1998 Minnesota Statutes

     16A.671 Certificates of indebtedness. 

    Subdivision 1.    Authority; advisory recommendation.  
 To ensure that cash is available when needed to pay warrants 
 drawn on the general fund under appropriations and allotments, 
 the governor may authorize the commissioner (1) to issue 
 certificates of indebtedness in anticipation of the collection 
 of taxes levied for and other revenues appropriated to the 
 general fund for expenditure during each biennium; and (2) to 
 issue additional certificates to refund outstanding certificates 
 and interest on them, under the constitution, article XI, 
 section 6.  

    Subd. 2.    Advisory recommendation.  Before 
 certificates are initially sold by any of the methods authorized 
 in subdivision 6, the governor shall seek the advisory 
 recommendation of the legislative advisory commission, or if 
 there is no commission, the executive council, on (1) the 
 necessity of issuing them, (2) the terms and conditions of the 
 sale, and (3) the maximum amount to be issued and outstanding 
 under the authorization.  If the commission or council does not 
 make a recommendation promptly, the recommendation is negative.  
 An additional recommendation is not required for refunding 
 outstanding certificates or for each issuance of certificates in 
 accordance with an approved line of credit, underwriting, or 
 placement agreement. 

    Subd. 3.    Definitions.  As used in this section, the 
 terms defined in this subdivision have the meanings given them:  

    (a) "General fund" means all cash and investments from time 
 to time received and held in the treasury, except proceeds of 
 state bonds and amounts received and held in special or 
 dedicated funds created by the constitution, or by or pursuant 
 to federal laws or regulations, or by bond or trust instruments, 
 pension contracts, or other agreements of the state or its 
 agencies with private persons, entered into under state law.  

    (b) "Maximum current cash flow requirement" means the 
 commissioner's written estimate of the largest of the amounts by 
 which, on a particular designated date in each month of the term 
 for which certificates are to be issued, the sum of (1) the 
 warrants then outstanding against the general fund plus (2) 
 those that must be drawn on the fund before the same date in the 
 following month, in payment of claims due for expenditure under 
 all appropriations and allotments, will exceed the amount of 
 cash or cash equivalent assets held in the general fund on the 
 first of these dates, excluding the proceeds of the certificates 
 to be issued.  

    Subd. 4.    Limitations of amount.  The principal amount 
 of certificates to be issued at any time must not exceed the 
 lesser of the following: 

    (1) An amount which, with interest thereon to maturity, 
 added to the then outstanding amount of certificates not 
 simultaneously paid and retired, will equal the then unexpended 
 balance of all money which will be credited to the general fund 
 during the current biennium under existing laws, as estimated by 
 the commissioner; or 

    (2) The maximum current cash flow requirement. 

    Subd. 5.    Terms.  The commissioner may establish by 
 order with the approval of the attorney general, but not subject 
 to chapter 14, including section 14.386, the terms of each 
 series of certificates of indebtedness including:  

    (1) the manner of sale under subdivision 6; 

    (2) the price, principal amount, and date of issue; 

    (3) the interest rate or rates and payment dates, or the 
 basis of computation of a variable rate; 

    (4) the maturity date or dates, within the current biennium 
 except as provided in subdivision 10; 

    (5) the terms, if any, of redemption before maturity; 

    (6) the form and method of execution, delivery, payment, 
 registration, conversion, and exchange, under section 16A.672. 

    Subd. 6.    Sale.  Certificates of indebtedness may be 
 sold in any of the ways listed in paragraphs (a) to (e).  

    (a) The commissioner may advertise for competitive bids.  

    (b) The commissioner may negotiate contracts with suitable 
 banks in or out of state to establish lines of credit, for an 
 agreed compensation.  The contracts must provide that the 
 commissioner may issue certificates of indebtedness up to a 
 maximum outstanding amount within an agreed period, bearing 
 interest at a fixed or variable rate.  The certificates must be 
 subject to redemption at par plus accrued interest at any time 
 at the commissioner's option.  

    (c) The commissioner may negotiate contracts with firms of 
 underwriters that will purchase or act as agents in the 
 placement of certificates of indebtedness issued within an 
 agreed period, up to a maximum amount outstanding.  The 
 certificates may be sold to the underwriters or investors (1) at 
 an agreed discount with the interest included in the face amount 
 payable at maturity, or (2) bearing interest at a stated 
 interest rate on the face amount, payable on one or more dates.  
 For the further security of these certificates the commissioner 
 may negotiate agreements for lines of credit under paragraph (b) 
 to pay the certificates with interest to maturity, if necessary, 
 by the issuance of new certificates under the lines of credit.  

