senate Bill S6985

Amended

Relates to the special powers of the environmental facilities corporation

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 11 / Apr / 2014
    • REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS
  • 28 / May / 2014
    • REPORTED AND COMMITTED TO FINANCE
  • 02 / Jun / 2014
    • 1ST REPORT CAL.1086
  • 03 / Jun / 2014
    • 2ND REPORT CAL.
  • 09 / Jun / 2014
    • ADVANCED TO THIRD READING
  • 12 / Jun / 2014
    • AMENDED ON THIRD READING (T) 6985A
  • 19 / Jun / 2014
    • PASSED SENATE
  • 19 / Jun / 2014
    • DELIVERED TO ASSEMBLY
  • 19 / Jun / 2014
    • REFERRED TO WAYS AND MEANS

Summary

Relates to the special powers of the environmental facilities corporation.

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Bill Details

See Assembly Version of this Bill:
A9789
Versions:
S6985
S6985A
Legislative Cycle:
2013-2014
Current Committee:
Law Section:
Public Authorities Law
Laws Affected:
Amd §§1285-j & 1285-m, Pub Auth L

Votes

6
0
6
Aye
0
Nay
0
aye with reservations
0
absent
0
excused
0
abstained
show Corporations, Authorities and Commissions committee vote details

Sponsor Memo

BILL NUMBER:S6985

TITLE OF BILL: An act to amend the public authorities law, in
relation to the special powers of the New York state environmental
facilities corporation

Purpose of the Bill:

The bill would permit the Environmental Facilities Corporation ("EFC")
to invest moneys held in the Clean Water State Revolving Fund
("CWSRF") and Drinking Water State Revolving Fund ("DWSRF") in a
broader array of debt securities.

Summary of Provisions:

Section 1 of the bill would amend Public Authorities Law ("PAL")
1285-j(6) to: (i) reduce the ratings requirement associated with EFC's
authorization to invest moneys within the CWSRF in obligations of
various New York State entities delineated in GML § 10(1)(f)(iv); and
(ii) permit EFC to invest CWSRF moneys in obligations of any agency,
instrumentality or governmental entity of another state rated in one
of the two highest rating categories by at least one nationally
recognized rating agency.

Section 2 of the bill would amend PAL § 1285-m(6) in a similar manner
as with the CWSRF to: (i) reduce the ratings requirement associated
with EFC's authorization to invest moneys within the DWSRF in
obligations of various New York State entities delineated in GML
10(1)(f)(iv),;and (ii) permit EFC to invest DWSRF moneys in
obligations of any agency, instrumentality or governmental entity of
another state rated in one of the two highest rating categories by at
least one nationally recognized rating agency.

Section 3 of the bill provides for an immediate effective date.

Existing Law:

PAL §§ 1285-j(6) and 1285-m(6) authorize EFC to invest moneys from the
CWSRF and the DWSRF-in obligations specifically identified in GML § 10
provided such obligations are rated by a nationally recognized rating
agency in one of its two highest rating categories.

GML § 10(1)(f)(iv) provides that in exchange for the deposit of public
funds, local governments may accept, as security, obligations issued
or fully insured by New York State, those issued by municipal
corporations, school districts and district corporations of New York
State and those issued by any public benefit corporation which under a
specific New York State statute may be accepted as security for
deposit of public funds.

Prior Legislative History:

This is a new bill.

Statement in Support:


New York's State Revolving Funds ("SRFs") are the largest in the
country with assets exceeding $13 billion. The SRFs are capitalized
through federal grants, State matching funds, repayments from prior
financings, proceeds from the issuance of bonds and investment income.
The SRFs provide funding for municipalities and other eligible
entities to construct clean water and drinking water infrastructure
projects throughout the state. A substantial portion of that funding
is generated through the issuance by EFC of bonds. In addition, EFC
places investments to support its bond issuances and to generate
interest income. The purpose of these investments is to enhance
bondholder security which preserves EFC's AAA credit ratings, and to
generate interest income which subsidizes funding costs for EFC's
borrowers.

EFC's investment portfolio exceeds $3 billion. Pursuant to PAL
1285-j(6) and 1285m(6), EFC is allowed to invest in obligations that
are specifically identified in GML § 10 but with the additional
requirement that all such investments must be rated "AA" by at least
one nationally recognized rating agency. By contrast, GML § 10, which
applies to all bcal governments in the State, does not impose the
universal "AA" rating requirement on investments by local government
entities. Indeed, with respect to the provision at issue in the bill
-- GML § 10(1)(f)(iv) - there is no ratings requirement imposed upon
municipalities.

