Capital Budget FAQ

Preliminary submissions of state agency capital budget requests are due mid-June, with final submissions due mid-October, in odd-numbered years. The Governor submits a proposed capital budget to the Legislature in January of even-numbered years. For the 2022 capital budget, key dates for agencies are:

Year	Timeframe	Action
2021	June 18	Deadline for state agency preliminary capital project submissions in CBS.
	June - October	MMB staff review requests and conduct site visits as needed.
	July 15	State agency preliminary capital budget requests published and submitted to the Legislature.
	October 15	Deadline for state agency final capital project submissions in CBS.
2022	January 18	State agency final capital budget requests and Governor’s recommended capital budget published and submitted to the Legislature.

All requests must be entered into the Capital Budget System (CBS) with adequate information to allow for meaningful consideration of the project by the Governor and Legislature. CBS is a web-based application, and all users must be authorized by MMB. CBS opens for project submissions in early May of odd-numbered years.  MMB publishes state agency preliminary requests, final requests, and the Governor’s capital budget recommendations using data entered in CBS.

All of the information we need to publish the capital budget documents is collected in various fields in CBS. You will need to submit the following information:

• Requests by amount, in priority order (if more than one request), for 2022, 2024, and 2026
  
• Brief summary of each project request 
• Detailed description of the project 
• Rationale for why the project is needed 
• Timeline for project 
• Other relevant background information 
• All funding sources (past and requested) 
• Detailed listing of costs 
• Answers to applicable statutory requirements 
• Strategic planning summary 
• Agency profile

The information you provide will be compiled, published on MMB's website, and provided to the Governor and Legislature for consideration, and is used to publish the Governor’s recommended capital budget.

MMB staff reviews each project based on various criteria. For example:

• Is the project eligible for general obligation bond funding? 
• Has all required information been entered in CBS, including statutory requirements? 
• Do Funding Sources equal Project Costs (projects cannot be submitted if totals do not match)? 
• What problem does the project address? 
• Can the project be completed in phases? 
• Can the project be completed with non-state funds? 
• Will the project require additional appropriations to operate? 
• Does the project serve a public purpose, and will the project be owned and operated by a public entity? 
• If requesting asset preservation appropriations, what is the total deferred maintenance backlog? 
• Will the project maximize energy efficiency, use sustainable resources, and/or make government more accessible?

If you are submitting a capital budget request, you will work with Minnesota Management and Budget, which:

• Reviews proposals for completeness and bondability
• Collects and disseminates information and provides instructions and form
• Calculates the cost of proposed bonding packages
• Forecasts debt service costs of future bonding bills based on a ten-year average of bond authorizations
• Assists with implementation issues after enactment

If you are submitting a capital budget request that impacts a state building, seeks funding for asset preservation, or seeks funding for predesign, you will work with the Department of Administration, which:

• Coordinates facility condition assessments (useful in asset preservation)
• Oversees capital improvements to state-owned buildings
• Facilitates compliance with sustainable building guidelines for state-owned buildings
• Reviews predesign before design begins
• Predesign Manual for Capital Budget Projects
• bee.yang@state.mn.us / 651-201-2393

If you are submitting a project with significant energy efficiency potential, which may be eligible for the Guaranteed Energy Savings Program, you will work with the Department of Administration and the Department of Commerce:

• Capital projects are expected to employ sustainable building guidelines and high-performance building practices (M.S. 16B.325). Projects should be:
  • Energy, cost, and resource efficient
  • Healthy, durable, and adaptable
• Agencies should identify and quantify energy savings opportunities in asset preservation lists
• Executive Order 11-12 seeks to advance statewide goals of reduced building energy use, and to capture economic and environmental benefits of energy conservation work in state buildings through:
  • Guaranteed Energy Savings Program (M.S. 16C.144)
  • State Energy Improvement Financing Program (M.S. 16B.322)

If you are submitting a request for construction, remodeling/renovation, or relocation, you will work with MN.IT:

• Consolidated agencies consult with MNIT CBTOs, MNIT teams, and enterprise services staff to ensure that appropriate technology and information security capabilities are in place to support in-office work, full-time telework, and hybrid telework.
• Non-consolidated agencies who consume MNIT services are encouraged to consult with MNIT enterprise services staff ahead of any significant change to office locations and their mix of in-office and remote work, to ensure that appropriate technology and information security capabilities are in place to support such changes.

