HF4617

Purpose

• The bill creates a new Minnesota statute to authorize the state to issue appropriations bonds to fund road and utility infrastructure for the Sears site in St. Paul. It aims to finance predesign, design, demolition, environmental remediation, construction, and equipping of infrastructure for the Sears site and to provide related debt service funding.

Key Provisions

• Establishes 16A.9645 (Sears Site Appropriation Bonds) and defines key terms used throughout the section.
• Authorizes the sale and issuance of appropriation bonds (in one or more issues) up to a net amount of $95,000,000 (net of issuance costs) to finance the Sears site project, including debt service costs and potential capitalized interest or credit enhancements.
• Sets the maximum bond term at 21 years and allows bonds to bear fixed or variable interest. Bonds may be issued as bonds, notes, or other similar instruments and must be fully negotiable.
• Allows the commissioner to enter into various agreements and ancillary arrangements (for example, trust indentures, leases, liquidity facilities, remarketing or dealer agreements, insurance, guaranties, indexing, or interest-rate exchange agreements) to support the bonds.
• Requires continuing disclosure to comply with federal securities laws and SEC rules.
• Provides for refunding bonds and the use of escrow if needed, with proceeds usable for debt service, purchase or retirement of refunded bonds, or interest on refunding bonds.
• Allows a range of entities to invest in the bonds, including state agencies, banks, investment companies, and fiduciaries.
• Declares that the bonds are not a pledge of the full faith and credit or taxing power of the state and are not public debt; debt service is limited to annual legislative appropriations and other specified sources.
• Requires the proceeds to be deposited into the Sears site appropriation bond proceeds fund and directs income from investments to be used for debt service.

Financing Mechanism and Terms

• Bond authorization amount: up to 95,000,000 net of issuance costs.
• Debt service: funded from the general fund through annual appropriations, and from other sources as allowed by the statute; not backed by the state's full faith and credit.
• Bond terms: can be issued in one or more series, with a maximum term of 21 years; interest can be fixed or variable; bonds are negotiable.
• Issuance and sale: can be public or private; bonds may be priced at any price or par value; bids may be rejected.
• Credit and liquidity: may include credit enhancement or liquidity facilities as part of the financing plan.
• Refunding: authority to issue refunding bonds to refinance outstanding bonds; escrow arrangements may be used.

Uses of Proceeds

• Proceeds must be credited to the Sears site appropriation bond proceeds fund.
• Eligible uses include predesign, design, demolition of pavement and structures, environmental remediation, construction, and equipping of infrastructure for the Sears site.
• Specific infrastructure scope includes sanitary sewer, clean water systems, public utility infrastructure, streets, sidewalks, lighting, and streetscape improvements within the public right-of-way to support Sears site development.
• A portion of proceeds may be used for debt service, issuance costs, credit enhancement, and payments under related agreements.

Oversight, Administration, and Grants

• Proceeds are allocated as follows:
  • Grants to the city of St. Paul or the Rondo Community Land Trust for the Sears site projects (predesign through infrastructure).
  • Debt service and related costs for the bonds (including capitalized interest and issuance costs).
• An annual appropriation from the general fund is required to pay debt service, subject to legislative appropriations and unallotment rules.
• Grants and debt service are overseen in part by the Metropolitan Council for designated projects.

Legal and Financial Framework

• No full faith and credit pledge: the state does not pledge its full faith and credit or taxing power to these bonds.
• Tax considerations: bonds may be includable in gross income for federal tax purposes or excludable, depending on the series.
• Non-subject to certain statutes: bonds are not subject to Chapter 16C; the new section governs their issuance and terms.
• Immunity waiver: the state’s waiver of immunity under section 3.751 applies to the appropriation bonds and related contracts.

Significant Changes to Existing Law

• Creates a new mechanism (Sears Site Appropriation Bonds) under a new statute (16A.9645) to finance specific Sears site infrastructure.
• Establishes a dedicated bond proceeds fund and a dedicated appropriation pathway for debt service, grants, and related costs without pledging the state’s full faith and credit.
• Introduces a broad framework for ancillary agreements (trust indentures, liquidity facilities, interest-rate and other derivative arrangements) to support the bonds.
• Sets explicit limits and governance around the use of proceeds, annual appropriations, and grants to local entities for redevelopment activities, tying infrastructure financing to a defined redevelopment area.

Implications for the Sears Site Project

• Provides a structured financing tool to fund upfront infrastructure needs for redevelopment.
• Creates a formal funding stream through the general fund for debt service, while shielding the state from an open-ended debt obligation.
• Ties local redevelopment grants (to St. Paul or the Rondo Community Land Trust) to the bond proceeds and project milestones.

Relevant Terms - appropriation bonds - debt service - Sears site - Sears site appropriation bond proceeds fund - predesign - design - demolition - environmental remediation - infrastructure - sanitary sewer - clean water systems - public utility infrastructure - streets - sidewalks - lighting - streetscape improvements - public right-of-way - Metropolitan Council - Rondo Community Land Trust - grant - credit enhancement - liquidity facilities - trust indentures - lease agreements - use agreements - operating agreements - management agreements - remarketing agreements - dealer agreements - interest exchange agreements - continuing disclosure - Securities and Exchange Commission rules - refunding bonds - escrow - eligible investments - full faith and credit - not public debt - general fund - investment earnings - capitalized interest - issuance costs - bond proceeds fund - bond payments account - immunity waiver - section 3.751 - 16A.9645 - bids - taxes not pledged to debt service - nonchapter 16C - credit enhancement - balance of proceeds after escrow - final payment of principal and interest