SB-0935, As Passed Senate, December 6, 2007

 

 

 

 

 

 

 

 

 

 

 

 

SENATE BILL No. 935

 

 

November 29, 2007, Introduced by Senator PAPPAGEORGE and referred to the Committee on Finance.

 

 

 

     A bill to amend 1855 PA 105, entitled

 

"An act to regulate the disposition of the surplus funds in the

state treasury; to provide for the deposit of surplus funds in

certain financial institutions; to lend surplus funds pursuant to

loan agreements secured by certain commercial, agricultural, or

industrial real and personal property; to authorize the loan of

surplus funds to certain municipalities; to authorize the

participation in certain loan programs; to authorize an

appropriation; and to prescribe the duties of certain state

agencies,"

 

by amending section 2a (MCL 21.142a), as amended by 2002 PA 16.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 2a. (1) The state treasurer may invest surplus funds

 

under the state treasurer's control in certificates of deposit or

 

in a financial institution which that qualifies with proof of

 

financial viability acceptable to the state treasurer under this

 

act to receive deposits or investments of surplus funds. In


 

addition to terms that may be prescribed in the investment

 

agreement by the state treasurer, an investment under this section

 

shall be subject to all of the following conditions and

 

restrictions:

 

     (a) The interest accruing on the investment shall not be more

 

than the interest earned by the financial institution on qualified

 

agricultural loans made after the date of the investment.

 

     (b) The financial institution shall provide good and ample

 

security as the state treasurer requires and shall identify the

 

qualified agricultural loans and the terms and conditions of those

 

loans that are made after the date of the investment which that are

 

attributable to that investment together with other information

 

required by this act.

 

     (c) As established in the investment agreement by the state

 

treasurer, a qualified agricultural loan shall be made at a rate or

 

rates of interest, if any.

 

     (d) To the extent the financial institution has not made

 

qualified agricultural loans as defined by subsection (9)(a) in an

 

amount at least equal to the amount of the investment within 90

 

days after the investment, the rate of interest payable on that

 

portion of the outstanding investment shall be increased to a rate

 

of interest provided in the investment agreement, with the increase

 

in the rate of interest applied retroactively to the date on which

 

the state treasurer invested the surplus funds.

 

     (e) For a qualified agricultural loan as defined by subsection

 

(9)(a), the investment agreement shall provide that the financial

 

institution does not have to repay any principal within the first


 

24 months after which the investment is made unless the investment

 

is no longer being used to make a qualified agricultural loan as

 

defined by subsection (9)(a), or to the extent the qualified

 

agricultural loan has been repaid.

 

     (f) For a qualified agricultural loan as defined by subsection

 

(9)(a), the investment agreement may include incentives for the

 

early repayment of the investment and for the acceleration of

 

payments in the event of a state cash shortfall as prescribed by

 

the investment agreement.

 

     (2) An investment made under this section is found and

 

declared to be a valid public purpose.

 

     (3) The attorney general shall approve documentation for an

 

investment pursuant to this section as to legal form.

 

     (4) The state treasurer shall deposit before May 1, 2002 up to

 

$30,000,000.00 of surplus funds with the financial institutions

 

participating in making qualified agricultural loans under this

 

section for the purpose of making those qualified agricultural

 

loans. Not more than $10,000,000.00 of this deposit shall be

 

allocated to qualified agricultural loans made to businesses under

 

subsection (9)(a)(iii).

 

     (5) Earnings from an investment made pursuant to this section

 

which are in excess of the average rate of interest earned during

 

the same period on other surplus funds, other than surplus funds

 

invested pursuant to section 1 or former section 2, shall be

 

credited to the general fund of the state. If interest from an

 

investment made pursuant to this section is below the average rate

 

of interest earned during the same period on other surplus funds,


 

other than surplus funds invested pursuant to section 1 or former

 

section 2, the general fund shall be reduced by the amount of the

 

deficiency on an amortized basis over the remaining term of the

 

investment. A loss of principal from an investment made pursuant to

 

this section shall reduce the earnings of the general fund by the

 

amount of that loss on an amortized basis over the remaining term

 

of the investment.

 

     (6) A new investment to which a qualified agricultural loan as

 

defined by subsection (9)(a)(ii) is attributed shall not be made

 

pursuant to this section after October 1, 2002, and shall not be

 

made with a term which extends beyond October 1, 2007. An

 

investment to which a qualified agricultural loan as defined by

 

subsection (9)(a)(iii) is attributed shall not be made pursuant to

 

this section after October 1, 2002, and shall not be made with a

 

term extending beyond October 1, 2007. The terms of the qualified

 

agricultural loan as defined by subsection (9)(a) shall provide

 

that zero-interest loans under this section be for a term not more

 

than 5 years and that the first payment made by the recipient occur

 

not later than 24 months after the date of the loan. An investment

 

to which a qualified agricultural loan as defined by subsection

 

(9)(a)(i) is attributed shall not be made with a term extending

 

beyond October 1, 2007.