The Minnesota Constitution defines how GO bond proceeds can be used. Article XI, Section 5, of the Minnesota Constitution contains the authority for incurring public debt (G.O. bonds). Subdivision (a) authorizes debt “to acquire and to better public lands and buildings and other public improvements of a capital nature, and to provide money to be appropriated or loaned to any agency or political subdivision of the state for such purposes.” 

In other words… 

• The project must be for a public purpose 
• The project must be publicly owned 
• The purpose of the bonds must be clearly set forth in the law 
• Project activities must constitute capital expenditures 

What do these standards mean? 

Public Purpose – 

• Must achieve public goal or benefit 
• Dominant benefit may not be to private entity 
• Public entity is responsible for implementation of the public purpose 

Publicly Owned – 

• A public entity must own the property 
• No grants may be made to private entities, including nonprofits or tribal governments 
• If not publicly owned outright, “ownership” must be in fee or a lease or easement for at least 125% of the property’s useful life 

Clearly Defined In Law – 

If the project is enacted in a capital investment bill: 

• The law must identify specific project or refer to a statute establishing a specific governmental program (which may fund multiple projects) 
• The appropriation must specify all desired project activities 
• If certain activities are not specified in the appropriation, funds may not be spent on them even if they are capital expenditures 

Capital Expenditures – 

See the following question for more information on this standard.

The basic test for capital expenditures requires that the project be long lived (10 years or more) and that expenditures be for a fixed asset (land, building, capital equipment or other improvement to land). 

The constitution requires GO bond proceeds to be spent on activities such as “acquisition”, “betterment”, and “improvements”.

Examples of eligible activities include:

• Purchase of land, buildings, easements
• Predesign and design
• Construction (including environmental testing and site preparation)
• Major renovation, roof reconstruction and replacement, major window replacement (if add to value or life of building)
• Fixtures, furnishings and equipment, only if installed
  • Upon initial construction, or
  • During major renovation to make the facility usable for the first time by the state agency or grant recipient
• Staff costs for project management if pursuant to a plan approved by MMB 
• Art – up to 1% of appropriation for building construction or alteration (M.S. §16B.35)
  

While this list is not exhaustive, the following examples are ineligible for GO bond proceeds:

• Options to purchase land or buildings 
• Fixtures, furnishings and equipment that don’t fit into categories above 
• General studies to evaluate the need for a capital project 
• Educational, promotional or informational costs incurred for a project not yet sited 
• Computer and financial modeling for a project not yet sited 
• Master planning 
• All relocation and moving costs 
• Operating and maintenance costs 
• Betterments to leaseholds with less than a 10-year term 
• Software and data management systems 
• Personal computers 
• Marketing expenses

There are restrictions on the use of GO bond financed property. “Private use” is any direct or indirect use by a nongovernmental person or entity. Bond-financed facilities used for private business threatens the tax-exempt status of the state’s bonds. If you anticipate private use in your proposed facility project, please involve MMB at the earliest opportunity by contacting budget.finance.mmb@state.mn.us to discuss options for avoiding private use pitfalls. The following are some examples of private use: 

• Rented skyboxes in sports facilities 
• Concessions 
• Naming rights, broadcast rights, advertising, sponsorships 
• Leased space 
• Office buildings 
• Convention center/arenas 
• Airport terminals 
• Parking garages 
• Academic institutions 
• Stadiums 
• Business incubators 
• Cell phone towers, solar panels, electric charging stations 

In these cases, a use agreement may be necessary. A use agreement is a lease, management or other contract between the public owner of bond financed property and another party operating or using it. 

• Governed by M.S. §16A.695, Commissioner’s Order and Use Contracts Checklist 
• MMB approval required 
• Must carry out a government program 
• The term of the use agreement must be substantially less than the property’s useful life (≤ 50% is rule of thumb) 
• The user must pay for operation and maintenance costs in most cases 
• A portion of any revenue received goes to pay off state GO bonds, if more revenue is received than is needed to cover operating costs

Several statutes govern asset preservation: 

• State Agency Asset Preservation: §16B.307, DNR: §84.946, HEAPR: §135A.046 
• CAPRA: §16A.632 (for unanticipated emergencies) 

Asset preservation appropriations: 

