2001 Minnesota Statutes

     116J.415 Challenge grant program. 

    Subdivision 1.    Organization.  The commissioner shall 
 make challenge grants to regional organizations to encourage 
 private investment, to provide jobs for low-income persons, and 
 to promote economic development in the rural areas of the state. 

    Subd. 2.    Funding regions.  The commissioner shall 
 divide the state outside of the metropolitan area as defined in 
 section 473.121, subdivision 2, into six regions.  A region's 
 boundaries must be coterminous with the boundaries of one or 
 more of the development regions established under section 
 462.385.  The commissioner shall designate up to $1,000,000 for 
 each region, to be awarded over a period of three years.  The 
 money designated to each region must be used for revolving loans 
 authorized in this section.  

    Subd. 3.    Selection of organizations to receive 
 challenge grants.  The commissioner shall select at least one 
 organization for each region to receive the challenge grants and 
 shall enter into grant agreements with the organizations.  An 
 organization must be a nonprofit corporation and must 
 demonstrate that:  

    (1) its board of directors includes citizens experienced in 
 rural development, representatives of the regional development 
 commissions, and representatives from all geographic areas in 
 the region; 

    (2) it has the technical skills to analyze projects; 

    (3) it is familiar with other available public and private 
 funding sources and economic development programs; 

    (4) it can initiate and implement economic development 
 projects; and 

    (5) it can establish and administer a revolving loan 
 account. 

    Subd. 4.    Revolving loan fund.  A regional 
 organization shall establish a commissioner certified revolving 
 loan fund to provide loans to new and expanding businesses in 
 rural Minnesota to promote economic development.  Eligible 
 business enterprises include technologically innovative 
 industries, value-added manufacturing, agriprocessing, 
 information industries, and agricultural marketing.  Loan 
 applications given preliminary approval by the organization must 
 be forwarded to the commissioner for final approval.  The amount 
 of state money allocated for each loan is appropriated from the 
 rural rehabilitation account established in section 116J.955 to 
 the organization's regional revolving loan fund when the 
 commissioner gives final approval for each loan.  The amount of 
 money appropriated from the rural rehabilitation account may not 
 exceed 50 percent for each loan.  The amount of nonpublic money 
 must equal at least 50 percent for each loan. 

    Subd. 5.    Loan criteria.  The following criteria apply 
 to loans made under the challenge grant program:  

    (1) loans must be made to businesses that are not likely to 
 undertake a project for which loans are sought without 
 assistance from the challenge grant program; 

    (2) a loan must be used for a project designed principally 
 to benefit low-income persons through the creation of job or 
 business opportunities for them; 

    (3) the minimum loan is $5,000 and the maximum is $200,000; 

    (4) a loan may not exceed 50 percent of the total cost of 
 an individual project; 

    (5) a loan may not be used for a retail development 
 project; and 

    (6) a business applying for a loan, except a 
 microenterprise loan under subdivision 6, must be sponsored by a 
 resolution of the governing body of the local governmental unit 
 within whose jurisdiction the project is located. 

    Subd. 6.    Microenterprise loans.  Challenge grants may 
 be used to make microenterprise loans to small, beginning 
 businesses, including a sole proprietorship.  Microenterprise 
 loans are subject to this section except that: 

    (1) they may also be made to qualified retail businesses; 

    (2) they may be for a minimum of $1,000 and a maximum of 
 $10,000; and 

    (3) they do not require a match. 

    Subd. 7.    Revolving fund administration.  (a) The 
 commissioner shall establish a minimum interest rate for loans 
 to ensure that necessary management costs are covered.  

    (b) Loan repayment amounts equal to one-half of the 
 principal and interest must be deposited in the rural 
 rehabilitation revolving fund for challenge grants to the region 
 from which the money was originally designated.  The remaining 
 amount of the loan repayment may be deposited in the regional 
 revolving loan fund for further distribution by the regional 
 organization, consistent with the loan criteria specified in 
 subdivisions 4 and 5. 

    (c) The first $1,000,000 of revolving loans for each region 
 must be matched by nonstate sources.  The matching requirement 
 does not apply to loans made under paragraph (b). 

    (d) Administrative expenses of each organization may be 
 paid out of the interest earned on loans and on interest earned 
 on money invested by the state board of investment under section 
 116J.413, subdivision 2. 

    Subd. 8.    Rules.  The commissioner shall adopt rules 
 to implement the duties specified in this section.  

    Subd. 9.    Local governmental unit loans.  A local 
 governmental unit may receive a loan under this section if the 
 local governmental unit has established a local revolving loan 
 fund and can provide at least an equal match to the loan 
 received from a regional organization.  For the purpose of 
 providing the match to establish the local revolving loan fund, 
 the local governmental unit may use any unencumbered money in 
 the general fund of the unit.  Revenues from tax increments 
 derived from a district located within the boundaries of the 
 local governmental unit may be used to fund a second local 
 revolving loan fund only if (1) those revenues are loaned in a 
 manner authorized in the district's tax increment financing plan 
 to a business located within the tax increment district, and (2) 
 the revenues are deposited in a loan fund that is separate from 
 the loan fund in which general fund money is established.  The 
 local governmental unit may deposit up to $50,000 of local 
 public money in each of the local revolving funds that may be 
 established under this subdivision.  The maximum loan available 
 to a local governmental unit under this section is $50,000.  The 
 money loaned to a local governmental unit by a regional 
 organization must be matched by the local revolving loan fund 
 and used to provide loans to businesses to promote local 
 economic development.  One-half of the money loaned to a local 
 governmental unit under this section by a regional organization 
 must be repaid to the rural rehabilitation account.  One-half of 
 the money may be retained by the local governmental unit's 
 revolving loan fund for further distribution by the local 
 governmental unit. 

    Subd. 10.    Regional cooperation.  An organization that 
 receives a challenge grant shall cooperate with other regional 
 organizations, including regional development commissions, 
 community development corporations, community action agencies, 
 and the Minnesota small business development centers and 
 satellites, in carrying out challenge grant program and 
 technical assistance responsibilities. 

    Subd. 11.    Reporting requirements.  An organization 
 that receives a challenge grant shall: 

    (1) submit an annual report to the commissioner by February 
 15 of each year that includes a description of projects 
 supported by the challenge grant program, an account of loans 
 made during the calendar year, the source and amount of money 
 collected and distributed by the challenge grant program, the 
 program's assets and liabilities, and an explanation of 
 administrative expenses; and 

    (2) provide for an independent annual audit to be performed 
 in accordance with generally accepted accounting practices and 
 auditing standards and submit a copy of each annual audit report 
 to the commissioner. 

    HIST: 1987 c 384 art 3 s 18; 1987 c 386 art 1 s 10; 1988 c 615 
 s 6; 1989 c 335 art 4 s 53,54,106; 1995 c 224 s 64-66; 1996 c 
 369 s 12; 1999 c 223 art 2 s 18