Minnesota Rules — Agricultural and Economic Development Board

Chapter 1580 AGRICULTURAL AND ECONOMIC DEVELOPMENT PROGRAM

Minn. R. 1580.0100 Purpose and Authority

Parts 1580.0100 to 1580.0900 are authorized by Minnesota Statutes, section 41A.04, subdivision 4, to carry out the purposes of Minnesota Statutes, chapter 41A, and to establish a process for application and approval of eligible financial assistance for agricultural resource projects.

History

• Statutory Authority: MS s 41A.04
• History: 11 SR 713

Minn. R. 1580.0200 Definitions

Subpart 1. Scope.

For purposes of parts 1580.0100 to 1580.0900, the terms defined in this part and in Minnesota Statutes, section 41A.02, have the meanings given to them.

Subp. 2. Chair.

"Chair" means the commissioner of management and budget acting as chair of the Minnesota Agricultural and Economic Development Board.

Subp. 3. Administrator.

"Administrator" means the commissioner of employment and economic development acting as the chief administrative officer of the Minnesota Agricultural and Economic Development Board, or a designee.

Subp. 4. County authority.

"County authority" means a rural development finance authority, or any county exercising the power of a rural development finance authority, pursuant to Minnesota Statutes, chapter 362A.

History

• Statutory Authority: MS s 41A.04
• History: 11 SR 713; L 1987 c 312 art 1, c 386 art 9 s 20; L 2003 1Sp4 s 1; L 2009 c 101 art 2 s 109

Minn. R. 1580.0300 Availability of Eligible Financial Assistance

Subpart 1. Purpose.

Loan guarantees or loans from bond proceeds are available from the board to further the development of the state's agricultural resources and to improve the market for its agricultural products.

Subp. 2. Amount of loan guarantee or bond issue; criteria.

The total principal amount of any guaranteed loan or bond issue may not exceed 80 percent of the total eligible costs of the related project as estimated by the board at the time the commitment to guarantee a loan or issue bonds is made, or in the case of a refunding or refinancing loan, 80 percent of the aggregate amount of principal and interest refunded or refinanced.

In determining the percentage of a loan guarantee or the amount of a bond issue for the project, the board will consider the following factors:

A. the amount of state financial assistance necessary to assure the feasibility of the project;

B. the amount of state financial assistance necessary to assure the lender's financial participation in the project;

C. the impact the project will have on the state and its agricultural resources; and

D. the availability of funds for state financial assistance.

Subp. 3. Eligible project costs.

Project costs eligible for a guaranteed loan or bond issue are defined in Minnesota Statutes, section 41A.02, subdivision 10, and include the following:

A. land and building acquisition costs;

B. site preparation;

C. construction costs;

D. engineering costs;

E. equipment and machinery;

F. bond issuance costs;

G. underwriting or placement fees;

H. permit and application fees, guarantee fees, insurance, letters of credit, and surety bonds;

I. fees of the board for application and guarantee;

J. certain contingency costs;

K. interest costs during construction;

L. legal fees;

M. costs of environmental review; or

N. any other expenses incurred by the borrower that are reasonably required for the construction and completion of the project. Working capital is not considered a cost of construction and completion of the project and is not an eligible project cost for a guaranteed loan or bond issue.

Subp. 4. Security for guaranteed loan or bond issue.

The guaranteed loan or bond issue must be secured by the best available collateral, which must include at a minimum, a mortgage on and security interest in all real and personal property comprising the project.

Subp. 5. Increase in project costs.

If the actual cost of a project exceeds the cost estimate, the board may consent to an increase in the amount of the guaranteed loan or bond issue pursuant to Minnesota Statutes, sections 41A.03, subdivision 2, and 474.17 to 474.25, if it determines that the increased costs will not jeopardize the board's interest and are necessary for the successful completion or operation of the project. The increase in the principal amount of the guaranteed loan or bond issue must not exceed 80 percent of the increased costs. The board may guarantee up to 90 percent of the increase in the principal amount of the guaranteed loan and interest on that amount.

History

• Statutory Authority: MS s 41A.04
• History: 11 SR 713

Minn. R. 1580.0400 Contents of Application

Subpart 1. Application forms.

The administrator shall prepare application forms for use by applicants. The application must provide the following information, unless waived by the board pursuant to subpart 2:

A. a description of the scope, nature, extent, and location of the project, including a preliminary or conceptual design of the project and a description of the technology to be applied;

B. the identity of the borrower and the prior experience of the borrower as it relates to the project;

C. a detailed, itemized estimate of the total cost of the project, including escalation and contingencies, with an explanation of the assumptions underlying the estimates;

D. a general description of the financial plan of the project, including the sources and uses of funds, the types and priorities of all security interests to be granted as security for the guaranteed loans or loans from bond proceeds and the project, and all other project related debt and equity;

E. an environmental report analyzing potential environmental effects of the project, any necessary or proposed mitigation measures, and other available data that is relevant to an environmental assessment;

F. a description of applications to be filed and an estimated timetable of approvals or permits required by federal, state, and local government agencies as conditions for construction and commencement of operation of the project;

G. an estimated construction schedule;

H. an analysis of the estimated cost and volume of production and market demand for the product, including economic factors justifying the analysis, and proposed and actual contracts or letters of intent relating to the supply of feedstock and raw materials and marketing or purchase of the production;

I. financial statements that include a balance sheet, an opening statement, and footnotes to the statements if available for the following time periods:

J. a description of the borrower's organization and, where applicable, a copy of its articles of incorporation or partnership agreement and bylaws;

K. the estimated amount of the loan from bond proceeds or the percentage of the loan guarantee requested, the proposed repayment schedule, a description of all security and collateral, and other terms and conditions of the loan;

L. an estimate of the amounts and times of receipt of guarantee and bond fees, sales and use taxes, property tax increments, and any other governmental charges which may be available for the support of the state guarantee fund as a result of the construction of the project, with an analysis of the assumptions on which the estimate is based;