• Cannot be used to buy land or buy or construct buildings, additions, or major new improvements 
• May only be used for capital costs on a currently owned capital asset 
• May include up to 10% for design costs for eligible projects in anticipation of future asset preservation projects 
• Requires property to be subject to M.S. §16A.695 and Commissioner’s Order 

Projects considered most needed and appropriate under §16B.307 include: 

• Life safety hazard removal like building code violations or structural defects 
• Hazardous substance removal or containment 
• Major projects would include roofs, windows, tuck-pointing, mechanical or electrical systems, utility infrastructure, tunnels, site renovations necessary to support building use, and structural components needed to preserve the exterior and interior of existing buildings 
• Parking structure renovation

If your agency administers a grant for a local project, a grant agreement must be in place before bond proceeds can be spent. Grant agreements are not required if an appropriation is made to an agency for its own capital needs. MMB has prepared generic forms for state agencies to use.

Forms are slightly different depending on the funding source:

• GO bond funds disbursed under an agency program 
• Other GO bond-funded projects 
• General fund (cash) 

The grantee must have independent statutory authority to operate the project (for example, via charter or statute). M.S. §16A.695 and Commissioner’s Order do not create new authorizations, and bonding legislation alone does not normally provide authority to operate the project or program. 

Grant recipients must demonstrate to the granting agency that they have an ability and plan to fund the program intended for the facility. 

If operated by a public entity:

• Entity must submit to granting agency a budget item or resolution supporting operation 

If operated by a private party:

• Granting agency must approve initial program implementation plan 
• Annually, granting agency must review program evaluation report and budget 

All financing must be in place to complete the project before the grant will be made available (M.S. §16A.502). The grant must clarify what the “project” is; e.g., if just predesign, funding for construction is not needed. 

MMB’s Capital Grants Manual lists acceptable documentation for different funding sources.

Agencies should plan to have funds encumbered within 4 years of the appropriation. The Commissioner of MMB issues a cancellation report on January 1 of each year in accordance with M.S. §16A.642.

• The cancellation report lists all bond financed and general fund capital appropriations enacted at least 4 years previously with unspent and unencumbered balances
• The 1/1/2027 report will show amounts from the 2022 bonding bill and earlier
• Such balances are cancelled as of July 1 of the year of the report
• Cancelled balances go to repay state bonds

“Bond financed property” or “BFP” is property acquired or bettered wholly or partly with GO bond proceeds.

• BFP stays BFP until 125% of useful life elapses or it is sold pursuant to §16A.695 and Commissioner’s Order
• A declaration must be recorded and provided to MMB to evidence restrictions on use and sale

Special rules apply to sales:

• Sale must comply with statutory authority, M.S. §16A.695 and Commissioner’s Order
• MMB approval of the sale is required
• Property must no longer be usable or needed for the government program
• Sale must be for fair market value (appraisal or public bidding)
• First dollar from the sale goes to the state to repay the bond fund
• See Sale of Bond Financed Property Checklist for all requirements

Capital Budget System

• Agency User Authorization Form (pdf)
• Statewide Administrative Portal - System Log In
  
• Capital Budget System Agency User Guide (PDF version)

Instructions, Policies, and Checklists

• Instructions and templates
  
• Capital grants manual for local governments 
• Capital grant agreements, instructions, and checklists 
• Financial policies and procedures for capital projects

Legal Information 

• MN Constitution, Article XI, Section 5 (bonding authority for public works)
• M.S. 16A.695 (GO bonding law) 
• Fourth Amended Commissioner’s Order (GO bonding implementation) (PDF version)
• Bond counsel opinions

• M.S. 16B.323: Solar Energy in State Buildings. Up to 5% of appropriation to be used on solar energy system- any new building that receiving bond funds, includes additions and major interior configuration or energy system.

• M.S. 16B.325: Apply Sustainable Guidelines (B3-MSBG) for new buildings & major renovations

• M.S. 216B.241 Sustainable Building SB 2030 requirements

• Contact/support: https://www.b3mn.org/

• M.S. 16B.326: Heating and Cooling Systems. Written plan w/predesign to consider providing Geothermal & Solar Energy Heating & Cooling Systems on new or replacement HVAC systems

• M.S. 16B.335, subd. 1: Notification to Legislature. Notification to select House & Senate members prior to final plans. Legislative response is needed prior to preparing final construction documents.