The bill would amend PAL §§ 1285-j(6) and 1285-m(6) to reduce to "A"
the rating standard applicable to obligations delineated in G'ML
10(1)(f)(iv) for purposes of CWSRF and DWSRF investments: obligations
issued or fully insured or guaranteed by New York State, those issued
by municipal corporations, school districts and district corporations
of New York State, and those issued by any public benefit corporation
which under a specific New York State statute may be accepted as
security for deposit of public moneys. Reducing the rating in this
manner would allow EFC to invest in, and earn additional investment
income from a more diverse array of New York State entities.
Diversity is a positive attribute in an investment portfolio. The
reduced rating requirement comes with manageable risk given EFC's
experience and competence in assessing the creditworthiness of
governmental entities in the State.

In addition, this legislation adds a new paragraph (d) to PAL
1285-j(6) and 1285-m(6) permitting EFC to invest CWSRF and DWSRF
moneys in obligations of any agency, instrumentality or governmental
entity of another state rated in one of the two highest rating
categories by at least one nationally recognized rating agency. This
provision would broaden the scope of eligible investment securities
particularly by allowing EFC to invest in revenue bonds of
out-of-state issuers meeting the stated ratings criteria. These
issuers are increasingly issuing revenue bonds and notes to finance
projects that historically have been undertaken by the issuance of
general obligation bonds by state or local governments. Revenue bonds
are more plentiful than general obligation bonds, and in the case of
"essential service" bonds (such as water and sewer bonds) and other
dedicated-tax bonds, offer more yield without taking on significant
additional risk. As with the revenue bonds issued by EFC, many other
issuers of revenue bonds provide enhanced opportunities for investors,
often at higher rates of return or with other favorable terms.


Retaining the higher rating standard for this class of securities
further protects the investment portfolio from additional risk of
out-of-state investment.

By allowing CWSRF and DWSRF assets to be invested in these obligations
as discussed above, the SRF programs (including the participating
municipalities), will benefit from higher investment returns.

Budget Implications:

None.

Local Impact:

Increased earnings on CWSRF and DWSRF investments will benefit
municipalities throughout the state by making more capital available
to finance critical environmental infrastructure projects.

Effective Date:

The bill would take effect immediately.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  6985

                            I N  S E N A T E

                             April 11, 2014
                               ___________

Introduced  by Sen. GRISANTI -- (at request of the Environmental Facili-
  ties Corporation) -- read twice and ordered printed, and when  printed
  to  be  committed  to  the  Committee on Corporations, Authorities and
  Commissions

AN ACT to amend the public authorities law, in relation to  the  special
  powers of the New York state environmental facilities corporation

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Subdivision 6 of section 1285-j of the  public  authorities
law,  as  amended by chapter 307 of the laws of 2005, is amended to read
as follows:
  6. Moneys in  the  water  pollution  control  revolving  fund  may  be
invested  as  provided  in  subdivision  four  of section twelve hundred
eighty-four of this title and may be further invested (a) in  investment
agreements  continuously  secured  by  obligations with any insurance or
reinsurance company or corporate affiliate thereof rated by a nationally
recognized rating agency in one of its two highest categories, any bank,
trust company or broker or dealer, as defined by the securities exchange
act of 1934, which is a dealer in government bonds,  which  reports  to,
trades  with  and is recognized as a primary dealer by a federal reserve
bank and is a member of the securities investors protection corporation,
if, (i) such obligations securing such investment agreements  are  obli-
gations  as  set forth in section ten of the general municipal law, (ii)
such obligations are delivered to a  trustee  for  the  benefit  of  the
corporation  or,  with  respect  to moneys pledged under an indenture of
trust relating to bonds or notes of  the  corporation,  to  the  trustee
under  such indenture, or are supported by a safe keeping receipt issued
by a depository satisfactory to the corporation as applicable,  provided
that  such  investment  agreements  must  provide  that the value of the
underlying obligations shall be maintained at a  current  market  value,
calculated  no less frequently than monthly, of not less than the amount
deposited thereunder, (iii) a prior perfected security interest  in  the
obligations  which  are  securing such agreement has been granted to the
corporation, as applicable, and (iv) such obligations are free and clear

