senate Bill S7185

Relates to the sale of bonds and notes in NYC, the refunding of bonds, the down payment for projects financed by bonds, variable rate debt, and interest rate exchange agreements in NYC

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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

  • 02 / May / 2014
    • REFERRED TO LOCAL GOVERNMENT
  • 03 / Jun / 2014
    • REPORTED AND COMMITTED TO FINANCE
  • 20 / Jun / 2014
    • COMMITTEE DISCHARGED AND COMMITTED TO RULES
  • 20 / Jun / 2014
    • ORDERED TO THIRD READING CAL.1673
  • 20 / Jun / 2014
    • SUBSTITUTED BY A9463

Summary

Relates to the sale of bonds and notes in NYC, the refunding of bonds, the down payment for projects financed by bonds, variable rate debt, and interest rate exchange agreements in NYC.

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Bill Details

See Assembly Version of this Bill:
A9463
Versions:
S7185
Legislative Cycle:
2013-2014
Law Section:
Local Finance Law
Laws Affected:
Amd §§54.10, 57.00, 90.00, 107.00 & 54.90, Loc Fin L; amd §10-A, §2 of Chap 868 of 1975; amd §5, Chap 142 of 2004

Votes

9
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9
Aye
0
Nay
0
aye with reservations
0
absent
0
excused
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abstained
show Local Government committee vote details

Sponsor Memo

BILL NUMBER:S7185

TITLE OF BILL: An act to amend the local finance law, in relation to
the sale of bonds and notes of the city of New York, the refunding of
bonds, the down payment for projects financed by bonds, variable rate
debt, and interest rate exchange agreements of the city of New York;
to amend the New York state financial emergency act, for the city of
New York, in relation to a pledge and agreement of the state; and to
amend chapter 142 of the laws of 2004, amending the local finance law
relating to interest rate exchange agreements of the city of New York
and refunding bonds of such city, in relation to the effectiveness
thereof

PURPOSE:

To ensure the City of New York an efficient and cost-effective access
to capital markets.

SUMMARY OF PROVISIONS:

Section one of this bill would amend section 54.10(a) of the Local
Finance Law to extend until 2015 the provisions of such section
authorizing the City to sell its obligations through negotiated
agreement, to provide for compensation for services rendered in
connection with the private sale of obligations by selling such
obligations at a discount, to provide for redemption of its
obligations prior to maturity at prices and pursuant to terms
determined by the City, and to include the costs of a negotiated
underwriting and other costs of issuance of its obligations in the
cost of the object or purpose being financed by such obligations.

Section two would amend LFL section 57.00(a) to extend until 2015 the
City's authority to sell bonds at private sale.

Section three would amend LFL section 90.00(g)(3) to extend until 2015
the City's authorization to exchange refunding bonds for outstanding
bonds under certain circumstances.

Section four would amend LFL section 107.00(d)(8) to extend until 2015
the inapplicability of the down payments provisions of that section to
certain bonds and notes of the City.

Section five of the bill would amend LFL section 54.90(a) to extend
through July 15th, 2015 the authorization for the City to issue bonds
or notes with variable rates of interest.

Section six of the bill would amend LFL section 54.90(d)(1) to extend
through July 15th, 2015 the authorization for the City to enter into
interest rate exchange agreements (commonly referred to as "swaps") or
similar agreements.

Section seven would amend section 10-a (1) of the New York State
Financial Emergency Act for the City of New York (FEA) to extend until
2015 the authority of the City to include the pledge and agreement of
the State in agreements with holders or guarantors of City
obligations.


Section eight would amend section 5 of Chapter 142 of the laws of 2004
to extend until 2015 the amendment to section 90.10(b)(2)(a) of the
LFL providing that for purposes of calculating present value savings
in a refund transaction, the interest payments on variable rate bonds
may be the fixed rate payable by the City in a related interest rate
agreement, if any, or as found by the Finance Board of the City of new
York (Finance Board); and in the case of refunding of variable rate
bonds with variable rate bonds, if determined by the Finance Board,
present value savings would not need to be demonstrated.

JUSTIFICATION:

This bill includes several elements that will be instrumental in
ensuring that the City of new York has efficient and cost-effective
access to the capital markets. First, in 1978, the legislature enact
various provisions of the LFL and the FEA to respond to the financial
emergency existing in the City and to improve marketability of City
obligations by authorizing their sale on terms consistent with current
market practices. Certain of these provisions contained sunset
provisions, and in 1982, the legislature extended certain sunset
provisions and introduced other changes necessary for the continued
successful marketing of City obligation, some of which were applicable
to other municipal issuers as well. Since 1986, the legislature has
extended these sunset provisions annually.

