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Minnesota Legislature

Office of the Revisor of Statutes

CHAPTER 41C. AGRICULTURAL DEVELOPMENT

Table of Sections
SectionHeadnote
41C.01SHORT TITLE.
41C.02DEFINITIONS.
41C.03GUIDING PRINCIPLES.
41C.04COMBINATION PROGRAMS.
41C.05AGRICULTURAL DEVELOPMENT BOND BEGINNING FARMER AND AGRICULTURAL BUSINESS ENTERPRISE LOAN PROGRAM.
41C.06LOAN ALLOCATION.
41C.07BONDS.
41C.08RESERVE FUNDS AND APPROPRIATIONS.
41C.09REMEDIES OF BONDHOLDERS.
41C.10BONDS AS LEGAL INVESTMENTS.
41C.11CONFLICTS OF INTEREST.
41C.12APPLICATION AND ORIGINATION FEE.
41C.13RULES.
41C.01 SHORT TITLE.
This chapter shall be called and may be cited as the "Minnesota Agricultural Development
Act."
History: 1991 c 332 s 6
41C.02 DEFINITIONS.
    Subdivision 1. Scope. The definitions in this section apply to this chapter.
    Subd. 2. Agricultural business enterprise. "Agricultural business enterprise" means a small
business, as defined in section 645.445, subdivision 2, which owns or plans to own properties,
real or personal, used or useful in connection with the general processing of agricultural products
or in the manufacturing, assembly, or fabrication of agricultural or agriculture-related equipment.
"Agricultural business enterprise" does not include an operation that involves the breeding or
raising of livestock.
    Subd. 3. Agricultural improvements. "Agricultural improvements" means improvements,
buildings, structures, or fixtures suitable for use in farming located on agricultural land, including
a single-family dwelling located on agricultural land that is or will be occupied by a beginning
farmer and structures attached to or incidental to the use of the dwelling.
    Subd. 4. Agricultural land. "Agricultural land" means land suitable for use in farming.
    Subd. 5. Authority. "Authority" means the Minnesota Rural Finance Authority established
in section 41B.025.
    Subd. 6. Beginning farmer. "Beginning farmer" means an individual or partnership with a
low or moderate net worth who engages in farming or plans to engage in farming.
    Subd. 7. Bonds. "Bonds" means bonds, notes, or other evidence of indebtedness issued
by the authority under this chapter.
    Subd. 8. Conservation farm equipment. "Conservation farm equipment" means the
specialized planters, cultivators, and tillage equipment used for reduced tillage or no-till planting
of row crops.
    Subd. 9. Depreciable agricultural property. "Depreciable agricultural property" means
personal property suitable for use in farming for which an income tax deduction for depreciation is
allowable in computing federal income tax under the Internal Revenue Code of 1986, as amended.
    Subd. 10. Farming. "Farming" means the cultivation of land for the production of
agricultural crops, the raising of poultry, the production of eggs, the production of milk, the
production of fruit or other horticultural crops, grazing, the production of livestock, aquaculture,
hydroponics, or the production of forest products.
    Subd. 11. Lending institution. "Lending institution" includes "eligible lender" as defined
in section 41B.02 and individuals.
    Subd. 12. Low or moderate net worth. "Low or moderate net worth" means:
(1) for an individual, an aggregate net worth of the individual and the individual's spouse
and minor children of less than $350,000 in 2004 and an amount in subsequent years which is
adjusted for inflation by multiplying that amount by the cumulative inflation rate as determined by
the United States All-Items Consumer Price Index; or
(2) for a partnership, an aggregate net worth of all partners, including each partner's net
capital in the partnership, and each partner's spouse and minor children of less than twice the
amount set for an individual in clause (1). However, the aggregate net worth of each partner and
that partner's spouse and minor children may not exceed the amount set for an individual in
clause (1).
History: 1991 c 332 s 7; 1992 c 532 s 3,4; 1996 c 347 s 1; 2004 c 254 s 23
41C.03 GUIDING PRINCIPLES.