    (d) The commissioner may make contracts for agreed fees 
 with suitable banks in or out of state to authenticate, issue, 
 pay principal and interest on, cancel, and otherwise deal as 
 fiscal agents of the state with certificates of indebtedness 
 issued under paragraph (a), (b), or (c).  

    (e) The commissioner may sell certificates of indebtedness 
 to the state board of investment without advertising for bids. 
 The board must determine that the terms are not less favorable 
 than those available at the time for the purchase of direct 
 obligations of the federal government or its agencies, of 
 comparable maturities.  The board may purchase the certificates 
 with any money under its control except money in a pension fund. 

    Subd. 6a.    Fiscal agent bank.  The commissioner may 
 enter into an agreement with a suitable bank or banks located 
 within or outside the state to authenticate, issue, pay 
 principal and interest on, cancel or otherwise deal with 
 certificates of indebtedness issued pursuant to this section, 
 for an agreed compensation.  

    Subd. 7.    Appropriation of proceeds.  The proceeds of 
 all certificates of indebtedness must be deposited in the 
 general fund, and shall be available for spending under any 
 appropriation from that fund for any purpose, subject to 
 subdivision 9.  

    Subd. 8.    Appropriation and accounting for payment of 
 certificates and expenses from the general fund.  The amounts 
 needed for the purposes in this subdivision are appropriated and 
 must be paid from the general fund.  These appropriations are 
 irrevocable and shall not be canceled.  They must be included in 
 the computation of current cash flow requirements and of amounts 
 available for allotment.  The purposes of the appropriations are:

    (1) payment of the principal of and interest and premium, 
 if any, on all certificates when due; 

    (2) actual and necessary travel and subsistence expenses of 
 state officers and employees and other expenses incidental to 
 the sale or placement, printing, execution, and delivery of 
 certificates; and 

    (3) costs of lines of credit.  

    Subd. 9.    Priority of certificate payments; covenants. 
  (a) The proceeds of certificates of indebtedness issued in 
 whole or in part to refund outstanding certificates and interest 
 as authorized in the constitution are available only for that 
 purpose until the refunded certificates and interest are paid.  

    (b) The commissioner may covenant by order, on behalf of 
 the state, for the security of the holders of any certificates, 
 to segregate cash and cash equivalent assets in a special 
 account within the general fund in the amounts and at the times 
 in advance of the due dates that the commissioner determines to 
 be advisable for marketing the certificates, and to act under 
 section 16A.152, subdivision 4, to perform the covenant.  The 
 amount in the account is available only to pay the principal of 
 and interest and premium, if any, on the certificates referred 
 to in the order.  

    Subd. 10.    Covenant to refund.  If cash and cash 
 equivalent assets in the general fund in excess of the amount of 
 outstanding warrants is not sufficient to pay any certificates 
 of indebtedness or interest when due, the commissioner may issue 
 refunding certificates maturing not later than December 1 in the 
 next calendar year to pay the deficiency.  With the approval of 
 the governor, the commissioner may covenant on behalf of the 
 state, in the order issuing any certificates, to offer refunding 
 certificates for sale if a deficiency is expected.  

    Subd. 11.    Constitutional tax levy.  If cash and cash 
 equivalent assets in the general fund in excess of the amount of 
 outstanding warrants, on December 1 immediately following the 
 close of a biennium, is not sufficient to pay:  

    (1) all refunding certificates of indebtedness; 

    (2) all other certificates outstanding at the end of the 
 biennium and not refunded; and 

    (3) all interest accrued on the certificates referred to in 
 clauses (1) and (2); 

    the state auditor shall levy upon all taxable property in 
 the state the tax required by the constitution, article XI, 
 section 6, collectible in the next calendar year and sufficient 
 to pay all amounts described in clauses (1), (2), and (3) on or 
 before December 1 in the collection year with interest to the 
 date or dates of payment. 

    HIST: 2Sp1981 c 1 s 5; 3Sp1981 c 2 art 7 s 2-5; 1982 c 424 s 
 130; 1982 c 639 s 28; 1Sp1982 c 3 s 2,3; 1984 c 597 s 37; 1984 c 
 628 art 2 s 1; art 6 s 1; 1993 c 192 s 111; 1997 c 187 art 4 s 2