HF4234

Purpose

This bill changes how Minnesota calculates the limit on private activity bonds used for financing qualifying residential rental projects. It amends Minnesota Statutes 2024 section 474A.02 subdivision 1a to redefine the “Aggregate bond limitation” that governs how much bond financing can be allocated.

Main Provisions

• The bill amends the definition of Aggregate bond limitation in Minnesota Statutes 2024 section 474A.02 subdivision 1a.
• It defines Aggregate bond limitation as: up to 55 percent of the greater of (1) 30 percent of the reasonably expected aggregate basis of a residential rental project and the land on which the project is or will be located, or (2) the maximum supportable permanent amortizing debt, subject to a maximum of 40 percent of the reasonably expected aggregate basis of the residential rental project and the land on which the project is or will be located.
• This definition applies to the allocation of private activity bonds for qualifying residential rental projects.
• The change directly affects how much bond financing can be allocated for these projects by tying the limit to project-based figures (the aggregate basis and land) and a cap.

Significant Changes to Existing Law

• The method for calculating the aggregate bond limitation is being revised. The bill changes the benchmark from the prior rule to a calculation based on the greater of specified benchmarks (a percentage of the project’s aggregate basis and land, or the maximum supportable debt), with an overarching cap tied to the project’s aggregate basis and land.
• As a result, the allowable amount of private activity bond financing for qualifying residential rental projects may be reduced or restricted under certain project conditions, compared to the existing law.

Practical Effects

• Financing for qualifying residential rental projects that rely on private activity bonds could become more limited.
• Developers may need to adjust project plans or seek alternative sources of funding if the bond allocation is constrained by the new calculation.

Notes

• The bill expressly changes the statutory language governing “Aggregate bond limitation” and the use of private activity bonds for residential rental projects.

Relevant Terms - Aggregate bond limitation - private activity bonds - qualifying residential rental projects - aggregate basis - land - maximum supportable permanent amortizing debt - Minnesota Statutes 2024 section 474A.02 subdivision 1a