M. a copy of any lending commitment or letter of intent issued by a lender to the borrower;

N. if a loan guarantee is requested, a statement from the lender, concerning the lender's general experience in financing and servicing debt incurred for projects of the size and general type of the project, and its proposed servicing and monitoring plan. In addition, the following information must be submitted:

O. a description of any legal actions pending or to be commenced against the borrower, including an explanation of each of these actions and borrower's defenses, if any;

P. a description of all potentially competitive products that are produced or processed in Minnesota and an analysis of the competitive impact of the project on the competing products and producers;

Q. if the application is made by an applicant other than the county authority and if tax increment financing is to be used for the project pursuant to Minnesota Statutes, section 41A.06, subdivision 5, a copy of a resolution adopted by the county authority where the project is located authorizing the use of tax increment financing;

R. a statement of informed consent by the applicant regarding the use and dissemination of the private data as provided in Minnesota Statutes, section 13.05, subdivision 4, paragraph (d). If the applicant is a corporation, then an authorized representative of the applicant shall provide a statement of informed consent in a form similar to that provided in Minnesota Statutes, section 13.05, subdivision 4, paragraph (d); and

S. any additional information reasonably related to (1) the criteria in part 1580.0600, and reasonably required for the board's consideration of project eligibility and conformity to generally accepted commercial lending practices as required by banks or other financial institutions considering such a project for debt financing and (2) to the purposes of Minnesota Statutes, section 41A.01.

Subp. 2. Waiver of application requirements.

An applicant may request the board to waive any of the requirements of subpart 1, items A to O. The request must be made in writing to the administrator. The board may waive a requirement if it determines that the requirement is not necessary to evaluate the eligibility or feasibility of the project. A request for waiver must state the reasons why, in the applicant's judgment, the information is not necessary.

Subp. 3. Feasibility study.

The board must require a feasibility study for the project, if the board determines that a study is necessary for its consideration of the project's eligibility for a loan guarantee or a loan from bond proceeds. The feasibility study must address those factors that the board determines are necessary in light of generally accepted commercial lending practices and the requirements of Minnesota Statutes, chapter 41A.

History

• Statutory Authority: MS s 41A.04
• History: 11 SR 713

Minn. R. 1580.0500 Application Procedure

Subpart 1. Application forms.

Upon the request of a person seeking a loan guaranty or a loan from bond proceeds, the administrator shall provide application forms for use by the person.

Subp. 2. Submission of application.

An applicant for eligible financial assistance must make written application to the board. This written application must include the information described in part 1580.0400, subpart 1. The applicant shall submit the completed application along with the necessary exhibits and attachments to the administrator. The administrator may require the borrower or lender to provide additional information that is necessary for the review of the application. The administrator shall notify the applicant of receipt of the application.

Subp. 3. Review by administrator.

The administrator shall review the application according to generally accepted commercial lending practices to determine whether or not to submit the application to the board for final action.

The administrator shall submit the application to the board for final action if the administrator determines:

A. that the project appears to be eligible for a loan guarantee or a loan from bond proceeds, and conforms to the purpose and requirements of Minnesota Statutes, chapter 41A;

B. that the application is complete or would be complete except for the applicant's request for a waiver pursuant to part 1580.0400, subpart 2;

C. that the project is both economically and technically feasible, and can reasonably be expected to maintain a sound financial condition and to retire the principal and pay interest on the guaranteed loan or on the bonds in accordance with the terms of the loan agreement;

D. that the project and its development are economically advantageous to the state; and

E. that money is available to fund the loan guaranties or bonds. The administrator shall notify the applicant of the administrator's decision whether or not to submit the application to the board. If the administrator determines to submit the application to the board, the administrator shall submit copies of the application to the board for approval or rejection.

Subp. 4. Appeal of administrator's determination.

If the administrator decides not to submit the application to the board for approval, the applicant may request the board to review the administrator's decision. The request must be made in writing and submitted to the chair. Upon request the board shall conduct a de novo review of the application pursuant to subpart 5.

Subp. 5. Board review of application.

The board shall review the completed application pursuant to part 1580.0600, and may seek assistance from the administrator and the board's advisory committee, if one exists. The board may hire consultants or professionals who are reasonably required for an evaluation of the eligibility and feasibility of the project.

Subp. 6. Approval and conditional commitment.

If the board approves an application, it may adopt a resolution that conditionally commits the state to guarantee the portion of the proposed loan or to issue bonds, not exceeding the limit in part 1580.0300, subpart 2. The commitment is not binding upon the state unless the board has executed on behalf of the state a final loan guarantee agreement or has issued bonds in conformity with parts 1580.0700 and 1580.0900.

Subp. 7. Denial of application.

If the application is not approved by the board, the administrator shall notify the applicant promptly in writing of the denial.

Subp. 8. Application fee.

When the application is filed, the applicant shall pay a fee equal to 0.25 percent of the amount of the loan guarantee or loan from bond proceeds requested. The fee must be paid to the commissioner of management and budget. The board must charge against the fee its costs of processing, reviewing, and evaluating the application. The costs charged against the fee may include, as applicable, the direct and indirect cost of work performed by state employees, the expenses of the advisory committee, and the fees, charges, and expenses paid to consultants or professionals the board considers necessary and reasonably required for its determination of project feasibility and eligibility for a loan guarantee or loan from bond proceeds.

If the board denies an application, the remaining fee balance must be refunded to the applicant. If the board issues a commitment for the project, the remaining fee balance must be transferred from the general fund to the guaranty fund and credited against the amount of commitment fee required in part 1580.0700.

Subp. 9. Misrepresentation in application.

Whenever a change occurs in the information provided by an applicant and borrower to the board or to the lender, the applicant and borrower shall immediately update and correct that information. Misrepresentation in the application or failure to update any required information shall constitute grounds to reject any application, revoke any notice of approval, and refuse to close any loan guaranty or issue bonds.

