1.1                          A bill for an act 
  1.2             relating to agriculture; creating an on-farm 
  1.3             processing loan program; amending Minnesota Statutes 
  1.4             2002, section 41B.049. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  Minnesota Statutes 2002, section 41B.049, is 
  1.7   amended to read: 
  1.8      41B.049 [METHANE DIGESTER AND ON-FARM PROCESSING LOAN 
  1.9   PROGRAM.] 
  1.10     Subdivision 1.  [ESTABLISHMENT.] The authority shall 
  1.11  establish and implement a methane digester loan program to help 
  1.12  finance the purchase of necessary equipment and the construction 
  1.13  of a system that will utilize manure to produce 
  1.14  electricity.  The authority shall also establish and implement 
  1.15  an on-farm processing loan program. 
  1.16     Subd. 2.  [REVOLVING FUND.] There is established in the 
  1.17  state treasury a revolving fund, which is eligible to receive 
  1.18  appropriations and the transfer of funds from other services.  
  1.19  All repayments of financial assistance granted under subdivision 
  1.20  1, including principal and interest, must be deposited into this 
  1.21  fund.  Interest earned on money in the fund accrues to the fund, 
  1.22  and money in the fund is appropriated to the commissioner of 
  1.23  agriculture for purposes of the manure digester loan program and 
  1.24  the on-farm processing loan program, including costs incurred by 
  1.25  the authority to establish and administer the program. 
  2.1      Subd. 3.  [ELIGIBILITY.] Notwithstanding section 41B.03, to 
  2.2   be eligible for a loan under this section a borrower must: 
  2.3      (1) in the case of a methane digester loan, locate the 
  2.4   projects and utilize the equipment and practices on land located 
  2.5   in Minnesota and in the case of an on-farm processing loan, 
  2.6   locate the equipment and practices on the borrower's farm; 
  2.7      (2) provide evidence of financial stability; 
  2.8      (3) demonstrate an ability to repay the loan; and 
  2.9      (4) provide evidence that the practices implemented and 
  2.10  capital assets purchased will be properly managed and maintained.
  2.11     Subd. 4.  [LOANS.] (a) The authority may make a direct loan 
  2.12  or participate in a loan with an eligible lender to a farmer who 
  2.13  is eligible under subdivision 3.  The interest rates and 
  2.14  Repayment terms of the authority's participation interest may 
  2.15  differ from the interest rates and repayment terms of the 
  2.16  lender's retained portion of the loan.  The authority's interest 
  2.17  rate for a direct loan or a loan participation must not exceed 
  2.18  four percent.  Loans made under this section before July 1, 
  2.19  2003, must be no-interest loans.  
  2.20     (b) Application for a direct loan or a loan participation 
  2.21  must be made on forms prescribed by the authority. 
  2.22     (c) Standards for loan amortization shall be set by the 
  2.23  Rural Finance Authority not to exceed ten years. 
  2.24     (d) Security for the loans must be a personal note executed 
  2.25  by the borrower and whatever other security is required by the 
  2.26  eligible lender or the authority. 
  2.27     (e) No loan proceeds may be used to refinance a debt 
  2.28  existing prior to application. 
  2.29     (f) The authority may impose a reasonable nonrefundable 
  2.30  application fee for each application for a direct loan or a loan 
  2.31  participation.  The authority may review the application fees 
  2.32  annually and make adjustments as necessary.  The application fee 
  2.33  is initially set at $100 for a loan under subdivision 1.  The 
  2.34  fees received by the authority must be deposited in the 
  2.35  revolving fund created in subdivision 2. 
  2.36     Subd. 5.  [LOAN CRITERIA.] (a) To be eligible, a borrower 
  3.1   must be a resident of Minnesota or an entity that is not 
  3.2   prohibited from owning agricultural land under section 500.24. 
  3.3      (b) State participation in a participation loan is limited 
  3.4   to 45 percent of the principal amount of the loan.  A direct 
  3.5   loan or loan participation may not exceed $250,000.  
  3.6      (c) Loans under this program may be used as a match for 
  3.7   federal loans or grants. 
  3.8      (d) A borrower who has previously received a methane 
  3.9   digester loan under subdivision 1 is prohibited from receiving 
  3.10  another methane digester loan under subdivision 1.  A borrower 
  3.11  who has previously received an on-farm processing loan under 
  3.12  subdivision 1 is prohibited from receiving another on-farm 
  3.13  processing loan under subdivision 1. 
  3.14     Sec. 2.  [EFFECTIVE DATE.] 
  3.15     Section 1 is effective retroactive to July 1, 2003.