• M.S. 16B.335, subd. 3: Predesign submittal. Predesign packages must be submitted to the Dept. of Administration for approval. Statute exempts certain projects from this requirement.

• M.S. 16B.335, subd. 4: Energy Conservation Standards. Projects must comply with standards in M.S. 216C.19 to 216C.20 and https://www.dli.mn.gov/business/codes-and-laws/2020-minnesota-state-building-codes

• M.S. 16B.335, subd. 3c: MINNCORR. Consider the use of MINNCOR products in specifications. 

• M.S. 177.42-44: Prevailing Wage. Contractor must pay prevailing wages and hours of labor.

• M.S. 16A.695: State Bond Financed Property Requirements. Various requirements related to leases and management contracts, sale of property, program funding, ground leases, and grant agreements.

• M.S. 16C.285: Responsible Contractor. Minimum requirements for contractors in order to receive contracts for projects.

• M.S. 16A.502: Non-state Commitments. If an appropriation is less than the total project cost, a sufficient contribution/match from non-state sources is required.

• M.S. 16A.86: State Share of Local Projects. State appropriation cannot exceed half the total project cost. Certain types of jurisdictions and projects are exempt.

• M.S. 363A.36: Certificates of Compliance for Public Contracts. Affirmative action plan certificate of compliance required for state agency contracts exceeding $100,000 and political subdivision contracts exceeding $250,000 that use state GO bonds.

• M.S. 363A.44: Equal Pay Certificate. Equal pay certificate of compliance required for state agency contracts exceeding $500,000 and political subdivision contracts exceeding $1,000,000 that use state GO bonds.

• Capital investment bills: Requirement to use U.S.-made steel (only if included in enacted legislation)

Submissions of local government and political subdivision capital budget requests are due mid-June, in odd-numbered years.  Final edits are due mid-October, in odd-numbered years. The Governor submits a proposed capital budget to the Legislature in January of even-numbered years. For the 2022 capital budget, key dates for local governments and political subdivisions are:

Year	Timeframe	Action
2021	June 18	Deadline for all local government capital project submissions in CBS.
	June - October	MMB staff review requests and conduct site visits as needed.
	July 15	Local government capital budget requests published and submitted to the Legislature.
	October 15	Deadline for final edits to local government capital projects in CBS.
2022	January 18	Local government final capital budget requests and Governor’s recommended capital budget published and submitted to Legislature.

All requests must be entered into the Capital Budget System (CBS) with adequate information to allow for meaningful consideration of the project by the Governor and Legislature. CBS is a web-based application, and all users must be authorized by MMB. CBS opens for project submissions in early May of odd-numbered years. MMB publishes local governments' requests and the Governor’s capital budget recommendations using data entered in CBS.

All of the information we need to publish the capital budget documents is collected in various fields in CBS. You will need to submit the following information:

• Requests by amount, in priority order (if more than one request)
• Brief summary of each project request
• Detailed description of the project
• Rationale for why the project is needed
• Timeline for project
• Other relevant background information
• All funding sources (past and requested)
• Detailed listing of costs
• Answers to applicable statutory requirements
• Resolution of support from the governing body
  

The information you provide will be compiled, published on MMB's website, and provided to the Governor and Legislature for consideration, and is used to publish the Governor’s recommended capital budget.

MMB staff reviews each project based on various criteria. For example:

• Is the project eligible for general obligation bond funding? 
• Has all required information been entered in CBS, including statutory requirements? 
• Do Funding Sources equal Project Costs (projects cannot be submitted if totals do not match)? 
• What problem does the project address? 
• Can the project be completed in phases? 
• Can the project be completed with non-state funds? 
• Will the project require additional appropriations to operate? 
• Does the project serve a public purpose, and will the project be owned and operated by a public entity? 
• If requesting asset preservation appropriations, what is the total deferred maintenance backlog? 
• Will the project maximize energy efficiency, use sustainable resources, and/or make government more accessible?