 

     (7) Annually, each financial institution in which the state

 

treasurer has made an investment under this section shall file an

 

affidavit, signed by a senior executive officer of the financial

 

institution, stating that the financial institution is in

 

compliance with the terms of the investment agreement and this act.


 

     (8) Before October 1, 2003, the state treasurer shall prepare

 

separate reports to the legislature and the house and senate

 

agriculture appropriations subcommittees regarding the disposition

 

of money invested for purposes of qualified agricultural loans as

 

defined by subsection (9)(a)(i) and for qualified agricultural loans

 

as defined by subsection (9)(a)(ii) and (iii). The reports for each

 

type of loan shall include all of the following information:

 

     (a) The total number of farmers and the total number of

 

agricultural businesses who have received such a loan.

 

     (b) By county, the total number and amounts of the loans.

 

     (c) The name of each financial institution participating in

 

the loan program and the amount invested in each financial

 

institution for purposes of such loan program.

 

     (d) Any action undertaken by the state treasurer under

 

subsection (15).

 

     (9) As used in this section:

 

     (a) "Qualified agricultural loan" means 1 or more of the

 

following types of loans, as applicable:

 

     (i) Until October 1, 2002, a loan to a natural or corporate

 

person who is engaged as an owner-operator of a farm in the

 

production of agricultural goods as defined by section 35(1)(h)

 

207(1)(d) of the single Michigan business tax act, 1975 PA 228, MCL

 

208.35 2007 PA 36, MCL 208.1207, who is experiencing financial

 

stress and difficulty in meeting existing or projected debt

 

obligations owed to financial institutions due to an agricultural

 

disaster as requested by the governor at rates commensurate with

 

rates charged by financial institutions for loans of comparable


 

type and terms at the time the loan is to be made, and who

 

certifies to the financial institution that the owner-operator will

 

not have more than $150,000.00 in outstanding loans otherwise

 

considered qualified agricultural loans under this subparagraph,

 

including the loan for which the owner-operator is applying. If

 

crop insurance was available for a particular crop and the producer

 

did not purchase the crop insurance for that crop, the amount of

 

the loan shall be reduced by 30% or $50,000.00, whichever is less.

 

A qualified agricultural loan under this subparagraph may be made

 

for either or both of the following purposes:

 

     (A) Operating capital including, but not limited to, capital

 

necessary for the rental, lease, and repair of equipment or

 

machinery, crop insurance premiums, and the purchase of seed, feed,

 

livestock, breeding stock, fertilizer, fuel, and chemicals.

 

     (B) Refinancing all or a portion of a loan entered into before

 

October 1, 2002 for a purpose identified in sub-subparagraph (A).

 

     (ii) A loan to an individual, sole proprietorship, partnership,

 

corporation, or other legal entity that is engaged and intends to

 

remain engaged as an owner-operator of a farm in the production of

 

agricultural goods as defined by section 35(1)(h) 207(1)(d) of the

 

single Michigan business tax act, 1975 PA 228, MCL 208.35 2007 PA

 

36, MCL 208.1207, who has suffered a 25% or more loss in major

 

enterprises or a 50% or more production loss in any 1 crop due to

 

an agricultural disaster on a farm located in this state, as

 

requested by the governor and as certified by the producer by means

 

of an affidavit demonstrating an accurate and valid production

 

loss.


 

     (iii) A loan to an individual, sole proprietorship, partnership,

 

corporation, or other legal entity that is engaged in an

 

agricultural business of buying, exchanging, or selling farm

 

produce, or is engaged in the business of making retail sales

 

directly to farmers and has 75% or more of its gross retail sales

 

volume exempted from sales tax under the Michigan agricultural

 

sales tax exemption, as provided in section 4a(1)(e) of the general

 

sales tax act, 1933 PA 167, MCL 205.54a. Businesses engaged in the

 

buying, exchanging, or selling of farm produce must have suffered a

 

50% or greater loss in volume of 1 commodity as compared with the

 

average volume of that commodity which the business handled over

 

the last 3 years to qualify for loans under this subparagraph.

 

Businesses engaged in making retail sales directly to farmers must

 

have suffered a 50% or greater reduction in gross retail sales

 

volume subject to the Michigan agricultural sales tax exemption as

 

compared with that business's average retail sales volume subject

 

to that exemption over the last 3 years to qualify for loans under

 

this subparagraph. All losses claimed by businesses attempting to

 

qualify for loans under this subparagraph must be directly

 

attributable to a natural disaster occurring after January 1, 2001,

 

as requested by the governor and as certified by the agricultural

 

business by means of an affidavit demonstrating an accurate and

 

valid loss.