(a) In the performance of its duties, implementation of its powers, and selection of specific
programs and projects to receive its assistance under this chapter, the authority must be guided by
the principles in paragraphs (b) to (e).
(b) The authority shall not become an owner of real or depreciable property, except on a
temporary basis if it is necessary in order to implement its programs, to protect its investments by
means of foreclosure or other means, or to facilitate transfer of real or depreciable property for the
use of beginning farmers.
(c) The authority shall exercise diligence and care in selection of projects to receive its
assistance and shall apply customary and acceptable business and lending standards in selection
and subsequent implementation of the projects. The authority may delegate primary responsibility
for determination and implementation of the projects to any federal governmental agency that
assumes any obligation to repay the loan, either directly or by insurance or guarantee.
(d) The authority shall establish a beginning farmer and agricultural business enterprise
loan program to aid in the acquisition of agricultural land and improvements and depreciable
agricultural property by beginning farmers and real and personal property for an agricultural
business enterprise.
(e) The authority shall develop programs for providing financial assistance to agricultural
producers in this state.
History: 1991 c 332 s 8
41C.04 COMBINATION PROGRAMS.
Programs authorized in this chapter may be combined with any other programs authorized in
this chapter or under another state or federal program in order to facilitate as far as practicable the
acquisition of agricultural land and property by beginning farmers, to facilitate the implementation
of permanent soil and water conservation practices and the acquisition of conservation farm
equipment, and to encourage the development of agricultural business enterprises.
History: 1991 c 332 s 9
41C.05 AGRICULTURAL DEVELOPMENT BOND BEGINNING FARMER AND
AGRICULTURAL BUSINESS ENTERPRISE LOAN PROGRAM.
    Subdivision 1. Development of program. The authority shall develop an agricultural
development bond beginning farmer and agricultural business enterprise loan program to facilitate
the acquisition of agricultural land and improvements and depreciable agricultural property by
beginning farmers and real and personal property by an agricultural business enterprise. The
authority shall exercise the powers granted to it in this chapter in order to fulfill the goal of
providing financial assistance to beginning farmers and agricultural business enterprises in the
acquisition of agricultural land, agricultural improvements, depreciable agricultural property, and
real and personal property for an agricultural business enterprise. The authority may participate
in and cooperate with programs of the Farmers Home Administration, Federal Land Bank, or
any other agency or instrumentality of the federal government or with any program of any other
state agency in the administration of the agricultural development bond beginning farmer and
agricultural business enterprise loan program and in the making or purchasing of mortgage or
secured loans under this chapter.
    Subd. 2. Eligibility; beginning farmers. The authority shall provide in the agricultural
development bond beginning farmer and agricultural business enterprise loan program that a
mortgage or a contract on behalf of a beginning farmer may be provided if the borrower qualifies
under authority rules and under federal tax law governing qualified small issue bonds and must:
(1) be a resident of Minnesota;
(2) have sufficient education, training, or experience in the type of farming for which the
loan is desired;
(3) have a low or moderate net worth, as defined in section 41C.02, subdivision 12;
(4) certify that the agricultural land to be purchased will be used by the borrower for
agricultural purposes;
(5) certify that farming will be the principal occupation of an individual borrower;
(6) agree to participate in a farm management program approved by the commissioner
of agriculture for at least the first five years of the loan, if an approved program is available
within 45 miles from the borrower's residence. The commissioner may waive this requirement
for any of the programs administered by the authority if the participant requests a waiver and
provides justification; and
(7) agree to file an approved soil and water conservation plan with the Soil Conservation
Service office in the county where the land is located.
    Subd. 3. Eligibility; agricultural business enterprises. (a) The authority shall provide in
the agricultural development bond beginning farmer and agricultural business enterprise loan
program that a mortgage or contract on behalf of an agricultural business enterprise may be
provided if the borrower qualifies under this chapter and rules of the authority and under federal
tax law governing qualified small issue bonds.
(b) An agricultural business enterprise is eligible for a program loan in an aggregate amount
not exceeding $250,000.
(c) An agricultural business enterprise is eligible for program loans only for new or expanded
operations located in a community with a population of 5,000 or less.