This network of legislation has enabled the City to continue to sell
its obligations in the public credit markets during both stable and
difficult times. Indeed, the size of the City's capital program and
the unpredictability of market conditions make the ability to sell
debt through negotiated sales crucial to the City. If the City is to
continue to undertake necessary capital projects, it is essential that
it retain the ability to utilize modern financing techniques. The
extension of these sunset provision therefore is essential to the
City's fiscal health.

Second, by extending through July 15th, 2015 the authorization of the
City to enter into interest rate exchange agreements or "swaps",
whether or not relating to variable-rate bonds, the Legislature would
be confirming the utility of these agreements that it recognized when
it created this swap authorization in Chapter 93 of the Laws of 2002.

Thirdly, with respect to interest on variable rate bonds used in a
refunding, by extending through July 15th, 2015 the amendment made to
section 90.10(b)(2)(a) of the LFL, the City would continue to be able
to demonstrate present value savings by permitting the rate on
variable rate bonds to be the fixed rate payable in a related interest
rate exchange agreement or as found by the Finance Board.
Furthermore, this would extend the City's ability to refund variable
rate bonds with other variable rate bonds without reference to the
present value savings test. The extension of these provisions and the
enhanced flexibility in entering into exchange agreements are
essential if the City is to efficiently access the public credit
markets.

Accordingly, the Mayor urges the earliest possible favorable
consideration of this proposal by the Legislature.


LEGISLATIVE HISTORY:

Chapter 79 of the Law of 2013.

EFFECTIVE DATE:

This act shall take effect immediately.

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

                                  7185

                            I N  S E N A T E

                               May 2, 2014
                               ___________

Introduced  by  Sen.  GOLDEN -- read twice and ordered printed, and when
  printed to be committed to the Committee on Local Government

AN ACT to amend the local finance law, in relation to the sale of  bonds
  and  notes  of  the city of New York, the refunding of bonds, the down
  payment for projects financed by bonds, variable rate debt, and inter-
  est rate exchange agreements of the city of New York; to amend the New
  York state financial emergency act, for  the  city  of  New  York,  in
  relation  to a pledge and agreement of the state; and to amend chapter
  142 of the laws of 2004, amending the local finance  law  relating  to
  interest  rate exchange agreements of the city of New York and refund-
  ing bonds of such city, in relation to the effectiveness thereof

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

  Section  1. The opening paragraph of paragraph (a) of section 54.10 of
the local finance law, as amended by chapter 79 of the laws of 2013,  is
amended to read as follows:
  To facilitate the marketing of any issue of bonds or notes of the city
of  New York issued on or before June thirtieth, two thousand [fourteen]
FIFTEEN, the mayor and comptroller of such  city  may,  subject  to  the
approval  of  the state comptroller and the limitations on private sales
of bonds and notes, respectively, provided by law:
  S 2. The opening paragraph of paragraph a  of  section  57.00  of  the
local  finance  law,  as  amended  by chapter 79 of the laws of 2013, is
amended to read as follows:
  Bonds shall be sold only at public sale and  in  accordance  with  the
procedure set forth in this section and sections 58.00 and 59.00 of this
title, except as otherwise provided in this paragraph. Bonds may be sold
at private sale to the United States government or any agency or instru-
mentality  thereof, the state of New York municipal bond bank agency, to
any sinking fund or pension fund of the municipality, school district or
district corporation selling such bonds, or, in the case of sales by the
city of New York prior to July first, two thousand  [fourteen]  FIFTEEN,
also to the municipal assistance corporation for the city of New York or
to any other purchaser with the consent of the mayor and the comptroller