If you are submitting a capital budget request, you will work with Minnesota Management and Budget, which:

• Reviews proposals for completeness and bondability
• Collects and disseminates information and provides instructions and form
• Calculates the cost of proposed bonding packages
• Forecasts debt service costs of future bonding bills based on a ten-year average of bond authorizations
• Assists with implementation issues after enactment

If you are submitting a capital budget request that seeks funding for predesign, you will work with the Department of Administration, which:

• Facilitates compliance with sustainable building guidelines for state-owned buildings 
• Reviews predesign before design begins 
• Predesign Manual for Capital Budget Projects 
• Contact: bee.yang@state.mn.us / 651-201-2393

The Minnesota Constitution defines how GO bond proceeds can be used. Article XI, Section 5, of the Minnesota Constitution contains the authority for incurring public debt (G.O. bonds). Subdivision (a) authorizes debt “to acquire and to better public lands and buildings and other public improvements of a capital nature, and to provide money to be appropriated or loaned to any agency or political subdivision of the state for such purposes.” 

In other words… 

• The project must be for a public purpose 
• The project must be publicly owned 
• The purpose of the bonds must be clearly set forth in the law 
• Project activities must constitute capital expenditures 

What do these standards mean? 

Public Purpose – 

• Must achieve public goal or benefit 
• Dominant benefit may not be to private entity 
• Public entity is responsible for implementation of the public purpose 

Publicly Owned – 

• A public entity must own the property 
• No grants may be made to private entities, including nonprofits or tribal governments 
• If not publicly owned outright, “ownership” must be in fee or a lease or easement for at least 125% of the property’s useful life 

Clearly Defined In Law – 

If the project is enacted in a capital investment bill: 

• The law must identify specific project or refer to a statute establishing a specific governmental program (which may fund multiple projects) 
• The appropriation must specify all desired project activities 
• If certain activities are not specified in the appropriation, funds may not be spent on them even if they are capital expenditures 

Capital Expenditures – 

See the following question for more information on this standard.

The basic test for capital expenditures requires that the project be long lived (10 years or more) and that expenditures be for a fixed asset (land, building, capital equipment or other improvement to land). 

The constitution requires GO bond proceeds to be spent on activities such as “acquisition”, “betterment”, and “improvements”.

Examples of eligible activities include:

• Purchase of land, buildings, easements
• Predesign and design
• Construction (including environmental testing and site preparation)
• Major renovation, roof reconstruction and replacement, major window replacement (if add to value or life of building)
• Fixtures, furnishings and equipment, only if installed
  • Upon initial construction, or
  • During major renovation to make the facility usable for the first time by the state agency or grant recipient
• Staff costs for project management if pursuant to a plan approved by MMB 
• Art – up to 1% of appropriation for building construction or alteration (M.S. §16B.35)
  

While this list is not exhaustive, the following examples are ineligible for GO bond proceeds:

• Options to purchase land or buildings 
• Fixtures, furnishings and equipment that don’t fit into categories above 
• General studies to evaluate the need for a capital project 
• Educational, promotional or informational costs incurred for a project not yet sited 
• Computer and financial modeling for a project not yet sited 
• Master planning 
• All relocation and moving costs 
• Operating and maintenance costs 
• Betterments to leaseholds with less than a 10-year term 
• Software and data management systems 
• Personal computers 
• Marketing expenses

There are restrictions on the use of GO bond financed property. “Private use” is any direct or indirect use by a nongovernmental person or entity. Bond-financed facilities used for private business threatens the tax-exempt status of the state’s bonds.  If you anticipate private use in your proposed facility project, please involve MMB at the earliest opportunity by contacting budget.finance.mmb@state.mn.us to discuss options for avoiding private use pitfalls.  Certain IRS safe harbors may apply, so please involve MMB at the earliest opportunity. The following are some examples of private use: 

• Rented skyboxes in sports facilities
• Concessions
• Naming rights, broadcast rights, advertising, sponsorships
• Leased space
• Office buildings
• Convention center/arenas
• Airport terminals
• Parking garages
• Academic institutions
• Stadiums
• Business incubators
• Cell phone towers, solar panels, electric charging stations

In these cases, a use agreement may be necessary. A use agreement is a lease, management or other contract between the public owner of bond financed property and another party operating or using it.

• Governed by M.S. §16A.695, Commissioner’s Order and Use Contracts Checklist
• MMB approval required
• Must carry out a government program
• The term of the use agreement must be substantially less than the property’s useful life (≤ 50% is rule of thumb)
• The user must pay for operation and maintenance costs in most cases
• A portion of any revenue received goes to pay off state GO bonds, if more revenue is received than is needed to cover operating costs

Grant agreements are required when a state agency funds a grant to another public entity. MMB has prepared generic forms for state agencies to use.