    Subd. 4. Loans and contracts for beginning farmers and agricultural business
enterprises. (a) The authority may:
(1) make loans to qualified beginning farmers for the acquisition of agricultural land,
agricultural improvements, depreciable agricultural property, and real and personal property for
an agricultural business enterprise. Each loan made by the authority under this program and all
collateral securing the loan may be assigned as security for the authority's bond.
(2) enter into contracts to purchase agricultural land, agricultural improvements, depreciable
agricultural property, and real and personal property for an agricultural business enterprise. Each
contract entered into by the authority under this program and all obligations of the authority
under the contract shall be assigned to the beginning farmer or agricultural business enterprise
without recourse.
(b) Loan documents and contracts entered into by the authority shall contain such terms
and conditions of repayment as may be agreed to between the beginning farmer or agricultural
business enterprise and the individual or agricultural lender involved, and such terms and
conditions as the authority may deem necessary.
(c) Each individual or agricultural lender purchasing a bond from the authority under this
program is responsible for making their own independent credit evaluation of the beginning
farmer or the agricultural business enterprise involved, and for the creation and perfection of any
security interest which they deem necessary for the loan or contract to be made on behalf of the
beginning farmer or the agricultural business enterprise.
(d) The authority shall bear no continuing responsibility for repayment of any bond issued
under the program other than the assignment of its interests under the loan document made with
the proceeds of the bond or the contract entered into in connection with the bond.
    Subd. 5. Other terms. The authority may provide that loans and contracts made under
this program may not be assumed or any interest in the agricultural land or improvements
or depreciable agricultural property or real or personal property of an agricultural business
enterprise may not be leased, sold, or otherwise conveyed without its prior written consent and
may provide a due-on-sale clause with respect to the occurrence of any of the foregoing events
without its prior written consent. The authority may provide by rule the grounds for permitted
assumptions of loans and contracts or for the leasing, sale, or other conveyance of any interest
in the agricultural land or improvements or real or personal property of an agricultural business
enterprise. However, the authority shall provide and state in its loan documents and contracts
that the interest rate of the loan or contracts shall increase to the then prevailing market rate if
the loan or contract is assumed by anyone other than a qualified beginning farmer or agricultural
business enterprise. This subdivision controls with respect to a loan or contract made under this
program, notwithstanding other law.
History: 1991 c 332 s 10; 1993 c 342 s 13
41C.06 LOAN ALLOCATION.
Not more than 25 percent of the total bond allocation available for beginning farmer and
agricultural business enterprise loans may be used for agricultural business enterprise loans.
However, any portion of the bond allocation that remains unencumbered on November 1 of each
year may be made available for agricultural business enterprise loans.
History: 1991 c 332 s 11
41C.07 BONDS.
    Subdivision 1. Authority. The authority may issue its negotiable bonds in principal amounts
which, in the opinion of the authority, are necessary to provide sufficient funds for achievement of
its corporate purposes, the payment of interest on its bonds, the establishment of reserves to secure
its bonds, and all other expenditures of the authority incident to and necessary or convenient to
carry out its purposes and powers. The bonds are investment securities and negotiable instruments
within the meaning of and for all purposes of the Uniform Commercial Code.
    Subd. 2. Payment of bonds. Bonds are payable solely and only out of the money, assets,
or revenues of the authority and as provided in the agreement with bondholders pledging any
particular money, assets, or revenues. Bonds are not an obligation of this state or any political
subdivision of this state other than the authority within the meaning of any constitutional or
statutory debt limitations, but are special obligations of the authority payable solely and only from
the sources provided in this chapter, and the authority shall not pledge the credit or taxing power
of this state or any political subdivision of this state other than the authority or make its debts
payable out of any money except that of the authority.
    Subd. 3. Resolution of authority. Bonds must be authorized by a resolution of the authority.
However, a resolution authorizing the issuance of bonds may delegate to an officer of the authority
the power to negotiate and fix the details of an issue of bonds by an appropriate certificate of
the authorized officer.
