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41B.19 GENERAL OBLIGATION BONDS.
    Subdivision 1. Procedure. For the purpose of developing the state's agricultural resources by
providing for the extension of credit on real estate security and to assure the timely payment of the
principal of and interest on the bonds or other obligations issued by the Rural Finance Authority,
and upon request of the Rural Finance Authority under section 41B.08, the commissioner of
finance may at the direction of the authority, issue general obligation bonds of the state in a
principal amount not exceeding $50,000,000. Additional amounts for the same purpose may be
authorized from time to time by law. The bonds must be secured as provided in the Minnesota
Constitution, article XI, section 7, and, except as provided in this section, must be issued and
secured as provided in section 16A.641. The proceeds of the bonds, except any premium and
accrued interest, must be deposited and held in, and disbursed from, a separate account in the
bond proceeds fund and used solely for the purposes specified in this section. The authority may
use the proceeds of the bonds to make direct loans or to purchase participations in qualified
agricultural loans as provided in this chapter. The participations purchased with the bond proceeds
must be held as assets of the rural renewal bond account established by subdivision 4 in the state
bond fund. The premium and accrued interest, if any, must be deposited in the rural renewal
bond account in the state bond fund.
    Subd. 2. Terms of bonds. Notwithstanding any provision of section 16A.641 to the contrary,
the commissioner of finance may fix the terms of the bonds as provided in sections 475.54,
subdivision 5a
, and 475.56, paragraph (b), and may enter into on behalf of the state all agreements
deemed necessary for this purpose, including those authorized to be entered into by municipalities
by that section. The proceeds of the general obligation bonds may be used to reimburse the
commissioner of finance for the costs of issuance of the bonds and the costs of development of
programs authorized in sections 41B.01 to 41B.23.
    Subd. 3. Sale of bonds. If determined by the commissioner of finance to be necessary in
order to reduce costs of issuance, to secure a favorable prevailing interest rate, or to receive the
bond proceeds by a specified date, or if the terms of the bonds are fixed as provided in sections
475.54, subdivision 5a, and 475.56, paragraph (b), the bonds may be sold by negotiation and
without solicitation of sealed bids.
    Subd. 4. Bond fund account. The commissioner of finance shall maintain in the state bond
fund a separate bookkeeping account designated as the rural renewal bond account, to record
receipts and disbursements of money transferred to the account to pay bonds issued under this
section and to record income from the investment of the money in the account. The income must
be credited to the account in each fiscal year in an amount equal to the approximate average
return that year on all funds invested by the commissioner of finance, as determined by the
commissioner of finance, times the average balance in the account that year.
    Subd. 5. Rural Finance Authority security account. The commissioner of finance shall
maintain a separate account designated as the Rural Finance Authority security account, into
which must be deposited the proceeds of the rural renewal general obligation bonds issued as
provided in this section. The commissioner of finance shall maintain a separate bookkeeping
account to record receipts and disbursements of money transferred to or from the security account
and to record income from the investment of money in the account. Upon the written request of
the authority, the commissioner of finance shall transfer from the security account to an account
or accounts the authority shall designate, a sum of money sufficient in amount, if available,
when added to the balances then on hand in the designated accounts, to pay bonds issued by the
authority under sections 41B.01 to 41B.23 and the interest on them due and to become due
on the next succeeding date for the payment of the principal of and interest on the bonds of
the authority or to restore to any debt service reserve fund established in connection with the
bonds any amount withdrawn from the debt service reserve account to pay the bonds. When no
revenue bonds secured by the security account are outstanding under the resolution authorizing
their issuance, the commissioner of finance shall transfer all money and securities on hand in
the security account to the state bond fund.
    Subd. 6. Investment of security account. (a) Money from time to time on deposit in the
security account must be invested by the State Board of Investment at the request of the authority
in any investment authorized by this subdivision. Money on deposit in the security account
may be invested in:
(1) certificates of deposit issued by or interest-bearing time deposits with a national banking
association or a bank and trust company organized under the laws of any state;
(2) deposits 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 those deposits;
(3) qualified agricultural loans or in participation interests in qualified agricultural loans; or
(4) qualified restructured loans.
