A bond is a loan. With a loan like a mortgage, the collateral is your house. With Bonds, the collateral is the full faith, credit and taxing authority of the State. Since the state is the one that issues the bonds – instead of borrowing from a bank, it borrows from whoever is willing to buy the bonds -- it’s kind of like a GoFundMe (if a GoFundMe that you have to pay back existed.) The state promises to pay the money back within a specified time and at a specific interest rate.
There are a few kinds of bonds that the state can use. General Obligation bonds are the ones that the “bonding bill” uses. Our constitution lists the purposes the state can spend G.O. bond proceeds on – most commonly, to “acquire and better” public land and buildings, and make other public capital improvements. If the expenditure doesn’t fall within a category specified in the constitution, you can’t spend bonding proceeds on it.
The state can’t use bonding for everything. They must be for a public purpose, specified in law, authorized in the constitution, and mature in not more than 20 years.
Capital project. A capital project, in general, is to acquire or improve fixed assets, such as land or buildings. The fixed asset must be long-lived; bond counsel has suggested that the useful life be at least ten years. The improvements must be substantial, extend the useful life or substantially increase the value of the fixed asset, and not be predictable or recurring (as repairs would be). For example, a study or planning is not capital in nature, but design work for a site-specific capital project is.
Publicly owned. Bonds issued under the capital improvements provision may only be for publicly owned projects, whether state or local. “Publicly owned” includes projects of the Minnesota Historical Society, but not projects owned by public radio, public TV, Indian tribes, the federal government, or private sewage systems even if they will serve the public. Three-fifths vote. A law to authorize the issuance of state G.O. bonds for capital improvements must be enacted with at least a three-fifths vote of the House and the Senate.