (2) if the bonds are not redeemable, the redemption price 
applicable on the first date after the purchase upon which the 
bonds become subject to redemption plus accrued interest to that 
date. 
    Sec. 12.  [446A.19] [STATE PLEDGE AGAINST IMPAIRMENT OF 
CONTRACTS.] 
    The state pledges and agrees with the holders of bonds 
issued under sections 4 to 13 that the state will not limit or 
alter the rights vested in the authority to fulfill the terms of 
any agreements made with the bondholders or in any way impair 
the rights and remedies of the holders until the bonds, together 
with interest on them, with interest on any unpaid installments 
of interest, and all costs and expenses in connection with any 
action or proceeding by or on behalf of the bondholders, are 
fully met and discharged.  The authority may include this pledge 
and agreement of the state in any agreement with the holders of 
bonds issued under sections 4 to 13. 
    Sec. 13.  [446A.20] [RESERVES; FUNDS; ACCOUNTS.] 
    The authority may establish reserves, funds, or accounts 
necessary to carry out the purposes of the authority or to 
comply with any agreement made by or any resolution passed by 
the authority. 
    Sec. 14.  [EFFECTIVE DATE.] 
    Sections 1 to 13 are effective the day following final 
enactment. 
    Approved April 18, 1988