HB-5717, As Passed Senate, June 14, 2012

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5717

A bill to establish an agricultural loan origination program;

to authorize certain loan guarantees; to prescribe the powers and

duties of certain state agencies and officials; to provide for an

appropriation; and to repeal acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. This act shall be known and may be cited as the

"agricultural disaster loan origination program act of 2012".

Sec. 2. As used in this act:

(a) "Agricultural processing" means the enhancement or

improvement of the overall value of an agricultural commodity or of

an animal or plant product into a product of higher value,

including, but not limited to, marketing, agricultural processing,

transforming, or packaging.

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

farm produce, a plant designed for value-added agricultural

processing, or a retail sales establishment of a business engaged

in making retail sales directly to farmers with 75% or more of its

gross retail sales volume exempted from sales tax under section

4a(1)(e) of the general sales tax act, 1933 PA 167, MCL 205.54a.

the Michigan right to farm act, 1981 PA 93, MCL 286.472.

(d) "Financial institution" means a state or national bank, a

state or federally chartered savings and loan association, a state

or federally chartered savings bank, a state or federally chartered

credit union, or other regulated lending institution that maintains

a principal office or branch office in this state under the laws of

this state or the United States, including, but not limited to, an

entity of the federally chartered farm credit system.

(e) "Person" means an individual, partnership, corporation,

association, governmental entity, or other legal entity.

(f) "Production of agricultural goods" means commercial

farming, including, but not limited to, cultivation of the soil;

growing and harvesting of an agricultural, horticultural, or

floricultural commodity; dairying; raising of livestock, bees,

fish, fur-bearing animals, or poultry; or turf or tree farming.

(g) "Program" means the qualified agricultural loan

origination program established under this act.

(h) "Qualified agricultural loan" means a loan that is issued

under the program and that meets all of the following conditions:

(i) The loan is made to 1 of the following:

(A) A person that is engaged in and intending to remain

engaged in this state as an owner or operator of a farm in the

production of agricultural goods that suffered a loss of 25% or

more in major enterprises or production loss of 50% or more in any

1 crop on a farm located within this state.

(B) A person that is engaged and intending to remain engaged

in this state in an agricultural business of buying, exchanging,

processing, storing, or selling farm produce that suffered a 50% or

greater loss in volume of 1 commodity when compared with the

average volume of that commodity that the business handled in the

prior 3 years.

in this state in the business of making retail sales directly to

farmers with 75% or more of the person's gross retail sales volume

exempted from sales tax under section 4a(1)(e) of the general sales

tax act, 1933 PA 167, MCL 205.54a, that suffered a 50% or greater

reduction in gross retail sales volume subject to the exemption

under section 4a(1)(e) of the general sales tax act, 1933 PA 167,

MCL 205.54a, when compared with the person's average retail sales

volume subject to that exemption in the prior 3 years.

(ii) The loss described in subparagraph (i) is due to an

agricultural disaster recognized by the governor, occurring after

January 1, 2012.

(iii) The person receiving the loan under subparagraph (i)

certifies in an affidavit that that person's loss satisfies the

relevant requirements of subparagraph (i).

(i) "Qualified financial institution" means a financial

institution that has a physical location in this state or whose

House Bill No. 5717 as amended June 14, 2012

principal office is located in this state, or both.

Sec. 3. (1) The state treasurer may establish a qualified

agricultural loan origination program as provided in this act.

(2) The program shall meet all of the following:

(a) A qualified financial institution shall make qualified

agricultural loans before March 31, 2013.

(b) A person receiving a qualified agricultural loan shall pay

an interest rate authorized under this act and established by the

qualified financial institution.

administrative costs incurred by the qualified financial

institution equal to 5% of the original principal amount of the

loan. Loan origination fees shall be paid by this state in 5 equal

installments by September 30, <<2017>>.

(3) A qualified agricultural loan shall comply with all of the

following:

(a) Interest shall be set by the qualified financial

institution at a rate of 1% or at the rate of the 5-year United

States treasury note plus 1/4%.

(b) The term of the loan shall not be more than 5 years.

not occur before 24 months after the issuance of the loan.

(4) A qualified agricultural loan described in section

2(h)(i)(A) shall be equal to not more than the value of the crop

loss as certified by the producer in an affidavit demonstrating an

accurate and valid production loss. The qualified agricultural loan

shall not exceed the lesser of $400,000.000 or the value of the

crop loss minus insurance proceeds received by the owner or

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 $100,000.00, whichever is less.

(5) A qualified agricultural loan described in section

2(h)(i)(B) or (C) shall not exceed the lesser of the following:

(a) Eight hundred thousand dollars per facility.

(b) One million dollars per person applying for the loan.

Sec. 4. (1) The state treasurer may take any necessary action

to ensure the successful operation of the program, including, but

not limited to, entering into agreements with qualified financial

institutions related to the operation of the program and the

issuance of qualified agricultural loans.

(2) The attorney general shall approve as to legal form all

documents relating to the payment of a loan origination fee by this

state.

(3) Each qualified financial institution participating in the

program shall do both of the following:

(a) Report to the state treasurer the principal amount of

loans made under the program by March 31, 2013.

(b) File an affidavit with the state treasurer signed by a

senior executive officer of the qualified financial institution

stating that the qualified financial institution is in compliance

with the program and this act.

(4) Upon request by the state treasurer, a qualified financial

institution shall forward a copy of any affidavits executed by a

House Bill No. 5717 as amended June 14, 2012

person receiving a loan under this act to the state treasurer. The

qualified financial institution and the state treasurer shall

destroy the affidavit or its copy after the qualified agricultural

loan is repaid.

(5) The program is found and declared to be for a valid public

purpose.

Sec. 5. An amount sufficient to pay loan origination fees

under section 3, not to exceed $15,000,000.00, shall be expended if

it is appropriated to the department of treasury. Not more than

$3,000,000.00 of this amount shall be used for loans offered under

section 2(h)(i)(B) or (C). The appropriation authorized in this

subsection is a work project appropriation, and any unencumbered or

unallotted funds are carried forward into the following fiscal

year. The following is in compliance with section 451a(1) of the

management and budget act, 1984 PA 431, MCL 18.1451a:

(a) The purpose of the project is to provide financial

assistance to the agricultural sector of this state's economy and

to alleviate financial distress caused by crop damage and related

economic impacts through the program.

(b) The work project will be accomplished through the use of

payments to qualified financial institutions for qualified

agricultural loan origination fees for administrative costs

incurred by qualified financial institutions.

$15,000,000.00.

(d) The estimated completion date of the work project is

September 30, <<2017>>.