History

• Statutory Authority: MS s 41A.04
• History: 11 SR 713; L 2009 c 101 art 2 s 109

Minn. R. 1580.0600 Criteria for Approval of Eligible Financial Assistance

In determining whether to approve or deny an application for a loan guarantee or a loan from bond proceeds, the board shall consider the following criteria:

A. the extent to which the project will further the development of the state's agricultural resources and improve the market for its agricultural products;

B. the extent to which the public financial assistance sought by the applicant under the program would provide the project with an unfair advantage in competing with other products produced or processed in Minnesota;

C. the viability of the project, including economic and commercial feasibility, technical feasibility, financial projections, and managerial capability;

D. conformity of the project to environmental standards;

E. the qualifications and credit history of the owners, operators, and lenders;

F. the nature and extent of the security;

G. the degree of financial participation by private persons not supported by the loan guarantee or bonds;

H. the availability of the board's bonding authority, proceeds, and money from other sources to support the guarantee; and

I. the market conditions and terms required for the sale of any bonds or loan guarantee.

History

• Statutory Authority: MS s 41A.04
• History: 11 SR 713

Minn. R. 1580.0700 General Terms and Conditions of Loan Guarantees

The loan guarantee agreement between the state and the lender, and the loan agreement between the lender and the borrower must contain the following provisions, unless the board determines that the applicant has shown in writing that a required term or condition is not necessary to ensure the lender and the state of repayment according to the terms of the loan agreement in light of generally accepted commercial lending practices:

A. Payments of principal and interest made by the borrower under the loan must be applied by the lender to reduce the guaranteed and nonguaranteed portion of the loan on a proportionate basis, and the nonguaranteed portion may not in any event receive preferential treatment over the guaranteed portion.

B. A period of grace must be allowed of at least 60 days from the date a principal or interest payment is due, prior to the making of demand for payment pursuant to the loan guarantee, to permit adequate time for a decision by the board regarding principal and interest assistance under part 1580.0800. Payment as required by the loan guarantee must be made within 60 days of receipt by the board of a written demand complying with the terms and conditions of the guarantee.

C. The lender shall not accelerate a payment of the loan or exercise other remedies available to the lender if the borrower defaults, unless:

D. If a payment of principal or interest is made by the board upon default of the borrower, the board is subrogated to the rights of the lender with respect to payment.

E. The borrower shall have promptly prepared and delivered to the board annual audited or reviewed financial statements of the project prepared by a certified public accountant according to generally accepted accounting principles.

F. Duly authorized representatives of the board must have access to the project site at reasonable times during construction and operation of the project.

G. The borrower shall maintain adequate records and documents concerning the construction and operation of the project in order that representatives of the board may determine its technical and financial conditions and its compliance with environmental requirements. The records shall include the amounts of all sales and use taxes paid on personal property and services purchased for the construction and operation of the project, with tax receipts furnished by the sellers or other supporting documentation determined by the board to be satisfactory. The amounts of those taxes must be reported to the board in the manner and at the times required by the board.

H. The borrower shall protect and preserve at all times the project assets and other collateral securing the loan and shall assist in liquidation of collateral to minimize loss in the event of default.

I. Orderly liquidation of assets of the project must be provided for in the event of default, with an option on the part of the board to acquire from the lender the lender's interest in the assets pursuant to the nonguaranteed portion of the loan.

J. The board must be paid at or before the closing of the guaranteed loan a fee or fees for the loan guarantee or the commitment to guarantee the loan. The aggregate fee must be one percent of the total principal amount of the guaranteed portion of the loan.

K. The lender shall perfect and maintain the mortgage lien on the real estate and the security interest in all personal property and collateral granted as security for the loan, and shall cause all other loan servicing functions to be performed that are normally required or performed by a reasonable and prudent lender with respect to a loan without a guarantee.

L. The lender must notify the board in writing without delay of:

M. The board or the lender may determine that the loan is in default when:

N. The borrower must be required to establish a reserve, from the proceeds of the loan or otherwise, to be maintained with the lender or with a trustee for the holders of the borrower's obligations, with a letter of credit, or in cash or securities of a specified market value at least one-half of the annual amount that would be required to amortize the entire amount of the loan over the term (or at the rate of yield resulting from the interest rates) provided in the loan agreement.

O. The lender must service the loan and receive the payments of principal and interest. In the event of default, the lender must continue to service the loan if requested by the board to do so. Upon written approval of the administrator, the lender may sell or transfer the loan or loan servicing functions.

P. The agreement shall contain other terms and conditions that the board determines necessary and appropriate to carry out the purposes of Minnesota Statutes, chapter 41A.

History

• Statutory Authority: MS s 41A.04
• History: 11 SR 713

Minn. R. 1580.0800 Principal and Interest Assistance

Subpart 1. Availability of assistance.

The board may at any time enter into a written contract with the borrower to pay the lender, an amount not greater than the amount of principal and interest to become due on one or more subsequent dates, without acceleration, if the board determines that:

A. the borrower is not more than 60 days overdue in payments of principal or interest due;

B. the borrower is or may become unable to meet in full principal or interest payments, or both, that are due or to become due within a specified period;

C. it is in the public interest to permit the borrower to continue to pursue the purposes of the project;

D. the probable net financial loss to the board will be less than that which would result in the event of a default;

E. the borrower is obligated by the contract to reimburse the state for the principal or interest advanced thereunder, with interest on those amounts, upon terms and conditions satisfactory to the board in light of generally accepted commercial lending practices; and

F. adequate funds are available to make the principal and interest payments pursuant to Minnesota Statutes, section 41A.03, subdivision 4.

Subp. 2. Terms of assistance.

All sums advanced for principal and interest assistance and interest on those amounts must be secured by the best available collateral and security interest granted by the loan agreement, but none of the advances made thereafter be repaid to the board until and unless all principal and interest currently due on the loan has been fully paid. In the event of subsequent default by the borrower, acceleration by the lender, and payment by the board of the full amount due under the loan guarantee or bonds, the board is subrogated to the rights of the lender with respect to the principal paid by it under the contract. Upon payment of the loan in full, with accrued interest, the remaining amount of the advances and interest on the advances may be paid to the board.