    Subd. 4. Requirements. Bonds must:
(1) state the date and series of the issue, be consecutively numbered and state on their face
that they are payable both as to principal and interest solely out of the assets of the authority and
do not constitute an indebtedness of this state or any political subdivision of this state other than
the authority within the meaning of any constitutional or statutory debt limit; and
(2) be either registered, registered as to principal only, issued in denominations as the
authority prescribes, fully negotiable instruments under the laws of this state, signed on behalf
of the authority with the manual or facsimile signature of the chair or vice-chair, attested by the
manual or facsimile signature of the secretary, have impressed or imprinted on them the seal of
the authority or a facsimile of it, be payable as to interest at rates and at times as the authority
determines, be payable as to principal at times over a period not to exceed 50 years from the date
of issuance, at places and with reserved rights of prior redemption as the authority prescribes,
be sold at prices, at public or private sale, and in a manner as the authority prescribes, and
the authority may pay all expenses, premiums, and commissions that it considers necessary
or advantageous in connection with the issuance and sale, and be issued under and subject to
the terms, conditions, and covenants providing for the payment of the principal, redemption
premiums, if any, interest and other terms, conditions, covenants, and protective provisions
safeguarding payment, not inconsistent with this chapter, as are found to be necessary by the
authority for the most advantageous sale.
    Subd. 5. Refunding. The authority may issue its bonds for the purpose of refunding any
bonds of the authority then outstanding, including the payment of any redemption premiums
and any interest accrued or to accrue to the date of redemption of the outstanding bonds. Until
the proceeds of bonds issued for the purpose of refunding outstanding bonds are applied to the
purchase or retirement of outstanding bonds or the redemption of outstanding bonds, the proceeds
may be placed in escrow and be invested and reinvested in accordance with the provisions of this
chapter. The interest, income, and profits earned or realized on an investment may also be applied
to the payment of the outstanding bonds to be refunded by purchase, retirement, or redemption.
After the terms of the escrow have been fully satisfied and carried out, any balance of proceeds
and interest earned or realized on the investments may be returned to the authority for use by
it in any lawful manner. All refunding bonds shall be issued and secured and are subject to the
provisions of this chapter in the same manner and to the same extent as other bonds.
    Subd. 6. Anticipation notes. The authority may issue negotiable bond anticipation notes and
may renew them from time to time, but the maximum maturity of the notes, including renewals,
must not exceed ten years from the date of issue of the original notes. Notes are payable from any
available money of the authority not otherwise pledged or from the proceeds of the sale of bonds
in anticipation of which the notes were issued. Notes may be issued for any corporate purpose of
the authority. Notes must be issued in the same manner as bonds and notes and the resolution
authorizing them may contain any provisions, conditions, or limitations, not inconsistent with the
provisions of this subdivision, which the bonds or a bond resolution of the authority may contain.
Notes may be sold at public or private sale. In case of default on its notes or violation of any
obligations of the authority to the noteholders, the noteholders have all the remedies provided in
this chapter for bondholders. Notes are as fully negotiable as bonds of the authority.
    Subd. 7. Filing. A copy of each pledge agreement by or to the authority, including without
limitation each bond resolution, indenture of trust or similar agreement, or any revisions or
supplements to it must be filed with the secretary of state and no further filing or other action
under article 9 of the Uniform Commercial Code or any other law of the state is required to
perfect the security interest in the collateral or any additions to it or substitutions for it and the lien
and trust so created are binding from and after the time made against all parties having claims
of any kind in tort, contract, or otherwise against the pledgor.
    Subd. 8. Personal liability limited. Members of the authority and any person executing its
bonds are not liable personally on the bonds or subject to personal liability or accountability by
reason of the issuance of the authority's bonds.
    Subd. 9. Notice. The authority shall publish a notice of intention to issue bonds in a
newspaper published and of general circulation in the state. The notice shall include a statement
of the maximum amount of bonds proposed to be issued and, in general, what net revenues will
be pledged to pay the bonds and interest on them. An action may not be brought questioning
the legality of the bonds or the power of the authority to issue the bonds or the legality of any
proceedings in connection with the authorization or issuance of the bonds after 60 days from
the date of publication of the notice.