(b) The principal amount of the investment under paragraph (a), clause (1), must be fully
insured by the Federal Deposit Insurance Corporation or Federal Savings and Loan Insurance
Corporation; or if not fully insured, the institution issuing the certificate of deposit or accepting the
time deposit must be rated in the AA or a higher category as defined by a nationally recognized
bond rating agency or in an equivalent or higher rating category based on any later redefinition.
(c) If and to the extent money has been transferred from the security account to provide for
the timely payment of the principal of and interest on bonds issued by the authority, or to transfer
money to a debt service reserve fund established in connection with the bonds, the authority shall
transfer to the security account on or before December 1 of each succeeding year an amount equal
to that previously transferred from the security account, provided that the authority's obligation
to transfer money to the security account is limited to money then on hand in funds or accounts
of the authority in excess of those appropriated to other purposes or required to provide for the
payment of the principal of and interest on bonds issued by the authority and to pay the costs of
issuing, carrying, administering, and securing the bonds of the authority and of administering and
implementing the programs of the authority financed by the bonds.
    Subd. 7. Transfers, appropriation. In addition to the money required to be transferred
to the rural renewal bond account under subdivision 5, and in order to reduce the amount of
taxes otherwise required by the Minnesota Constitution to be levied for the state bond fund, the
commissioner of finance shall transfer from the general fund to the rural renewal bond account,
on December 1 in each year, a sum of money sufficient in amount, when added to the balance
then on hand in that account, to pay all bonds issued under this section and the interest on them
due and to become due to and including July 1 in the second ensuing year. All money to be so
credited and all income from its investment is annually appropriated for the payment of the bonds
and interest on them, and shall be available in the rural renewal bond account before the levy of
the tax in any year required by the Minnesota Constitution, article XI, section 7. The legislature
may also appropriate to the rural renewal bond account any other money in the state treasury
not otherwise appropriated, for the security of bonds issued under this section in the event that
sufficient money is not available in the account from the appropriation in this section, before the
levy of the tax in any year. The commissioner of finance shall make the appropriate entries in
the accounts of the respective funds.
    Subd. 8. Constitutional levy. On or before December 1 in each year the state auditor shall
levy on all taxable property within the state whatever tax may be necessary to produce an amount
sufficient, with all money then in the rural renewal bond account, to pay the entire amount of
principal and interest due on or before July 1 in the second year thereafter on bonds issued under
this section. This tax must be levied upon all real property used for a homestead, as well as
other taxable property, notwithstanding section 273.13, subdivision 22. The tax must not be
limited in rate or amount until all the bonds and interest on them are fully paid. The proceeds
of this tax are appropriated and must be credited to the state bond fund, and the principal and
interest on the bonds are payable from all the proceeds. As much of the proceeds as is necessary is
appropriated for the payments. If at any time there is insufficient money from the proceeds of the
taxes to pay the principal and interest when due on the bonds, the principal and interest must be
paid out of the general fund in the state treasury, and the amount necessary for the payment is
hereby appropriated.
    Subd. 9. Compliance with federal law. The commissioner of finance may covenant and
agree with the holders of the bonds issued under this section that the state will comply, insofar as
possible, with the provisions of the United States Internal Revenue Code now or hereafter enacted
that are applicable to the bonds and that establish conditions under which the interest to be paid
on the bonds will not be includable in gross income for federal tax purposes.
    Subd. 10. Taxability of interest. Interest on the bonds authorized by this section may be
issued without regard to whether the interest to be paid on them is includable in gross income for
federal tax purposes.
History: 1986 c 398 art 6 s 19; 1987 c 396 art 1 s 27,28,31; 1989 c 271 s 9; 1996 c 463 s 36

Official Publication of the State of Minnesota
Revisor of Statutes