History

• Statutory Authority: MS s 41A.04
• History: 11 SR 713

Minn. R. 1580.0900 Issuance of Bonds

Subpart 1. Bond resolution.

If the board intends to fund the eligible financial assistance by issuing bonds for a project pursuant to Minnesota Statutes, section 41A.05, subdivision 2, the board shall first pass a preliminary resolution. The preliminary resolution must not obligate the board to issue bonds or to fund eligible financial assistance, but must constitute an expression of current intention of the board to issue bonds or to fund eligible financial assistance. If the board subsequently determines that there are no adverse changes in the financial conditions or key personnel of the applicant or borrower, market conditions, availability of bond issuance authority, and other conditions that the board considers necessary, and the board decides in conformance with Minnesota Statutes, section 41A.01, and in accordance with generally accepted commercial lending practices to make eligible financial assistance available, the board shall pass a final resolution that authorizes the issuance and sale of bonds to extend eligible financial assistance to the project. The final resolution must specify the terms and conditions under which bonds will be issued. The preliminary resolution may contain a time limit with respect to issuance of bonds, may be revoked or amended by the board at any time before the final resolution of the board without liability to the board, and may impose any conditions or requirements that the board considers desirable. The administrator shall notify the applicant of the board's approval and provide the applicant with a copy of the resolution passed. Throughout this process, if the board does not extend financial assistance, the board has no liability to the applicant or borrower.

Subp. 2. Bond reserve.

A bond reserve fund must be established by the borrower in order to provide additional security for the bonds. The reserve may come out of bond proceeds. The amount of the reserve must not be less than one-half of the annual amount that would be required to amortize the entire amount of the bonds over the term and at the interest rate (or at the rate of yield resulting from the interest rates) provided in the bond issue resolution.

History

• Statutory Authority: MS s 41A.04
• History: 11 SR 713

Chapter 1585 HAZARDOUS WASTE PROCESSING FACILITY LOANS

Minn. R. 1585.0100 Scope and Authority

Parts 1585.0100 to 1585.0700 apply to applications for financial assistance for hazardous waste processing facilities made to the authority under Minnesota Statutes, sections 115A.162 and 41A.066.

History

• Statutory Authority: MS s 41A.04; 41A.066
• History: 11 SR 713; L 1987 c 386 art 9 s 20 subd 2

Minn. R. 1585.0200 Definitions

Subpart 1. Scope.

For the purposes of parts 1585.0100 to 1585.0700, the following terms have the meanings given to them.

Subp. 2. Authority.

"Authority" means the Minnesota Agricultural and Economic Development Board created in Minnesota Statutes, section 41A.01.

Subp. 3. Board.

"Board" means the Waste Management Board established in Minnesota Statutes, section 115A.04.

Subp. 4. Chairperson.

"Chairperson" means the chairperson of the board.

Subp. 5. Commissioner.

"Commissioner" means the commissioner of the Department of Employment and Economic Development.

Subp. 6. Hazardous waste processing facility.

"Hazardous waste processing facility" means any real or personal property to be used for the collection or processing of hazardous waste as those terms are defined in Minnesota Statutes, section 115A.03, subdivisions 5, 13, and 25.

Subp. 7. Hazardous waste processing facility loan or loan.

"Hazardous waste processing facility loan" or "loan" has the meaning given to it in Minnesota Statutes 1986, section 116M.03, subdivision 15.

Subp. 8. Private person.

"Private person" means any person, including individuals, firms, partnerships, associations, societies, trusts, private corporations, or natural persons. "Private person" includes the plural or the singular and does not include a public or governmental body.

History

• Statutory Authority: MS s 41A.04; 41A.066
• History: 11 SR 713; L 1987 c 312 art 1, c 386 art 9 s 20 subd 2; L 2003 1Sp4 s 1

Minn. R. 1585.0300 Eligible Applicants for the Hazardous Waste Processing Facility Loan Program

A private person proposing to develop and operate a hazardous waste processing facility is eligible to apply to the authority for a loan.

History

• Statutory Authority: MS s 41A.04; 41A.066
• History: 11 SR 713; L 1987 c 386 art 9 s 20 subd 2

Minn. R. 1585.0400 Eligible Project for Hazardous Waste Processing Facility Loan

An eligible project must be a hazardous waste processing facility as defined in part 1585.0200, subpart 6.

History

• Statutory Authority: MS s 41A.04; 41A.066
• History: 11 SR 713; L 1987 c 386 art 9 s 20 subd 2

Minn. R. 1585.0500 Procedures for Hazardous Waste Processing Facility Loan Applications

Subpart 1. In general.

To apply for assistance from the authority, an applicant shall submit an application to the commissioner on a form provided by the commissioner. An application must be completed, dated, and signed by an owner, general partner, or an authorized officer of an applicant. The commissioner shall follow the procedures under part 1587.1200, subparts 2 to 7 and 9 to 11.

Subp. 2. Contents.

Applications must comply with part 1587.1000, subparts 2 and 3.

Also, applications must include information necessary for certification by the board under Minnesota Statutes, section 115A.162 and information demonstrating that general casualty and pollution liability insurance is available for the proposed hazardous waste processing facility and the cost of obtaining the insurance must be included in all financial data required to be provided under part 1587.1000, subpart 3, item J.

In addition, the application must contain a certification that the applicant, the officers and directors of the applicant, any shareholder or partner which has a five percent or more ownership of the applicant, and the proposed hazardous waste processing facility, if any, have never been a defendant in any civil or criminal action or the respondent in any administrative consent decree or assurance relating to the collection or processing of hazardous waste as those terms are defined in Minnesota Statutes, section 115A.03, subdivisions 5, 13, and 25.

