February 6, 2007, Introduced by Senators JELINEK, VAN WOERKOM, KAHN and GILBERT and referred to the Committee on Appropriations.
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 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 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 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 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) of
the single business tax act, 1975 PA 228, MCL 208.35, 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) of the single
business tax act, 1975 PA 228, MCL 208.35, 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.
(18) Notwithstanding any other provision of this section, an
owner-operator farmer or producer may request a suspension of
payments of an existing zero interest loan for 2 years under the
following qualifying circumstances:
(a) The borrower resides in a county that has been declared,
or is declared, to be an agricultural disaster by the United States
department of agriculture, upon the request of the governor.
(b) The borrower submits an application for a loan under the
United States department of agriculture loan program accompanied by
the appropriate documentation demonstrating that the borrower has
suffered an agricultural disaster for calendar year 2006.
(19) Upon application under the conditions described in
subsection (18), execution of the appropriate agreement between the
borrower and lender, and approval of both the lender and the
department of treasury, the lender may suspend the loan payments
for 2 years from the date of the execution of the agreement.