Section 42. (a) It is in the best interest of the commonwealth to promote the prosperity and general welfare of all citizens by enhancing cultural activities throughout the commonwealth by partially financing the acquisition, construction, expansion, renovation and repair of our cultural facilities. Preserving cultural resources may stimulate further investment in the arts, heritage, entertainment, humanities and interpretive sciences, which will increase employment and entrepreneurial opportunities for the citizens of the commonwealth and increase tourism to the regions where these facilities are located, including tourism from outside the commonwealth.

(b) (1) As used in this section and section 43, the following terms shall, unless the context clearly requires otherwise, have the following meanings:-

''Agency'', the Massachusetts Development Finance Agency.

''Applicant'', a cultural organization, as defined in this section, that has submitted an application for financial assistance from the fund.

''Committee'', the cultural facilities advisory fund committee.

''Cultural facility'', a building, structure or site that is, or will be, owned, leased or otherwise used by 1 or more cultural organizations and that is accessible to the public and exempt from income taxation pursuant to section 501 (c)(3) of the Internal Revenue Code. The term cultural facility may include, but shall not be limited to, museums, historical sites, zoos, aquariums, nature or science centers, theaters, concert halls, exhibition spaces, classrooms and auditoriums suitable for presentation of performing or visual arts. Municipally owned buildings, structures or sites must be a minimum of 50,000 square feet in size, of which at least 50 per cent is used as a cultural facility; provided, however, that if such building, structure or site is 125 years old or older and is significant in the history, archeology, architecture or culture of the nation, the commonwealth or the community in which it is located, it may be of any size. Public or private institutions of higher education may qualify if they demonstrate that their cultural facility provides service and open access to the community and the general public outside of the regular educational mission of the public or private institute of higher education and demonstrates financial need.

''Cultural organization'', a nonprofit, public or private, civic educational or professional organization or educational foundation which is primarily concerned with the arts, humanities, interpretive sciences or local arts and which is exempt from income taxation pursuant to section 501 (c)(3) of the Internal Revenue Code. Public or private institutions of higher education may qualify if they demonstrate that their cultural organization provides service and open access to the community and the general public outside of the regular educational mission of the public or private institute of higher education demonstrates and financial need.

''Director'', the executive director of the Massachusetts Development Finance Agency.

''Eligible project'', the acquisition, design, construction, repair, renovation, rehabilitation or other capital improvement or deferred maintenance of a cultural facility consistent with this section.

''Feasibility and technical assistance grant'', a direct grant of monies from the fund subject to matching grant requirements, to an applicant for payment of the costs and expenses related to the undertaking and completion of a planning and feasibility study for a proposed eligible project; provided, however, that no such grant shall exceed $50,000. The agency may award a feasibility and technical assistance grant only upon its finding that: (i) the project is an eligible project; (ii) there is a demonstrated need for the project; (iii) the project will benefit tourism in the local area; (iv) there is a demonstrated financial need for the grant or loan; (v) there is local support for the project; and (vi) if undertaken, the proposed project would qualify as an eligible project.

''Fund'', the Massachusetts Cultural Facilities Fund.

''Grant'', a direct grant of monies from the fund to an applicant for payment of the costs of an eligible project, except that the amount of any single grant awarded from the fund shall not exceed $5,000,000.

''Loan'', a direct loan of monies from the Fund to an applicant to finance a portion of the cost of an eligible project, except that the amount of any single loan awarded from the fund shall not exceed $5,000,000.

''Massachusetts cultural council'', a public instrumentality created pursuant to section 52 of chapter 10.

''Matching funding'', private or public monies donated or appropriated to an eligible project in the proportions to the qualified investment as set forth in subsection (c).

''Public body'', the commonwealth and any body politic and corporate of the commonwealth, including any political subdivision thereof, or any consortium of any contiguous subdivisions and any federal agency.

''Qualified investment'', a grant, including a feasibility grant, loan, guarantee or other financing or credit enhancement device provided under the Fund for an eligible project.

(2) There shall be the Massachusetts Cultural Facilities Fund, under the control of the agency, to which shall be credited, subject to appropriation, for any fiscal year in which revenues deposited into the Massachusetts Tourism Fund, established pursuant to section 35J of chapter 10, exceed the amounts deposited into the Massachusetts Tourism Fund in the previous fiscal year, 50 per cent of the increase in revenues beyond amounts received in the prior fiscal year by the Massachusetts Tourism Fund from the tax imposed by section 3 of chapter 64G, section 22 of chapter 546 of the acts of 1969 or any appropriation made pursuant to section 35J of chapter 10. In addition to the funds set forth in the preceding sentence, the fund shall be credited, subject to appropriation, in each fiscal year after the first appropriation to the fund, an additional amount not less than the previous fiscal year's appropriation. The fund shall also be credited in each fiscal year, subject to annual appropriation, an amount equal to the funds previously appropriated annually for payment of principal and interest on obligations issued for the rehabilitation, operation and maintenance of the Hynes convention center, or in no case less than $13,000,000 per annum. The fund shall also be credited with all bond proceeds, federal funds, private contributions, loans or other monies lawfully made available to the fund. The purpose of the fund shall be to make grants, and loans when appropriate, to finance eligible projects. Applicants may apply to the Fund for a feasibility and technical assistance grant, a grant and a loan for the acquisition, construction, expansion, renovation or repair of cultural, entertainment, public venues or other commercial facilities, and the agency may make a qualified investment in such a project upon its finding that: (i) the project is an eligible project; (ii) there is a demonstrated need for the project; (iii) the project will benefit tourism in the local area; (iv) there is a demonstrated financial need for the grant or loan; and (v) there is local support for the project. The agency shall hold the fund in a separate account, segregated from all other agency funds. Except as hereinafter provided, the agency may invest and reinvest the Fund and the income thereon: (i) in making qualified investments; (ii) in investing funds not required for immediate disbursement in the purchase of such securities as may be lawful investments for fiduciaries in the commonwealth; (iii) for paying binding obligations associated with the qualified investments which are secured by the fund as the same become payable; (iv) for paying the principal and interest on qualified investments secured by the fund or the payments of any redemption premium required to be paid when such obligations are redeemed prior to maturity; and (v) for the reasonable costs of administering the fund, provided that the costs shall not exceed 7.5 per cent of the total loans or grants made annually.

