senate Bill S6985A

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:
A9789A
Versions:
S6985
S6985A
Legislative Cycle:
2013-2014
Current Committee:
Law Section:
Public Authorities Law
Laws Affected:
Amd §§1285-j & 1285-m, Pub Auth L

Sponsor Memo

BILL NUMBER:S6985A

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; and providing for the repeal of such
provisions upon the expiration thereof

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 the 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: 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; provided further that nothing contained in this act shall
be construed so as to extend the provisions of this act beyond
September. 30, 2017, when upon such date this act shall expire and the
provisions contained herein shall be deemed repealed.

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

                                 6985--A
    Cal. No. 1086

                            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 -- reported favorably from said committee and committed to
  the Committee on Finance -- reported favorably  from  said  committee,
  ordered  to  first  and  second  report,  ordered  to a third reading,
  amended and ordered reprinted, retaining its place  in  the  order  of
  third reading

AN  ACT  to amend the public authorities law, in relation to the special
  powers of the New York state environmental facilities corporation; and
  providing for the repeal of such provisions upon the expiration there-
  of

  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

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
S                                                          LBD13980-05-4

S. 6985--A                          2

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
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

S. 6985--A                          3

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 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; provided
further that nothing contained in this act shall be construed so  as  to
extend  the  provisions of this act beyond September 30, 2017, when upon
such date this act shall expire  and  the  provisions  contained  herein
shall be deemed repealed.

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