History

• Statutory Authority: MS s 41A.04; 41A.066
• History: 11 SR 713; L 1987 c 386 art 9 s 20 subd 2

Minn. R. 1585.0600 Procedures for Application Processing

Subpart 1. In general.

Processing of applications must comply with parts 1587.1100 and 1587.1200, subparts 2 to 7 and 9 to 11.

Subp. 2. Initial review for completeness.

When an application is received by the commissioner, a copy of the application will be sent to the chairperson or a designee for review. Upon receipt of the notification from the chairperson or a designee that the application is either complete or incomplete for certification by the board, the commissioner will follow the procedure under subpart 1.

Subp. 3. Forward application to board.

Upon determination that the application is complete it will be forwarded to the board for certification pursuant to Minnesota Statutes, section 115A.162.

History

• Statutory Authority: MS s 41A.04; 41A.066
• History: 11 SR 713; L 1987 c 386 art 9 s 20 subd 2

Minn. R. 1585.0700 Review and Approval

Subpart 1. Certification must be completed.

The authority may not approve an application nor make a loan to an applicant unless the application has been certified by the board.

Subp. 2. Authority review and approval.

If the board has certified an application, the authority shall approve the application and make the loan if funds are available and if the authority finds that the following criteria are satisfied:

A. the applicant is eligible under part 1585.0300;

B. the project is eligible under part 1585.0400;

C. the application is complete and contains all required certifications;

D. the development and operation of the hazardous waste processing facility as proposed in the application is economically feasible; and that the hazardous waste processing facility's feasibility is sufficient to allow the authority to sell the bonds as required for its financing;

E. upon review of the application, there is a reasonable expectation that the principal and interest on the loan will be fully repaid;

F. the hazardous waste processing facility is unlikely to be developed and operated without a loan from the authority as certified to by the applicant in the application; and

G. the applicant has complied with parts 1585.0300 to 1585.0700.

Subp. 3. Authority review and disapproval.

The authority shall disapprove the application if it finds that one or more of the criteria set forth in subpart 2 have not been satisfied.

Subp. 4. Additional information and certifications.

The following additional information is required by the authority, if applicable, prior to disbursing financial assistance:

A. all additional information and certifications required under part 1587.1100, subpart 2; and

B. a certificate of the general casualty insurer and a certificate of the pollution liability insurer that the insurance is in full force and effect. Prior to expiration of any insurance policy, the applicant shall furnish the commissioner with evidence that the policy has been renewed, replaced, or is no longer required.

History

• Statutory Authority: MS s 41A.04; 41A.066
• History: 11 SR 713; L 1987 c 386 art 9 s 20 subd 2

Chapter 1587 FINANCIAL ASSISTANCE

Minn. R. 1587.0100 Scope

Parts 1587.0100 to 1587.1200 are general rules that apply to all applications for financial assistance made available by the board under the act and under Minnesota Statutes, chapter 469.

History

• Statutory Authority: MS s 41A.04
• History: 10 SR 475; L 1987 c 386 art 5 s 5

Minn. R. 1587.0200 Definitions

Subpart 1. Statutory definitions.

The terms defined in Minnesota Statutes 1986, section 116M.03, Minnesota Statutes, section 469.110, and this part apply to this chapter.

Subp. 2. Act.

"Act" means Laws of Minnesota 1980, chapter 547.

Subp. 3. Applicant.

"Applicant" means a person, partnership, firm, corporation, or association that applies to the board for financial assistance.

Subp. 4. Board.

"Board" means the Minnesota Agricultural and Economic Development Board.

Subp. 5. Commissioner.

"Commissioner" means the commissioner of employment and economic development or the commissioner's designee.

Subp. 6. Financial assistance.

"Financial assistance" means loans, loan guarantees or insurance, and any other use of funds permitted by the act.

Subp. 7. Members.

"Members" means the commissioner and those persons appointed to the board under Minnesota Statutes, section 41A.02, subdivision 3.

Subp. 8. Project.

"Project" means that which is funded or secured, or is proposed to be funded or secured, by financial assistance.

History

• Statutory Authority: MS s 41A.04
• History: 9 SR 111; 10 SR 475; L 1987 c 312 art 1 s 10; c 386 art 5 s 5; 17 SR 1279; L 2003 1Sp4 s 1

Minn. R. 1587.0300 Regular Meetings

Regular meetings of the board shall be held on the fourth Wednesday of each month at 3:00 p.m. at the offices of the board in Saint Paul, Minnesota, unless another place of meeting is designated by resolution. If this date falls on a legal holiday, the regular meeting shall be held on the next succeeding business day.

History

• Statutory Authority: MS s 41A.04
• History: 9 SR 111; L 1987 c 386 art 5 s 5

Minn. R. 1587.0400 Special Meetings

Special meetings of the board may be called upon reasonable notice to all members by the chairperson or by a majority of the existing members of the board, for the purpose of transacting any business designated in the notice, and shall be held at the business offices of the board in Saint Paul, Minnesota, unless another place of meeting is designated by resolution. At a special meeting, no business may be considered other than as designated in the notice unless all of the members of the board are present at the special meeting.

History

• Statutory Authority: MS s 41A.04
• History: 9 SR 111; L 1987 c 386 art 5 s 5

Minn. R. 1587.0500 Public Appearances at Meetings of Members

The following procedures shall govern public appearances at meetings of the members:

A. With respect to regular meetings, the commissioner shall complete the agenda for meetings of the members not less than five nor more than seven days prior to the date of the meeting.

B. With respect to regular meetings, any person who desires to appear and address the members shall make a written request to the commissioner, at least ten days prior to the date of the meeting, setting forth the nature of the matter about which the person wishes to appear.

C. With respect to regular or special meetings, any person who desires to appear and address the members with respect to any matter enumerated on the agenda shall make a written request to the commissioner, at least 24 hours before the meeting.

D. Any member may at any time request that a person be permitted to appear and address the members at any regular or special meeting. All requests must be placed on the agenda for review by the members at the meeting. A majority vote of the members present is required to grant a request to address the members.