History: 1991 c 332 s 12
41C.08 RESERVE FUNDS AND APPROPRIATIONS.
    Subdivision 1. Authority. The authority may create and establish one or more special funds,
each to be known as a "bond reserve fund" and shall pay into each bond reserve fund any money
appropriated and made available by the state for the purpose of the fund, any proceeds of sale of
bonds to the extent provided in the resolutions of the authority authorizing their issuance, and any
other money that is available to the authority for the purpose of the fund from any other sources.
Money held in a bond reserve fund, except as otherwise provided in this chapter, must be used
as required solely for the payment of the principal of bonds secured in whole or in part by the
fund or of the sinking fund payments with respect to the bonds, the purchase or redemption of
the bonds, the payment of interest on the bonds, or the payments of any redemption premium
required to be paid when the bonds are redeemed prior to maturity.
    Subd. 2. Withdrawals. Money in a bond reserve fund may not be withdrawn from it in an
amount that will reduce the amount of the fund to less than the bond reserve fund requirement
established for the fund, as provided in this section, except for the purpose of making payment
when due of principal, interest, redemption premiums, and the sinking fund payments with
respect to the bonds for the payment of which other money of the authority is not available. Any
income or interest earned by, or incremental to, a bond reserve fund due to the investment of it
may be transferred by the authority to other funds or accounts of the authority to the extent
the transfer does not reduce the amount of that bond reserve fund below the bond reserve fund
requirement for it.
    Subd. 3. Issuance of secured bonds. The authority may not at any time issue bonds, secured
in whole or in part by a bond reserve fund if, upon the issuance of the bonds, the amount in the
bond reserve fund will be less than the bond reserve fund requirement for the fund, unless the
authority at the time of issuance of the bonds deposits in the fund from the proceeds of the bonds
issued or from other sources an amount which, together with the amount then in the fund will not
be less than the bond reserve fund requirement for the fund. For the purposes of this section, the
term "bond reserve fund requirement" means, as of any particular date of computation, an amount
of money required to be on deposit therein in the bond reserve fund, as provided in the resolutions
of the authority authorizing the bonds with respect to which the fund is established.
    Subd. 4. Repayment. Amounts paid over to the authority by the state under this section
constitute and must be accounted for as advances by the state to the authority and, subject to the
rights of the holders of any bonds of the authority, must be repaid to the state without interest
from all available operating revenues of the authority in excess of amounts required for the
payment of bonds, the bond reserve fund, and operating expenses.
    Subd. 5. Annual report. The authority shall cause to be delivered to the finance committees
in the legislature within 90 days of the close of its fiscal year its annual report certified by an
independent certified public accountant, who may be the accountant or a member of the firm of
accountants who regularly audits the books and accounts of the authority selected by the authority.
In the event that the principal amount of any bonds deposited in a bond reserve fund is withdrawn
for payment of principal or interest thereby reducing the amount of that fund to less than the bond
reserve fund requirement, the authority shall immediately notify the legislature of this event and
take steps to restore the fund to its bond reserve fund requirement from any amounts available,
other than principal of a bond issue, that are not pledged to the payment of other bonds.
History: 1991 c 332 s 13
41C.09 REMEDIES OF BONDHOLDERS.
    Subdivision 1. Default. If the authority defaults in the payment of principal or interest on
an issue of bonds at maturity or upon call for redemption and the default continues for a period
of 30 days or if the authority fails or refuses to comply with the provisions of this chapter, or
defaults in an agreement made with the holders of an issue of bonds, the holders of 25 percent
in aggregate principal amount of bonds of the issue then outstanding, by instrument filed in the
office of the clerk of the county in which the principal office of the authority is located and proved
or acknowledged in the same manner as a deed to be recorded, may appoint a trustee to represent
the holders of the bonds for the purposes provided in this section.
