BILL NUMBER:S7555

TITLE OF BILL:
An act
to amend the local finance law, in relation to making technical
amendments to the time frame within which a governing board of the
municipality or school district authorized to incur debt to finance a
deficit may make adjustments to its proposed budget; updating the list
of types of obligations which may be issued by municipalities, school
districts or district corporations; and to amend chapter 386 of the laws
of 2010, amending the local finance law relating to the private sale of
bonds, in relation to eliminating the expiration and repeal of such
provisions

PURPOSE:
To correct two technical errors in the Local
Finance Law and to repeal the expiration of the increase in the amount
of bonds a municipality, school district or district corporation
annually may sell at private sale in any fiscal year.

SUMMARY OF PROVISIONS:
Section 1 of this bill would
amend Paragraph d of Section 10.10 of the Local Finance Law to delete
the phrase "within fifteen days after receipt of any such
recommendations."

              

Section 2 of this bill would add a new Subdivision 12 to Paragraph a of
Section 20.00 of the Local Finance Law to update the list of types of
obligations which may be issued by municipalities, school districts or
district corporations to add deficiency notes.

Section 3 of this bill would amend Section 14 of Chapter 386 of the Laws
of 2010 to repeal the sunset provision that would have the increase in
the amount of bonds a municipality, school district or district
corporation annually may sell at private (negotiated) sale in any fiscal
year from $51 million to $55 million expire on June 1, 2012.

PRIOR LEGISLATIVE HISTORY:
New bill.

JUSTIFICATION:
Section 1 of this bill is a technical
amendment to language added by Chapter 341 of the Laws of 2007, which
enacted Section 10.10 of the Local Finance Law. Section 10.10 provides
uniform requirements applicable to municipalities and school districts
that are authorized by general or special law to contract indebtedness
to finance the liquidation of operating deficits. Paragraph d of Section
10.10 sets forth a procedure for the submission of the proposed budget
of the municipality or school district to the State Comptroller (and, in
the case of a school district, the Commissioner of Education) for review
and recommendation. Among other things, Paragraph d provides that "no
later than five days prior to the adoption of the budget" the
municipality or school district must review those recommendations and
either make adjustments to the proposed budget consistent with the
recommendations or explain in writing the reasons for the rejection of
any recommendation. Later in the same sentence as the quoted provision,


the phrase "within fifteen days after receipt of any such
recommendations" appears, creating an ambiguity as to the proper
timeframe for the municipality or school district to act. It is
apparent that the inclusion of this phrase in Paragraph d was
inadvertent and likely a carryover from an earlier version of the bill
that was enacted. The phrase "within fifteen days after the receipt of
any such recommendations" is inconsistent with the budget review
timeframe otherwise set forth in Paragraph d of Section 10.10 of the
Local Finance Law and should be deleted so that the statute is
consistent and clear.

Section 2 of this bill makes a technical amendment relating to Chapter
386 of the Laws of 2010, which, among other things, added Local Finance
Law § 29.20 to authorize municipalities, school districts and district
corporations to issue deficiency notes to finance a deficiency in any
fund or funds arising from revenues being less than the amount estimated
in the budget for the current fiscal year. Paragraph a of Section 20.00
of the Local Finance Law, which lists by name the types of bonds and
notes that a municipality, school district or district corporation may
issue, also should have been amended at that time, but was not. This
bill will correct that oversight.

Section 3 of this bill relates to the increase from $1 million to $5
million in the maximum amount of bonds that municipalities, school
districts and district corporations may sell at private sale annually,
which was enacted into law by Chapter 386 of the Laws of 2010. Pursuant
to Section 14 of Chapter 386 of the Laws of 2010, the increased maximum
amount is scheduled to expire on June 1, 2012. Section 6 of Chapter 386
of the Laws of 2010 required the State Comptroller to prepare a report
on the private sales of bonds conducted pursuant to Paragraph b of
Section 63.00 of the Local Finance Law, including recommendations with
respect to such private sales. Section 6 also required municipalities,
school districts and district corporations to file reports of each
private sale with the Comptroller.

In December 2011, the Comptroller prepared a report on private sales of
bonds by municipalities, school districts and district corporations as
required by Chapter 386 of the Laws of 2010
(http://www.osc.state.ny.us/localgov/pubs/research/
privatesalesbonds.pdf). As noted in this report, the increase in the
private sale cap did not significantly increase the number of localities
that issued bonds at private sale. Also, given that a number of the
sales over the $1 million threshold were conducted through some form of
competitive process that included the receipt of bids, it is unclear
that a formal public sale, as would have been required under the law
prior to the amendment in Chapter 386 of the Laws of 2010, would have
yielded appreciably different results. The increase in the cap did give
local issuers with relatively small bond issues additional options on
how best to gain market access. The enhanced flexibility afforded by
this private sale option also allowed issuers the opportunity to
premarket their bonds to both retail and institutional investors,
potentially expanding the pool of investors. Finally, the report noted
that private bond sales are particularly useful to smaller local
governments that generally conduct bond sales involving smaller
principal amounts and may find the cost of obtaining a bond rating
and/or the cost of publishing a formal notice of sale to be economically
prohibitive. In consideration of these points, the Comptroller's report


recommended keeping the statutory private sale cap of $5 million in
place and repealing the sunset provision. This bill would implement the
recommendation made in such report.

The Comptroller urges the passage of this proposed legislation.

FISCAL IMPLICATIONS FOR STATE:
This bill has no significant State fiscal impact.

EFFECTIVE DATE:
This act shall take effect
immediately; provided, however, if section three of this act shall
become a law on or after June 1, 2012 such section shall take effect
immediately and shall be deemed to have been in full force and effect on
and after June 1, 2012.