History

• Statutory Authority: MS s 41A.04
• History: 9 SR 111; L 1987 c 386 art 5 s 5

Minn. R. 1587.0600 Misrepresentation of Application Information

Subpart 1. Affirmative duty.

An applicant or financial institution has an affirmative duty and obligation to update and correct all information provided to the board.

Subp. 2. Board's action.

If information provided to the board by either the applicant or the financial institution contains a material misrepresentation or omission, the board may:

A. reject an application whether or not previously approved;

B. refuse to provide financial assistance;

C. make financial assistance provided by it immediately due and payable; or

D. revoke any preliminary or final resolution prior to the provision of financial assistance or prior to the sale of the bonds approved by it.

History

• Statutory Authority: MS s 41A.04
• History: 9 SR 111; L 1987 c 386 art 5 s 5

Minn. R. 1587.1000 Procedures for Financial Assistance Applications

Subpart 1. In general.

To apply for assistance from the board, an applicant shall submit an application form to the commissioner on a form provided by the commissioner. An application must be completed, dated, and signed by an owner, general partner, or an authorized officer of the applicant. The commissioner shall follow the procedures under part 1587.1200.

Subp. 2. Contents.

An application must contain at a minimum the following information:

A. A written history of the business.

B. The source and use of funds to finance the project.

C. Financial statements that include a balance sheet, an operating statement, a statement of the sources and uses of funds, and footnotes to the statements if available for the following time periods:

D. A marketing plan that describes:

E. Current resumes of key personnel and signed personal financial statements dated as of the date of the application for any person who owns 20 percent or more interest in the business.

F. A resolution of support or other comparable preliminary approval from the local government unit with respect to the project to be financed or secured with financial assistance.

G. A statement of informed consent by the applicant regarding the use and dissemination of the private data as provided in Minnesota Statutes, section 13.05, subdivision 4, paragraph (d). If the applicant is a corporation, then an authorized representative of the applicant shall provide a statement of informed consent in a form similar to that provided in Minnesota Statutes, section 13.05, subdivision 4, paragraph (d).

H. Certification that the employer does not discriminate in employment in a manner contrary to applicable federal or state laws and rules.

I. Certification of business compliance with all federal, state, or local laws or rules that affect the conduct of business in the state.

Subp. 3. Business plan.

As part of the application, the applicant shall submit to the commissioner a comprehensive business plan. The business plan must include, but is not limited to, the following:

A. a management summary of the plan including:

B. a description of the company including the following:

C. a market analysis including:

D. a description of the product or product line including:

E. a description of the marketing strategy including:

F. the management plan including:

G. an operating plan including:

H. a schedule indicating the completion dates for realizing the significant aspects of the business plan;

I. a discussion of the risks and problems inherent to the business plan, including both the negative factors and plans to minimize the impact of those factors; and

J. financial data including:

History

• Statutory Authority: MS s 41A.04
• History: 10 SR 475; L 1987 c 386 art 2 s 22,23

Minn. R. 1587.1100 Collateral Requirements and Additional Information or Certifications

Subpart 1. Collateral requirements.

The board shall require collateral as it considers necessary in accordance with generally accepted commercial lending practices to protect the interests of the board in the financial assistance. At a minimum, the collateral will take one or more of the following forms:

A. mortgage on real property;

B. security position on personal property;

C. security of its financial assistance with assets being financed by the financial assistance and other assets of the company to protect the interests of the state's financial participation;

D. letter of credit or equivalent instrument;

E. guarantees or other assurances of repayment of affiliates of the applicant or other interested parties with respect thereto;

F. guarantees or other assurances of repayment of shareholders or partners who have 20 percent or more ownership in the applicant;

G. bond insurance or other credit enhancements; and

H. assignments of leases or rents on property or equipment.

Subp. 2. Additional information or certifications.

The following additional information, as applicable, is required by the board prior to disbursing financial assistance, as well as any other information that the board in its sole discretion considers advisable for prudent financial management of board financial assistance:

A. a lease agreement on property or equipment;

B. a listing of property, including serial numbers for machinery and equipment, that will serve as collateral to the financial assistance;

C. certification of insurance for workers' compensation and employer's liability;

D. a statement provided by the Internal Revenue Service of tax clearance;

E. an appraisal of collateral offered to the board for the financial assistance; and

F. a certificate of the insurers of all collateral that insurance is in force and effect. Prior to expiration of any insurance policy, the applicant shall furnish the commissioner with evidence that the policy has been renewed, replaced, or is no longer required.

History

• Statutory Authority: MS s 41A.04
• History: 10 SR 475; L 1987 c 386 art 2 s 22,23

Minn. R. 1587.1200 Procedures for Application Processing

Subpart 1. Deadline for submission.

The applicant shall submit a complete application to the commissioner by the first business day of any month in order for the board to consider it in that month. If an application is received after the first of the month and can be reviewed by the commissioner for eligibility and financial feasibility prior to the board agenda deadline, the board may consider the application at the meeting in that month.

Subp. 2. Completed applications.

An application is complete when the commissioner receives all required documentation and exhibits.

Subp. 3. Incomplete applications.

If an incomplete application is received, the commissioner shall notify the applicant of specific deficiencies in the application. The applicant has 60 days from the date of mailing of the commissioner's notification to complete the application. If the application is not completed and received by the commissioner within 60 days, the application is deemed to be rejected and the applicant shall reapply to be further considered.

Subp. 4. Review of eligibility of project and applicant.

The commissioner shall review all completed applications to determine if the project and the applicant are eligible and meet the requirements of the act and any of parts 1587.1000 to 1587.1300 and any parts relating to the financial assistance for which the applicant has applied.

If the project and applicant are eligible, the commissioner shall review the application for economic feasibility as provided in subpart 6.

Subp. 5. Ineligible project or applicant.