Forms are slightly different depending on the funding source:

• GO bond funds disbursed under an agency program 
• Other GO bond-funded projects 
• General fund (cash) 

The grantee must have independent statutory authority to operate the project (for example, via charter or statute). M.S. §16A.695 and Commissioner’s Order do not create new authorizations, and bonding legislation alone does not normally provide authority to operate the project or program. 

Grant recipients must demonstrate to the granting agency that they have an ability and plan to fund the program intended for the facility. 

If operated by a public entity:

• Entity must submit to granting agency a budget item or resolution supporting operation 

If operated by a private party:

• Granting agency must approve initial program implementation plan 
• Annually, granting agency must review program evaluation report and budget 

All financing must be in place to complete the project before the grant will be made available (M.S. §16A.502). The grant must clarify what the “project” is; e.g., if just predesign, funding for construction is not needed. 

MMB’s Capital Grants Manual lists acceptable documentation for different funding sources.

A political subdivision cannot be a mere fiscal agent or conduit through which general obligation (GO) bond funds flow. While outside organizations may work with a political subdivision to request GO bond funds for a project that has a public purpose, the political subdivision must have a qualifying ownership interest in the project and must remain responsible for operating the bond financed property and the public program associated with it, even if the outside group abandons the project or property. A political subdivision can have a qualifying ownership interest through fee title or through a ground lease or easement interest that meets the requirements of the GO Checklist for Ground Leases and Easements found here: https://mn.gov/mmb/debt-management/capital-projects/grant-agreements/checklists.jsp. When an outside group wants to be involved with the operation of a bond financed project, the political subdivision that owns the project can enter into a use agreement with the outside group permitting the outside group to carry out the governmental program. Such a use agreement must meet the requirements of the GO Checklist for Use Agreements found here: https://mn.gov/mmb/debt-management/capital-projects/grant-agreements/checklists.jsp.

Nonprofit organizations that have a capital budget request, but the project will not be owned by a political subdivision, can share project information with MMB and the Legislature to request funding from a funding source that does not involve GO bonds. Such requests are most often for general fund cash. Please reach out to the MMB Capital Budget Coordinator, Marianne.Conboy@state.mn.us, for a form that organizes nonprofit requests for projects that will not be owned by a political subdivision. It is important that the entity requesting funds for the project, and receiving the state funds in the bonding bill, has the ownership interest in the project. 

Local projects in the bonding bill are commonly required to provide non-state matching funds as a condition of receiving the state capital appropriation, pursuant to M.S. §16A.86, subd.4. Sometimes, the bill language for enacted capital appropriations specifies that the recipient may not receive the capital appropriation until the recipient has a commitment for or receipt of matching funds. Non-state funding may include federal, local, and private funds.

Capital projects must also meet the “full funding requirement” in M.S. §16A.502. In many cases, additional financing is needed to complete a project above and beyond the amount of the state appropriation plus matching requirements named in the appropriation bill. In these cases, the grantee must similarly demonstrate that all financing is in place to complete the project. Applicants should become familiar with M.S. §16A.502, which states, in part, “If a state appropriation or grant for a capital project or project phase is not sufficient, by itself, to complete the project or project phase, and thus requires a commitment from other sources: (1) the commitment, including any required match, must be in an amount that, when added to the appropriation or grant, is sufficient to complete the project or project phase; and (2) the appropriation or grant is not available until the commissioner [of MMB] has determined that the commitment is sufficient.”

The grant recipient must provide sufficient documentation to the granting agency to verify that it has complied with all matching requirements. For further information, please refer to the financial operating policy 0302-01. Specific questions on matching requirements should be forwarded to the Capital Bonding Coordinator at MMB.

Local governments that receive a grant or a loan made from state general obligation bond proceeds often want to be reimbursed from the bond proceeds for expenses that were incurred in the past and for which they have already paid their contractor from other funds. However, Minnesota’s general obligation bonds are tax-exempt. Federal tax law regulates the issuance and the use of tax-exempt bonds by states and local governments. The tax regulations limit the state’s ability to use the proceeds of tax-exempt bonds to reimburse costs that have already been paid from other funds. 

Any expenses incurred by a political subdivision for a project prior to the effective date of the bonding bill  must remain funded by sources other than general obligation bond proceeds, such as local funds. Non-state expenditures such as these can count toward matching funds and/or full funding for the project. Until state funds are appropriated and a grant agreement is entered into, the grantee begins work at its own risk and is responsible for understanding and complying with all applicable public contracting rules.