(3) To the extent feasible, the agency may issue bonds on behalf of the fund. Bond proceeds shall be used for the purposes authorized by this section. The bonds shall be issued as revenue bonds and shall be recourse only to the funds appropriated or otherwise contributed under this section and such reserve funds as may be expressly created to guarantee the same. The bonds shall not be general obligations of either the agency or the commonwealth. Bonds issued in furtherance of this section shall not be subject to, or otherwise included in, the principal amount of debt obligations issued under section 29.

(4) The agency shall adopt by-laws or rules necessary to establish a minimum reserve to be maintained by the fund for the purpose of ensuring the fulfillment of any obligations incurred as a result of any bonds issued by the agency on behalf of the Fund. No qualified investment may be made where the expenditure would reduce the fund's assets to an amount below the minimum reserve.

(5) The agency shall be reimbursed from the fund for all reasonable and necessary direct costs and expenses incurred in any fiscal year associated with its bond issuance, administration, management and operation of the fund, including reasonable staff time and out-of-pocket expenses and the reasonable and approved administrative costs incurred by the Massachusetts cultural council or such other qualified organization which the agency may contract for services. The agency is authorized to establish a minimum reserve, in addition to such reserve established pursuant to subsection (2), to be maintained by the fund for the purpose of ensuring the satisfaction of the agency's and its agents' administrative costs.

(c) The fund may make qualified investments in eligible projects. The fund may make grants to applicants for eligible projects. No grant shall be made pursuant to this section without the required matching funding. The amount of any single grant, other than a feasibility and technical assistance grant awarded from the fund, shall not exceed $5,000,000 per annum. Grants for a total value of:

(i) less than $1,000,000 shall be subject to a matching funding requirement of the amount of the grant;

(ii) greater than or equal to $1,000,000 and less than $2,500,000 shall be subject to a matching funding requirement of at least twice the amount of the grant;

(iii) greater than or equal to $2,500,000 but less than $4,000,000 shall be subject to a matching funding requirement of at least 3 times the amount of the grant; and

(iv) greater than or equal to $4,000,000 and not more than $5,000,000 shall be subject to a matching funding requirement of at least 4 times the amount of the grant.

Notwithstanding any general or special law to the contrary, as a condition of accepting a grant from the fund, an applicant shall agree that, whenever ownership of any property which was acquired or improved with a grant from the Fund is transferred to a for-profit entity or to an unrelated nonprofit entity which stops operating the property as a cultural facility, the full amount of such grant shall be repaid immediately to the fund. The agency may take a security interest or such other interest in the eligible project as may be necessary to secure its potential repayment rights.

(d) Notwithstanding any general or special law to the contrary, the agency shall enter into a contract with the Massachusetts cultural council or another qualified organization to manage some or all of the grant administration process on behalf of the agency. The agency may enter into a contract with another qualified organization to manage some or all of the grant administration process only if the Massachusetts cultural council fails to adequately perform its duties under a duly executed contract, ceases to exist, or for just cause. If the agency enters into a contract with another qualified organization, the agency shall submit, in writing, the reasons for the termination of its contract with the Massachusetts cultural council to the chairs of the joint committee on economic development and emerging technologies and the chairs of the joint committee on tourism, arts and cultural development. A contract executed pursuant to this section shall address, but shall not be limited to: proposed rules and guidelines for the fund, providing technical assistance to potential applicants, reviewing and evaluating applications and providing findings and recommendations to the committee as to which grant applications should be approved and awarded and which should be denied. The agency shall establish rules relative to the Fund, with the advice of the committee. Copies of the rules, and any modifications or amendments thereto, shall be delivered to the clerk of the house of representatives, the clerk of the senate, the chairs of the house and senate committees on ways and means, the chairs of the joint committee on economic development and emerging technologies and the chairs of the joint committee on tourism, arts, and cultural development.

(e) The agency shall annually, not later than December 31, submit a report on the Fund's progress to the clerk of the house of representatives, the clerk of the senate, the chairs of the house and senate committees on ways and means, the chairs of the joint committee on economic development and emerging technologies and the chairs of the joint committee on tourism, arts and cultural development. The annual report shall include: (i) a list of grant or loan recipients from the fund; (ii) the associated amounts received by each recipient; (iii) the amount of non-state funding leveraged by the Fund; (iv) the purpose of the grants or loans from the Fund; (v) an annual statement of cash inflows and outflows detailing the sources and uses of the Fund; (vi) a forecast of future payments based on current binding obligations; and (vii) a detailed breakdown of the purposes and amounts of administrative costs charged to the Fund.