Capital Investment Replacement Requirements Move Forward at the Legislature

Some city projects would be required to establish capital infrastructure replacement accounts to prove their financial ability to maintain and potentially replace state-funded projects.

A version of language that would place new requirements on cities that receive state funding for infrastructure projects has been added to a bill that would provide general funds for some capital infrastructure projects. Similar proposals have been discussed in each of the past four legislative sessions. The current language can be found in article 2, section 6 of HF 5162 (Rep. Fue Lee, DFL-Minneapolis).

Details of the proposal

The proposed requirement would apply to any local infrastructure project that receives a direct appropriation from the state, which would include those that are specifically named in a line item. Other local projects that would be subject to the requirement include those in the governor’s capital budget proposal and specific legislative earmarks added during the capital budget appropriation process at the Legislature.

Cities that have infrastructure projects funded in that manner would be expected to create an account that is limited in use to the rehabilitation, expansion, replacement, or preservation of the infrastructure being financed or to address a capital project for a different capital asset in the city as part of their contractual agreement with the state. If those accounts are not maintained, significant financial penalties could be levied against the city.

Exemptions

Several important exemptions to the proposed requirement are provided:

• It would not apply to infrastructure funds passing through state agencies and their programs, only to direct appropriations to a city.
• It would not apply if the city does an annual long-term budget schedule or capital improvement plan that assesses the condition, maintenance needs, and replacement of its infrastructure.
• It would not apply if the city’s adjusted net tax capacity per capita is below the median level among cities in the state.

Next steps

The League has been actively raising concerns on this issue at every hearing over the past four sessions and continues to work with the Legislature, Gov. Tim Walz’s office, and state agencies to prevent a situation where a city would need to have enough access to funding and financing to build the project without state assistance in order to qualify for state assistance.

The work to finalize the bonding and general fund infrastructure bills has just started but will need to be completed quickly. Cities with questions or concerns about this requirement should contact their legislators.

Read more news articles.