Grantees should plan to have a grant agreement executed within 4 years of the appropriation. The commissioner of MMB issues a cancellation report on January 1 of each year.

• The cancellation report lists all bond and general fund capital appropriations enacted at least 4 years previously with unspent and unencumbered balances
• The 1/1/2027 report will show amounts from 2022 bonding bill and earlier
• Such balances are cancelled as of July 1 of the year of the report
• Cancelled balances go to repay state bonds

“Bond financed property” or “BFP” is property acquired or bettered wholly or partly with GO bond proceeds.

• BFP stays BFP until 125% of useful life elapses or it is sold pursuant to §16A.695 and Commissioner’s Order
• A declaration must be recorded and provided to MMB to evidence restrictions on use and sale

Special rules apply to sales:

• Sale must comply with statutory authority, M.S. §16A.695 and Commissioner’s Order
• MMB approval of the sale is required
• Property must no longer be usable or needed for the government program
• Sale must be for fair market value (appraisal or public bidding)
• First dollar from the sale goes to the state to repay the bond fund
• See Sale of Bond Financed Property Checklist for all requirements

Capital Budget System

• Local User Authorization Form (PDF version)
• Statewide Administrative Portal - System Log In
  
• Capital Budget System Local User Guide (PDF version)

Instructions, Policies, and Checklists 

• Instructions and templates
• Capital grants manual for local governments  
• Capital grant agreements, instructions, and checklists  
• Financial policies and procedures for capital projects

Legal Information 

• MN Constitution, Article XI, Section 5 (bonding authority for public works)
• M.S. 16A.695 (GO bonding law)
• Fourth Amended Commissioner’s Order (GO bonding implementation) (PDF version)
• Bond counsel opinions

• M.S. 16B.323: Solar Energy in State Buildings. Up to 5% of appropriation to be used on solar energy system- any new building that receiving bond funds, includes additions and major interior configuration or energy system.

• M.S. 16B.325: Apply Sustainable Guidelines (B3-MSBG) for new buildings & major renovations

• M.S. 216B.241 Sustainable Building SB 2030 requirements

• Contact/support: https://www.b3mn.org/

• M.S. 16B.326: Heating and Cooling Systems. Written plan w/predesign to consider providing Geothermal & Solar Energy Heating & Cooling Systems on new or replacement HVAC systems

• M.S. 16B.335, subd. 1: Notification to Legislature. Notification to select House & Senate members prior to final plans. Legislative response is needed prior to preparing final construction documents.

• M.S. 16B.335, subd. 3: Predesign submittal. Predesign packages must be submitted to the Dept. of Administration for approval. Statute exempts certain projects from this requirement.

• M.S. 16B.335, subd. 4: Energy Conservation Standards. Projects must comply with standards in M.S. 216C.19 to 216C.20 and https://www.dli.mn.gov/business/codes-and-laws/2020-minnesota-state-building-codes

• M.S. 16B.335, subd. 3c: MINNCORR. Consider the use of MINNCOR products in specifications.

• M.S. 177.42-44: Prevailing Wage. Contractor must pay prevailing wages and hours of labor.

• M.S. 16A.695: State Bond Financed Property Requirements. Various requirements related to leases and management contracts, sale of property, program funding, ground leases, and grant agreements.

• M.S. 16C.285: Responsible Contractor. Minimum requirements for contractors in order to receive contracts for projects. 

• M.S. 16A.502: Non-state Commitments. If an appropriation is less than the total project cost, a sufficient contribution/match from nonstate sources is required.

• M.S. 16A.86: State Share of Local Projects. State appropriation cannot exceed half the total project cost. Certain types of jurisdictions and projects are exempt.

• M.S. 363A.36: Certificates of Compliance for Public Contracts. Affirmative action plan certificate of compliance required for state agency contracts exceeding $100,000 and political subdivision contracts exceeding $250,000 that use state GO bonds.

• M.S. 363A.44: Equal Pay Certificate. Equal pay certificate of compliance required for state agency contracts exceeding $500,000 and political subdivision contracts exceeding $1,000,000 that use state GO bonds.

• Capital investment bills: Requirement to use U.S.-made steel (only if included in enacted legislation)