HF4737

Purpose

• The bill aims to help fund emergency shelter facilities for people experiencing homelessness by allowing the state to issue special bonds. The money from these bonds would be used to grant eligible applicants to build, expand, renovate, or improve emergency shelter facilities, and to cover the costs of issuing and repaying the bonds.

Key terms and definitions

• Emergency shelter facility: a shelter that provides safe, sanitary, accessible, and suitable housing for individuals and families experiencing homelessness, whether sheltering day or night.
• Appropriation bonds: a type of state bond debt that is paid back using money the legislature may appropriate in the future, rather than from the state’s general taxing power.
• Eligible applicant: tribal governments, certain nonprofit organizations (501(c)(3)), cities, counties, or housing and redevelopment authorities that meet the bill’s criteria.
• Special appropriation emergency shelter facility bond proceeds fund: a dedicated state treasury fund where bond proceeds are kept.
• Debt service: principal and interest payments on the bonds, plus related costs like issuance fees and credit enhancements.

How it works (funding and bonds)

• Bond authority and cap: The commissioner can issue appropriation bonds up to a total net cost of 47 million dollars (after issuance costs) to fund the purposes in the bill.
• Use of bond proceeds: Proceeds go into the special bond proceeds fund and may be used to pay debt service and to make payments under related agreements.
• Bond terms: Bonds can be issued in one or more series, may be fixed or variable rate, and may be used for refunding of other bonds. They may be private or public sales, and must be fully negotiable. Each series cannot exceed 21 years, and some bonds may be secured by various agreements (trust indentures, liquidity facilities, letters of credit, etc.).
• Not a general obligation: These bonds are not the state’s public debt, and the state’s full faith and credit or taxing power is not pledged to their payment. Debt service is payable only from appropriations the Legislature may make in future budgets.
• Repayment and terms: An annual appropriation from the general fund is provided to the debt service account to pay principal and interest through fiscal year 2048. The bonding process can include various agreements (e.g., management, insurance, or indexing agreements) to support repayment.
• Governance and oversight: The state may enter into required disclosures and other contracts to comply with federal securities laws.

Grant program for emergency shelter facilities

• Grants to eligible applicants: Bond proceeds are used to fund grants that improve or expand emergency shelter facilities. Eligible activities include:
  • Adding new facilities or expanding existing ones.
  • Renovating facilities not currently operating as emergency shelters.
  • Increasing shelter beds, including major maintenance to address deferred repairs or failing mechanical, electrical, or safety systems.
  • Improving safety, sanitation, accessibility, and habitability.
• Funding scope: Grants may cover up to 100% of project costs or a specific phase up to 1,000,000 per project. Projects must meet applicable building codes at completion.
• Competitive process: The Department of Human Services must run a statewide competitive process (RFP) to identify eligible projects and applicants.
• Geographic and local funding requirements: At least 40% of bond proceeds must go to projects in greater Minnesota. If greater Minnesota requests are insufficient to meet this share, the remaining funds may go to other eligible projects.
• Local funding and priority: Preference is given to projects where the eligible applicant contributes at least 10% of total project funding.
• Operational arrangements: Projects may involve lease or management agreements for operation of the facilities, subject to applicable rules.
• Other rules: Projects must comply with state and local building codes, and the grants are administered in a way that aligns with other relevant laws and processes.

Administrative details and requirements

• Responsible agencies: The Department of Human Services administers grants, while the state treasurer and related offices handle bond proceeds and debt service.
• Lease and management: Authorized to include leases or management agreements for facility operation, consistent with existing law (e.g., 16A.695).
• Immune waiver: The bill provides a waiver of immunity from certain civil actions for the state related to the appropriation bonds and related contracts.
• Other protections and mechanics: Bonds can be issued with various protections (e.g., insurance, credit enhancements) and must follow the forms and procedures established for such instruments.

Timing and sunset aspects

• Initial debt service funding starts in fiscal year 2027 and the funding framework remains in place through fiscal year 2048, subject to appropriation by the Legislature.

What this changes in law

• Creates a new borrowing mechanism (appropriation bonds) specifically for emergency shelter facilities.
• Establishes a dedicated fund and a dedicated debt service stream funded by general fund appropriations in the future.
• Sets up a grant program with competitive selection to expand or improve emergency shelter capacity, prioritizing greater Minnesota and leveraging local funding.
• Introduces rules for bond issuance, investment, and related contracts, while clarifying the state’s liability framework with a immunity waiver.

Relevant terms - appropriation bonds - emergency shelter facility - grants - eligible applicant - greater Minnesota - debt service - capitalized interest - credit enhancement - liquidity facility - trust indenture - lease or management agreement - competitive request for proposal (RFP) - special appropriation emergency shelter facility bond proceeds fund - not a general obligation debt - waiver of immunity