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD13980-03-4

S. 6985                             2

of adverse third party claims, or (b) in obligations  as  set  forth  in
section  ten  of the general municipal law, OTHER THAN THOSE OBLIGATIONS
SET FORTH IN SUBPARAGRAPH (IV) OF PARAGRAPH  F  OF  SUBDIVISION  ONE  OF
SECTION TEN OF THE GENERAL MUNICIPAL LAW, that are rated by a nationally
recognized rating agency in one of its two highest rating categories, OR
(C)  IN  OBLIGATIONS AS SET FORTH IN SUBPARAGRAPH (IV) OF PARAGRAPH F OF
SUBDIVISION ONE OF SECTION TEN OF THE GENERAL  MUNICIPAL  LAW  THAT  ARE
RATED BY A NATIONALLY RECOGNIZED RATING AGENCY IN ONE OF ITS THREE HIGH-
EST  RATING  CATEGORIES, OR (D) IN OBLIGATIONS OF ANY AGENCY, INSTRUMEN-
TALITY OR GOVERNMENTAL ENTITY OF ANOTHER STATE  THAT  ARE  RATED  BY  AT
LEAST  ONE NATIONALLY RECOGNIZED RATING AGENCY IN ONE OF ITS TWO HIGHEST
RATING CATEGORIES.
  S 2. Subdivision 6 of section 1285-m of the public authorities law, as
amended by chapter 307 of the laws  of  2005,  is  amended  to  read  as
follows:
  6.  Moneys  in  the  drinking  water revolving fund may be invested as
provided in subdivision four of section twelve  hundred  eighty-four  of
this title and may be further invested:
  (a)  in investment agreements continuously secured by obligations with
any insurance company or  reinsurance  company  or  corporate  affiliate
thereof rated by a nationally recognized rating agency in one of its two
highest  categories,  any  bank,  trust  company or broker or dealer, as
defined by the securities exchange act of 1934, which  is  a  dealer  in
government  bonds,  which reports to, trades with and is recognized as a
primary dealer by a federal reserve bank and is a member of the  securi-
ties  investors  protection  corporation,  if  such investment agreement
provides that:
  (i) such obligations securing such  investment  agreements  are  obli-
gations as set forth in section ten of the general municipal law;
  (ii) such obligations are to be delivered to a trustee for the benefit
of the corporation or, with respect to moneys pledged under an indenture
of  trust  or  trust  agreement relating to bonds or notes of the corpo-
ration, to the trustee under such indenture or trust agreement,  or  are
supported  by a safe keeping receipt issued by a depository satisfactory
to the corporation as applicable, provided that such  investment  agree-
ments must provide that the value of the underlying obligations shall be
maintained at a current market value, calculated no less frequently than
monthly, of not less than the amount deposited thereunder;
  (iii) a prior perfected security interest in the obligations which are
securing  such agreement has been granted to the corporation, such trus-
tee or such depository as applicable; and
  (iv) such obligations are  free  and  clear  of  adverse  third  party
claims; or
  (b)  in obligations as set forth in section ten of the general munici-
pal law, OTHER THAN THOSE OBLIGATIONS SET FORTH IN SUBPARAGRAPH (IV)  OF
PARAGRAPH  F  OF SUBDIVISION ONE OF SECTION TEN OF THE GENERAL MUNICIPAL
LAW, that are rated by a nationally recognized rating agency in  one  of
its two highest rating categories; OR
  (C) IN OBLIGATIONS AS SET FORTH IN SUBPARAGRAPH (IV) OF PARAGRAPH F OF
SUBDIVISION  ONE  OF  SECTION  TEN OF THE GENERAL MUNICIPAL LAW THAT ARE
RATED BY A NATIONALLY RECOGNIZED RATING AGENCY IN ONE OF ITS THREE HIGH-
EST RATING CATEGORIES; OR
  (D) IN OBLIGATIONS OF  ANY  AGENCY,  INSTRUMENTALITY  OR  GOVERNMENTAL
ENTITY OF ANOTHER STATE THAT ARE RATED BY AT LEAST ONE NATIONALLY RECOG-
NIZED RATING AGENCY IN ONE OF ITS TWO HIGHEST RATING CATEGORIES.

S. 6985                             3

  S  3.  This  act shall take effect immediately; provided, however that
the amendments to subdivision 6 of section 1285-j and subdivision  6  of
section  1285-m  of  the public authorities law made by sections one and
two of this act shall not affect the expiration and  reversion  of  such
subdivisions and shall expire and be deemed repealed therewith.

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