Lease-purchase agreement and sale and issuance of certificates of participation authorized to fund improvements to or replacement of state's MAXIS system.

A bill for an act

relating to capital investment; authorizing a lease-purchase agreement and the sale

and issuance of certificates of participation to fund improvements to or replacement

of the state's MAXIS system; proposing coding for new law in Minnesota Statutes,

chapter 16A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

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[16A.83] MAXIS IMPROVEMENTS LEASE-PURCHASE FINANCING.

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Subdivision 1.

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Definitions.

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(a) For purposes of this section, the following terms have

the meanings given.

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(b) "Lease-purchase agreement" means an agreement for the lease and installment

purchase of the MAXIS project, or a portion of the project, between the commissioner, on

behalf of the state, and a vendor or a third-party financing source.

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(c) "MAXIS lease-purchase guidelines" means policies, procedures, and requirements

established by the commissioner for the MAXIS project that is financed pursuant to a

lease-purchase agreement.

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(d) "MAXIS project" means the development, acquisition, installation, and

implementation of a modernization plan or replacement of the state's MAXIS system.

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Subd. 2.

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Lease-purchase financing.

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The commissioner may enter into a lease-purchase

agreement in an amount sufficient to fund the MAXIS project and authorize the public or

private sale and issuance of certificates of participation, provided that:

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(1) the MAXIS project has been authorized by law to be funded pursuant to a

lease-purchase agreement;

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(2) the term of the lease-purchase agreement and the related certificates of participation

shall not exceed the lesser of (i) the expected useful life of the MAXIS project financed by

the lease-purchase agreement and the certificates or (ii) ten years from the date of issuance

of the lease-purchase agreement and the certificates;

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(3) the principal amount of the lease-purchase agreement and the certificates is sufficient

to provide for the costs of issuance, capitalized interest, credit enhancement, or reserves, if

any, as required under the lease-purchase agreement;

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(4) money sufficient for payment of lease obligations has been committed in the

authorizing legislation for the MAXIS project for the fiscal year during which the

lease-purchase agreement is entered into, provided that no lease-purchase agreement shall

obligate the state to appropriate money sufficient to make lease payments due under an

agreement in a future fiscal year; and

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(5) planned expenditures for the MAXIS project are permitted within the MAXIS

lease-purchase guidelines.

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Subd. 3.

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Covenants.

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The commissioner may covenant in a lease-purchase agreement

that the state will abide by the terms and provisions that are customary in lease-purchase

financing transactions, including but not limited to covenants providing that the state:

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(1) must maintain insurance as required under the terms of the lease-purchase agreement;

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(2) is responsible to the lessor for any public liability or property damage claims or costs

related to the selection, use, or maintenance of the MAXIS project; to the extent of insurance

or self-insurance maintained by the state; and for costs and expenses incurred by the lessor

as a result of any default by the state; or

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(3) authorizes the lessor to exercise the rights of a secured party with respect to the

MAXIS project or any portion of the project in the event of default or nonappropriation of

money by the state, and for the present recovery of lease payments due during the current

term of the lease-purchase agreement as liquidated damages in the event of default.

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Subd. 4.

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Credit and appropriation of proceeds.

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Proceeds of the lease-purchase

agreement and certificates of participation must be credited to the MAXIS lease project

fund in the state treasury. Net income from investment of the proceeds, as estimated by the

commissioner, must be credited to the appropriate accounts in the MAXIS lease project

fund. Money in the MAXIS lease project fund is appropriated for the purposes described

in the authorizing law for the MAXIS project under this section.

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Subd. 5.

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Transfer of funds.

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Before the lease-purchase proceeds are received in the

MAXIS lease project fund, the commissioner may transfer to that fund from the general

fund amounts not exceeding the expected proceeds from the lease-purchase agreement and

certificates of participation. The commissioner shall return these amounts to the general

fund by transferring proceeds when received. The amounts of these transfers are appropriated

from the general fund and from the MAXIS lease project fund.

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Subd. 6.

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Administrative expenses.

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Actual and necessary travel and subsistence expenses

of employees and all other nonsalary expenses incidental to the sale, printing, execution,

and delivery of the lease-purchase agreement and certificates of participation may be paid

from the lease-purchase proceeds. The lease-purchase proceeds are appropriated for this

purpose.

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Subd. 7.

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Treatment of MAXIS lease project fund.

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Lease-purchase proceeds remaining

in the MAXIS lease project fund after the purpose for which the lease-purchase agreement

was undertaken is accomplished or abandoned, as determined by the commissioner, must

be transferred to the general fund.

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Subd. 8.

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Lease-purchase not public debt.

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A lease-purchase agreement does not

constitute or create a general or moral obligation or indebtedness of the state in excess of

the money from time to time appropriated or otherwise available for payments or obligations

under the agreement. Payments due under a lease-purchase agreement during a current lease

term for which money has been appropriated is a current expense of the state.

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Subd. 9.

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Tax treatment.

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Property purchased subject to a lease-purchase agreement

under this section is not subject to personal property taxes. The purchaser of property for

lease to the state under a valid lease-purchase agreement under this section is not subject

to the sales tax on the purchase of the property or on the payments received under the

agreement, but the state is subject to the tax under chapter 297A on property acquired under

the agreement.

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Subd. 10.

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Refunding certificates.

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The commissioner from time to time may enter into

a new lease-purchase agreement and issue and sell certificates of participation for the purpose

of refunding any lease-purchase agreement and related certificates of participation then

outstanding, including the payment of any redemption premiums, any interest accrued or

that is to accrue to the redemption date, and costs related to the issuance and sale of the

refunding certificates. The proceeds of any refunding certificates may, in the discretion of

the commissioner, be applied (1) to the purchase or payment at maturity of the certificates

to be refunded, (2) to the redemption of outstanding lease-purchase agreements and

certificates on any redemption date, or (3) to pay interest on the refunding lease-purchase

agreements and certificates and may, pending application, be placed in escrow to be applied

to the purchase, payment, retirement, or redemption. Any escrowed proceeds, pending use,

may be invested and reinvested in obligations that are authorized investments under section

11A.24. The income earned or realized on any authorized investment may also be applied

to the payment of the lease-purchase agreements and certificates to be refunded, interest or

premiums on the refunded certificates, or to pay interest on the refunding lease-purchase

agreements and certificates. After the terms of the escrow have been fully satisfied, any

balance of proceeds and any investment income may be returned to the general fund or, if

applicable, the MAXIS lease project fund, for use in a lawful manner. All refunding

lease-purchase agreements and certificates issued under the provisions of this subdivision

must be prepared, executed, delivered, and secured by appropriations in the same manner

as the lease-purchase agreements and certificates to be refunded.

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Sec. 2.

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[16A.835] MAXIS LEASE-PURCHASE APPROPRIATION.

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$10,000,000 in fiscal year 2027, $10,000,000 in fiscal year 2028, and $10,000,000 in

each fiscal year 2029 to 2036 are appropriated from the general fund to the commissioner

to make payments under a lease-purchase agreement as defined in section 16A.83 for

development, acquisition, installation, and implementation of a modernization plan or

replacement of the state's MAXIS system, provided that the state is not obligated to continue

the appropriation of money or to make lease payments in any future fiscal year. Any

unexpended portions of this appropriation cancel to the general fund at the close of each

biennium. This section expires June 30, 2037.

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