    Subd. 2. Actions. The authority or any trustee appointed under the indenture under which the
bonds are issued may, but upon written request of the holders of 25 percent in aggregate principal
amount of the issue of bonds then outstanding shall:
(1) enforce all rights of the bondholders including the right to require the authority to carry
out its agreements with the holders and to perform its duties under this chapter;
(2) bring suit upon the bonds;
(3) by action require the authority to account as if it were the trustee of an express trust
for the holders;
(4) by action enjoin any acts or things which are unlawful or in violation of the rights of
the holders; and
(5) declare all the bonds due and payable and, if all defaults are made good, with the
consent of the holders of 25 percent of the aggregate principal amount of the issue of bonds then
outstanding, annul the declaration and its consequences.
    Subd. 3. Trustee's powers. The trustees may exercise functions specifically set forth or
incident to the general representation of bondholders in the enforcement and protection of their
rights.
    Subd. 4. Notice. Before declaring the principal of bonds due and payable, the trustee shall
first give 30 days' notice in writing to the governor, to the authority, and to the attorney general of
the state.
    Subd. 5. Jurisdiction. The district court has jurisdiction of any action by the trustee on
behalf of bondholders. The venue of the action is in the county in which the principal office
of the authority is located.
The bondholders may, to the extent provided in the resolution to which the bonds were issued
or in its agreement with the authority, enforce any of the remedies in subdivision 2, clauses (1) to
(5), or the remedies provided in the proceedings or agreements for and on their own behalf.
History: 1991 c 332 s 14
41C.10 BONDS AS LEGAL INVESTMENTS.
Bonds are securities in which public officers, state departments and agencies, political
subdivisions, insurance companies, and other persons carrying on an insurance business, banks,
trust companies, savings associations, investment companies, and other persons carrying on
a banking business, administrators, executors, guardians, conservators, trustees, and other
fiduciaries and other persons authorized to invest in bonds or other obligations of this state may
properly and legally invest funds including capital in their control or belonging to them. The
bonds are also securities which may be deposited with and may be received by public officers,
state departments and agencies, and political subdivisions for any purpose for which the deposit
of bonds or other obligations of this state is authorized.
History: 1991 c 332 s 15; 1995 c 202 art 1 s 25
41C.11 CONFLICTS OF INTEREST.
    Subdivision 1. Disclosure; prohibitions. If a member or employee of the authority has an
interest, either direct or indirect, in a contract to which the authority is or is to be a party or in a
mortgage lender requesting a loan from or offering to sell mortgage or secured loans to the
authority, the interest must be disclosed to the authority in writing and must be set forth in the
minutes of the authority. The member or employee having the interest may not participate in
action by the authority with respect to that contract or mortgage lender.
    Subd. 2. Certain interests. This section does not limit the right of a member, officer, or
employee of the authority to acquire an interest in bonds or notes or to limit the right of a member
or employee other than the executive director to have an interest in a bank or other financial
institution in which the funds of the authority are deposited or which is acting as trustee or paying
agent under a trust indenture to which the authority is a party.
    Subd. 3. Executive director's interest. The executive director may not have an interest
in a bank or other financial institution in which the funds of the authority are deposited or
which is acting as trustee or paying agent under a trust indenture to which the authority is a
party. The executive director may not receive, in addition to fixed salary or compensation, any
money or valuable thing, either directly or indirectly, or through any substantial interest in any
other corporation or business unit, for negotiating, procuring, recommending, or aiding in any
purchase or sale of property or loan made by the authority, nor shall the executive director be
pecuniarily interested, either as principal, co-principal, agent, or beneficiary, either directly,
indirectly, or through any substantial interest in any other corporation or business unit, in any
purchase, sale, or loan.
History: 1991 c 332 s 16
41C.12 APPLICATION AND ORIGINATION FEE.
The authority may impose a reasonable application and origination fee for each loan issued
under the beginning farmer and agricultural business enterprise loan program. The origination
fee initially shall be set at 1.5 percent and the application fee at $50. The authority shall review
the fees annually and make adjustments as necessary. The fees must be deposited in the state
treasury and credited to the general fund.
History: 1991 c 332 s 17
41C.13 RULES.
The authority may adopt rules for the efficient administration of this chapter.
History: 1991 c 332 s 18; 1997 c 187 art 1 s 3