 

     (b) "Surplus funds" means, at any given date, the excess of

 

cash and other recognized assets that are expected to be resolved

 

into cash or its equivalent in the natural course of events and

 

with a reasonable certainty, over the liabilities and necessary


 

reserves at the same date.

 

     (c) "Financial institution" includes, but is not limited to,

 

entities of the farm credit system or a state or federally

 

chartered savings bank. For purposes of this section, entities of

 

the farm credit system or a state or federally chartered savings

 

bank may be qualified as a financial institution eligible to

 

receive an investment under this section notwithstanding that its

 

principal office is not located in this state if the proceeds of

 

the investment will be committed to qualified agricultural loans in

 

this state.

 

     (d) "Corporate person" or "corporation" means, except in

 

relation to a qualified agricultural loan under subdivision (a)(iii),

 

a corporation in which a majority of the corporate stock is owned

 

by persons operating the farm applying for a loan.

 

     (e) "Facility" means a plant designed for receiving or storing

 

farm produce or a retail sales establishment of a business engaged

 

in making retail sales directly to farmers, which establishment has

 

75% or more of its gross retail sales volume exempted from sales

 

tax under the Michigan agricultural sales tax exemption, as

 

provided in section 4a(1)(e) of the general sales tax act, 1933 PA

 

167, MCL 205.54a.

 

     (10) A qualified agricultural loan as defined by subsection

 

(9)(a)(ii) shall be equal to not more than the value of the crop

 

loss as certified by the producer by means of an affidavit

 

demonstrating an accurate and valid production loss. The qualified

 

agricultural loan shall not exceed the lesser of $200,000.00 or the

 

value of the crop loss minus the amount of any grant under federal


 

disaster assistance or insurance proceeds received by the owner-

 

operator as a result of the same crop loss. If crop insurance was

 

available for a particular crop and the producer did not purchase

 

the crop insurance for that crop, the amount of the loan shall be

 

reduced by 30% or $50,000.00, whichever is less.

 

     (11) A qualified agricultural loan as defined by subsection

 

(9)(a)(iii) shall not exceed the lesser of the following:

 

     (a) $300,000.00 per facility.

 

     (b) An amount not to exceed the value of the direct loss of

 

the individual, sole proprietorship, partnership, corporation, or

 

other legal entity making application for the loan, as determined

 

by the department of treasury under subsection (9)(a)(iii).

 

     (c) $400,000.00 per individual, sole proprietorship,

 

partnership, corporation, or other legal entity making application

 

for the loan.

 

     (12) The financial institutions participating in the loan

 

program pursuant to subsection (9)(a) shall have the option of

 

making state subsidized loans to farmers or to businesses described

 

in subsection (9)(a)(iii) before October 1, 2002, with terms approved

 

by the state treasurer by using their existing deposits for the

 

loans and receiving from the state treasurer an interest rate

 

subsidy equal to 120% of the state treasurer's common cash earnings

 

rate. The state's reimbursement to financial institutions

 

participating in the loan program pursuant to subsection (9)(a)

 

shall not be made before October 1, 2002.

 

     (13) There is hereby appropriated an amount sufficient to make

 

the distributions required under subsections (4) and (12) in the


 

2001-02 fiscal year for not to exceed $210,000,000.00 in qualified

 

agricultural loans. For each qualified agricultural loan for which

 

a distribution is made pursuant to subsection (12), the maximum

 

amount of investments authorized by subsection (4) shall be reduced

 

by an amount equal to 100% or more of the qualified agricultural

 

loan, as determined by the department of treasury, for which a

 

distribution is made pursuant to subsection (12).

 

     (14) Any money for purposes of qualified agricultural loans as

 

defined by subsection (9)(a)(ii) that has not been invested by the

 

state treasurer by October 1, 2002, shall increase the maximum

 

amount available under this section for qualified agricultural

 

loans as defined by subsection (9)(a)(i).

 

     (15) The state treasurer may take any necessary action to

 

ensure the successful operation of this section, including making

 

investments with financial institutions to cover the administrative

 

and risk-related costs associated with a qualified agricultural

 

loan.

 

     (16) Upon request by the department of treasury, a financial

 

institution shall forward a copy of any affidavits executed and

 

filed under this section to the department of treasury. The

 

financial institution and the department of treasury shall destroy

 

the affidavit or its copy after the qualified agricultural loan is

 

paid off.

 

     (17) If the recipient of a qualified agricultural loan as

 

defined by subsection (9)(a) receives a federal grant after the

 

receipt of a qualified agricultural loan under this section, then

 

any federal grant money remaining after all federal obligations are


 

met shall be allocated by the recipient to payment of the balance

 

of any outstanding loan made under this section.