The commissioner shall notify the applicant in writing if the applicant or the project is ineligible. The applicant has 30 days from the date of the commissioner's notification to amend the application.

Upon receipt of an amended application, the commissioner shall review the amended application under subpart 4. The commissioner shall reject the amended application if the project or applicant are ineligible. If the project and applicant are eligible, the commissioner shall review the amended application for economic feasibility under subpart 6.

If the application is not amended within 30 days, the application must be rejected and will not receive any further consideration.

Subp. 6. Economic feasibility review.

The commissioner shall review the application in accordance with generally accepted commercial lending practices, including the use of the standards as printed in the most current annually updated version of the Annual Statement Studies, issued by Robert Morris Associates, Philadelphia, Pennsylvania.

The commissioner shall obtain any other credit information when available from private credit rating agencies including, but not limited to, Standard & Poors and Dun & Bradstreet. In accordance with generally accepted commercial lending practices, the commissioner may check personal references.

The commissioner shall determine if the applicant can generate sufficient cash flow and maintain a sound financial condition.

The commissioner shall determine if there is sufficient collateral for the financial assistance. The submission of the application by the commissioner to the board at a board meeting shall be deemed conclusive evidence that the commissioner has made the determinations required pursuant to this subpart.

Subp. 7. Rejection of application based on economic feasibility.

The commissioner shall notify the applicant in writing if the application is not economically feasible and the application is rejected.

If the application is rejected due to economic feasibility, the applicant may, within 30 days after written notification by the commissioner, request that the commissioner submit the rejected application to the board for review at the next regularly scheduled meeting of the board for which the agenda has not been established.

If so submitted, the board must evaluate the application at its board meeting, in accordance with subpart 9.

Subp. 8. Certification of public purpose for small business and business loans.

In addition to the economic feasibility review in subpart 6, the applicant must certify that the project assists in fulfilling the purposes of the act as expressed in Minnesota Statutes 1986, section 116M.09, or assists in fulfilling one or more of the following criteria:

A. The applicant is located in an area of the state that is experiencing one of the most severe unemployment rates in the state.

B. The applicant is located in a border community that experiences a competitive disadvantage due to location and with this financial assistance the applicant would be induced to stay in Minnesota rather than to move to another state.

C. The applicant is likely to expand within the state and to create additional taxable property to local units of government.

D. The financial assistance applied for will help induce the applicant to locate in an area of economic distress or will help to provide jobs that would not otherwise be available to that area without the inducement of this financial assistance.

E. The financial assistance applied for will create or maintain sufficient numbers and types of jobs to justify participation in the financial assistance programs.

F. Energy sources and public facilities will be sufficient to support the successful operation of the project.

G. If the financial assistance will have the effect of a transfer of employment from one area of the state to another, that the project is economically advantageous to the state or that the project is necessary to the continued operation of the business enterprise within the state.

Subp. 9. Board evaluation procedure.

Applications approved for processing by the commissioner must be presented to the board for approval or disapproval. The board shall review and consider approval of an application on the basis of effectuating the purposes of the act as expressed in Minnesota Statutes 1986, section 116M.09 or assist in fulfilling one or more of the criteria listed in subpart 8. If the board disapproves the application, the commissioner shall so notify the applicant. If the board approves the financial assistance, it shall pass a preliminary or a final resolution giving approval to the project to be financed and stating in either the preliminary or final resolution or combination of both the name of the project owner; a brief description of the project; the maximum amount of bonds to be issued, or the maximum amount of the loan to be made, or the maximum amount of the loan to be guaranteed or insured, whichever is applicable; and other provisions as the board in its sole discretion deems advisable for prudent financial management of board financial assistance. The commissioner shall notify the applicant of the board's approval and provide the applicant with a copy of the resolution passed. If the financial assistance is funded by bonds, then passage of a preliminary and a final resolution as provided in subpart 10 are required before financial assistance is approved. Throughout this process if the board does not extend financial assistance, the board has no liability to the applicant.

Subp. 10. Funding of financial assistance by bonds.

If the board intends to fund the financial assistance by issuing bonds, the board shall first pass a preliminary resolution. The preliminary resolution must not obligate the board to issue bonds or to fund financial assistance, but must only constitute an expression of current intention of the board to issue bonds or to fund the financial assistance. If the board subsequently determines that there are no adverse changes in the financial conditions or key personnel of the applicant, market conditions, availability of bond issuance authority, and other conditions that the board deems necessary and the board decides in accordance with generally accepted commercial lending practices to make financial assistance available, the board shall pass a final resolution that authorizes the issuance and sale of bonds to extend financial assistance. The final resolution must specify the terms and conditions under which bonds will be issued. The preliminary resolution may contain a time limit with respect to the issuance of the bonds, may be revoked or amended by the board at any time prior to the final resolution of the board without liability to the board, and may impose any conditions or requirements that the board deems desirable. The commissioner shall notify the applicant of the board's approval and provide the applicant with a copy of the resolution passed. Throughout this process, if the board does not extend financial assistance, the board has no liability to the applicant.

Subp. 11. Preparation of documents.

The commissioner has the authority and responsibility to prepare or cause to be prepared all necessary documents and to execute them on behalf of the board.

History

• Statutory Authority: MS s 41A.04
• History: 10 SR 475; L 1987 c 386 art 2 s 22,23

Chapter 1589 SMALL BUSINESS DEVELOPMENT LOAN PROGRAM

Minn. R. 1589.0100 Purpose of Small Business Development Loan Program

The small business development loan program issues financial assistance in a form involving a guarantee or insurance from the economic development fund or any account thereof and revenue bonds to finance small business loans.

History

• Statutory Authority: MS s 41A.04
• History: 10 SR 475; L 1987 c 386 art 2 s 22,23

Minn. R. 1589.0200 Eligible Applicants for Small Business Development Loan Program

Persons, partnerships, firms, or corporations engaged in and determined by the board to constitute a small business as defined in the regulations of the United States Small Business Administration, Code of Federal Regulations, title 13, part 121, are considered eligible small businesses or eligible applicants.

