System Procedures
Chapter 6 - Facilities Management
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Procedure 6.7.2 Leasing College or University Property for Non-College and University Activities

Part 1. Authority.

MnSCU has authority to lease real property under its control. Income from the lease of real property may be retained by the Board of Trustees, subject to the budgetary control of the Commissioner of Finance and Minnesota Statutes section 16A.695 (Exhibit A), Minnesota Statutes section 136F.06 and 136F.71, subd. 1.

Part 2. Leasing Property.

Leases shall generally be subject to a thirty (30)-day cancellation clause. A lease may not exceed five (5) years at a time without the approval of the State Executive Council. State property may not be leased out for more than twenty-five (25) years.

Part 3. Lease Proceeds.

Subpart A. Source of Funding. The source of funding for the capital expenditures for MnSCU real property and buildings affects the disposition of lease income. The source of the capital expenditures for MnSCU real property and buildings generally falls into five categories:

Proceeds from the sale of State General Obligation Bonds (State bond financed property) which were provided directly for college and university facilities or indirectly through school districts, joint technical college districts or intermediate districts prior to the merger;
State General Fund (not bond proceeds);
Proceeds from gifts, bequests, devises or endowments;
School district funds (some technical college property); and
MnSCU Revenue Bond Fund (certain state university facilities only).

Subpart B. Lease Proceeds from Property which Was Not Financed with State General Obligation Bonds. State colleges and universities can retain all proceeds from a lease of campus property where the property was acquired, constructed or bettered with any combination of funds from the State General Fund, the MnSCU Revenue Bond Fund, school district funds or proceeds from gifts, bequests, devises or endowments.
Subpart C. Lease Proceeds from State Bond-Financed Property.

General. State colleges and universities must comply with Minnesota Statutes section 16A.695 and the Order Amending Order of the Commissioner of Finance relating to Use and Sale of State Bond Financed Property dated July 20, 1995 (Exhibit B). Lease proceeds from MnSCU property acquired, constructed or bettered in whole or in part with the proceeds from state general obligation bonds (state bond financed property) must be allocated as follows:
- The colleges and universities may retain from the lease proceeds the amount needed and authorized to be used to pay the operating costs of the state bond financed property (as defined in 3 below).
- Any lease proceeds in excess of the amounts needed and authorized to be used to pay the operating costs must be paid to the Commissioner of Finance. (Minnesota Statutes section 16A.695 and the Order Amending Order of the Commissioner of Finance Relating to Use and Sale of State Bond Financed Property dated July 20, 1995.)
  
  Section 16A.695, subdivision 2 generally requires that lease proceeds from state bond financed property that are not needed to pay nor authorized to be used to pay the operating costs of the property must be paid to the Commissioner of Finance in the same proportion as the state bond financing is to the total public financing of the property, deposited in the state bond fund and used to pay or redeem or defease the bonds which were issued to finance the property.
The Commissioner of Finance's Approval of the Lease May Be Required.
- Leases of state bond financed property where the intended lessee is a public entity may be entered into between the college or university and the lessee without obtaining the approval of the Commissioner of Finance.
- Leases of state bond financed property where the intended lessee is not a public entity must be submitted to the Commissioner of Finance for approval not less than sixty (60) or ninety (90) days prior to the proposed date of execution of the lease. Such a lease is not effective unless approved by the Commissioner of Finance. The nature of the lease determines whether the lease must be submitted sixty (60) or ninety (90) days prior to its effective date. See Exhibit B, The Commissioner's Order, section 4.04 and 4.05.
Calculating Operating Expenses. Building operating costs may be calculated to include building operations staffing costs, maintenance, utilities, security, repair and alteration, and any other direct or indirect costs associated with the building operation. In calculating the rental costs, state colleges and universities may use a percentage of the total facilities costs of the campus or the total operating costs of the rental property. If only a portion of a building is being leased, a per square foot cost can be calculated for the leased space, plus proration of any common space.

Part 4. Reporting.

State colleges and universities will report both facility operating expenses and lease income in the proper fund as follows:

Operating expenses and lease income for facilities constructed or acquired in whole or in part with state bond proceeds must be reported in the state treasury general fund (Fund 105). Lease income from state bond financed facilities will be reported in the general fund appropriation account GEN using MnSCU receipt code 9749. Such reporting will ensure that lease income for state bond financed property can be verified for compliance with Minnesota Statute 16A.695 and consistently reported in the state accounting system.
Operating expenses and lease income for facilities constructed or acquired through MnSCU/state university revenue bond funds will be reported in the state university revenue bond fund.
Operating expenses and lease income for facilities using any other funds not included in 1 and 2 above will be reported in the state treasury fund account which was used for the original construction or acquisition.

Any departure from this procedure must be approved by the Vice Chancellor for Budget.