History

• Statutory Authority: MS s 41A.04
• History: 10 SR 475; L 1987 c 386 art 2 s 22,23

Minn. R. 1589.0300 Eligible Loans for Small Business Development Loan Program

Subpart 1. In general.

The board shall make small business loans to applicants in compliance with the act and parts 4305.1000 to 4305.1200 and 4307.0100 to 4307.0500 in order to help create or retain jobs for the state.

Subp. 2. Purpose of loan.

A small business loan must be used to provide interim or long term financing for certain capital expenditures as provided in the act, and for expenditures that meet the requirements of federal industrial development bond laws, including:

A. acquisition costs of land, buildings, or both;

B. site preparation;

C. construction costs;

D. engineering costs;

E. costs of equipment, machinery, or both;

F. bond issuance costs;

G. underwriting or placement fees;

H. trustee's fees;

I. fee of guarantor, insurer, or financial institution, other than the board, who provides letters of credit, surety bonds, or equivalent security;

J. board fees, including application and guaranty fees of the board and administrative costs and expenses;

K. certain contingency costs;

L. interest costs during construction;

M. legal fees, including those of the board's bond counsel; and

N. debt service reserve fund. Working capital loans are not eligible for financial assistance under this loan program.

Subp. 3. Size of eligible loans.

The principal amount of any financial assistance in the form of bonds to be financed by the board may not be less than $250,000, unless the applicant agrees to pay all bond issuance costs, and may not exceed the maximum amount permitted to be loaned to an eligible small business as defined in the act for the total value of eligible items listed in subpart 2.

Subp. 4. Equity requirements.

The maximum amount of a loan for project equipment is 75 percent of the cost of the equipment, and for all other authorized project expenses is 80 percent of the cost. The applicant must contribute at least 25 percent of the cost of project equipment and at least 20 percent of all other costs. Instead of a cash equity contribution the board shall accept collateral which, if contributed to the financial assistance, would make the maximum loan percentage of the project costs for equipment equal to 75 percent and for all other authorized expenses equal 80 percent. The board may require a lower loan to project percentage based upon the economic feasibility of the application. The board may accept letters of credit or other credit enhancements as part of the equity contribution by the applicant.

Subp. 5. Maximum term.

The maximum term of a small business development loan may not exceed the average useful life of the real property, or 80 percent of the useful life of the equipment or machinery, or the following limits, whichever is less:

A. for real property, land, or buildings, 21 years;

B. for equipment or machinery, 11 years;

C. for a combination of items A and B, a weighted average of those years will be used.

Subp. 6. Interest rate.

The board shall set interest rates at a negotiated rate that approximates the market rate of interest for securities of equivalent value at the time the bonds are initially sold.

Subp. 7. Security requirements.

Financial assistance, either for real property or equipment, may be secured only with the best available security including one or more of the following:

A. A mortgage or other adequate security as determined by the board on the real property to be financed.

B. A lien or other adequate security as determined by the board on equipment to be financed by the board.

C. Other security as determined by the commissioner to have a value at least equal to the principal amount to be financed by the board less the value, as determined by the board, of the security provided in items A and B, if any. Other security shall be in a form and kind satisfactory to the board and may consist of some or all of the following:

D. In addition to or in substitution for any of the items A to C, any guarantee or other collateral or security, as required by insurers or other providers of collateral or security with respect to the bonds, other than the board, or as required by the board in accordance with generally accepted commercial lending practices.

History

• Statutory Authority: MS s 41A.04
• History: 10 SR 475; L 1987 c 386 art 2 s 22,23

Minn. R. 1589.0400 Debt Service Reserve Fund for Small Business Development Loan Program

In conjunction with each amount of financial assistance it extends, the board shall establish and fund a debt service reserve fund sufficient to cover approximately 12 months' debt service or a lesser amount to ensure the tax exempt status of interest on the bonds if the bonds are intended to be tax exempt. The reserve must be funded through the proceeds of the bonds to be issued and sold in conjunction with each particular amount of financial assistance extended. The interest earned on the debt service reserve fund must accrue to the benefit of the applicant except to the extent necessary to ensure the tax exempt status of the interest on the bonds if the bonds are intended to be tax exempt. This amount must be applied to offset the principal and interest payments on an annual basis or to redeem bonds prior to maturity provided the financial assistance is current.

History

• Statutory Authority: MS s 41A.04
• History: 10 SR 475; L 1987 c 386 art 2 s 22,23

Minn. R. 1589.0500 Final Resolution for Small Business Development Loan Program

Subpart 1. Final resolution.

After the board passes a preliminary resolution, the board may pass a final resolution that authorizes the issuance and sale of bonds to fund the financial assistance to the applicant, both as discussed in part 4305.1200, subpart 10. Whether the board may pass the final resolution for an application under the program depends, in part, upon the following:

A. a determination that there are no adverse changes in the financial condition or key personnel of the applicant since the date of completion of the application;

B. market conditions;

C. availability of bond issuance authority; and

D. other conditions that the board considers necessary in accordance with generally accepted commercial lending practices.

Subp. 2. Bond issuance.

Upon passage of the final resolution, the board shall commence to issue bonds in accordance with market conditions and the other legal conditions that govern the issuance of its bonds and notes. This issuance must be in accordance with the contents of any insurance contracts, agreements with lenders providing letters of credit, or other forms of financial assistance and other terms and conditions necessary to effectuate bond sale. Funds will not be disbursed at the loan closing until it has been determined by the commissioner that there are no adverse changes in the condition or key personnel of the business entity applying for the financial assistance in accordance with generally accepted commercial lending practices. After the bonds are issued and sold, there will be a loan closing at which the funds are transferred and documents are signed in accordance with the terms of the final resolution and the respective bond resolution.

History

• Statutory Authority: MS s 41A.04
• History: 10 SR 475; L 1987 c 386 art 2 s 22,23