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD14956-01-4

S. 7185                             2

of  such  city and approval of the state comptroller, or, in the case of
sales by the county of Nassau prior to December thirty-first, two  thou-
sand seven, also to the Nassau county interim finance authority with the
approval  of the state comptroller, or, in the case of sales by the city
of Buffalo prior to June thirtieth, two thousand thirty-seven,  also  to
the  Buffalo  fiscal  stability authority with the approval of the state
comptroller, or, in the case of bonds or other obligations of a  munici-
pality issued for the construction of any sewage treatment works, sewage
collecting  system,  storm  water  collecting  system,  water management
facility, air pollution control facility or solid waste disposal facili-
ty, also to the New York state environmental facilities corporation, or,
in the case of bonds or other obligations of a school district or a city
acting on behalf of a city school district in a city having a population
in excess of one hundred twenty-five thousand but less than one  million
inhabitants according to the latest federal census, issued to finance or
refinance  the  cost  of  school  district  capital facilities or school
district capital equipment, as defined in section sixteen hundred seven-
ty-six of the public authorities law, also to the dormitory authority of
the state of New York. Bonds of a river improvement or drainage district
established by or under the supervision of the  department  of  environ-
mental conservation may be sold at private sale to the state of New York
as  investments for any funds of the state which by law may be invested,
provided, however, that the rate of interest on any such bonds  so  sold
shall  be  approved  by  the  water power and control commission and the
state comptroller. Bonds may also be sold at private sale as provided in
section 63.00 of this title. No bonds shall be sold on option  or  on  a
deferred  payment plan, except that options to purchase, effective for a
period not exceeding one year, may be given:
  S 3. Subdivision 3 of paragraph  g  of  section  90.00  of  the  local
finance law, as amended by chapter 79 of the laws of 2013, is amended to
read as follows:
  3.  Outstanding bonds may, pursuant to a power to recall and redeem or
with the consent of the holders  thereof,  be  exchanged  for  refunding
bonds (i) if the refunding bonds are to bear interest at a rate equal to
or  lower than that borne by the bonds to be refunded or (ii) if, in the
case of the city of New York prior to July first,  two  thousand  [four-
teen] FIFTEEN, the annual payment required for principal and interest on
the  refunding bond is less than the annual payment required for princi-
pal and interest on the bond to be refunded, in each  case  such  annual
payments  to  be determined by dividing the total principal and interest
payments due over the remaining life of the bond by the number of  years
to maturity of the bond or (iii) if the bonds to be refunded were issued
by  the city of New York after June thirtieth, nineteen hundred seventy-
eight and prior to July  first,  two  thousand  [fourteen]  FIFTEEN  and
contain  covenants  referring  to  the  existence  of the New York state
financial control board for the city of New York or any other  covenants
relating  to  matters  other  than  the  prompt payment of principal and
interest on the obligations when due and the  refunding  bond  omits  or
modifies any such covenant.
  S  4.  Subdivision  8  of  paragraph  d of section 107.00 of the local
finance law, as amended by chapter 79 of the laws of 2013, is amended to
read as follows:
  8. Notwithstanding any other provision of law, the  financing  by  the
city of New York prior to July first, two thousand [fourteen] FIFTEEN of
any  object  or purpose which has a period of probable usefulness deter-
mined by law by the issuance of any bonds or notes,  including  (i)  the

S. 7185                             3

issuance  of bonds or notes to obtain reimbursement for funds heretofore
advanced for the object or purpose for which  the  bonds  or  notes  are
being issued, (ii) the issuance of bonds or notes to redeem notes previ-
ously  issued for the object or purpose for which the bonds or notes are
being issued or (iii) the issuance of bonds to refund  bonds  previously
issued for the object or purpose for which bonds are being issued.
  S  5.  The  closing  paragraph  of paragraph a of section 54.90 of the
local finance law, as amended by chapter 79 of  the  laws  of  2013,  is
amended to read as follows:
  Notwithstanding the foregoing, whenever in the judgment of the finance
board  of the city of New York the interest of such city would be served
thereby, the city of New York may without further approval  issue  bonds
or  notes, on or before July fifteenth, two thousand [fourteen] FIFTEEN,
with interest rates that vary in accordance with a formula or  procedure
and  are  subject to a maximum rate of interest set forth or referred to
in the bonds or notes and may provide  the  holders  thereof  with  such
rights  to  require  the city or other persons to purchase such bonds or
notes or renewals thereof from the proceeds of  the  resale  thereof  or
otherwise from time to time prior to the final maturity of such bonds or
notes as the finance board of the city of New York may determine and the
city  may resell, at any time prior to final maturity, any such bonds or
notes acquired as a result of the exercise  of  such  rights;  provided,
however,  that  at no time shall the total principal amount of bonds and
notes issued by the city of New York pursuant to this  paragraph  (other
than  bonds  and  notes (1) bearing interest at rates and for periods of
time that are specified without reference to future events or contingen-
cies, or (2) described in section 136.00 of this article)  exceed  twen-
ty-five  percent of the limit prescribed by section 104.00 of this arti-
cle.
  S 6. The opening paragraph of subdivision 1 of paragraph d of  section
54.90  of the local finance law, as amended by chapter 79 of the laws of
2013, is amended to read as follows:
  On or before July fifteenth, two thousand [fourteen] FIFTEEN the mayor
and comptroller of the city of New York may:
  S 7. Subdivision 1 of section 10-a of section 2 of chapter 868 of  the
laws  of  1975,  constituting the New York state financial emergency act
for the city of New York, as amended by chapter 79 of the laws of  2013,
is amended to read as follows:
  1.  In  the  event that after the date on which the provisions of this
act become operative, any notes or bonds are issued by the city prior to
July 1, [2014] 2015, or any bonds are issued by a state financing  agen-
cy,  the state of New York hereby authorizes the city and authorizes and
requires such state financing agency to include a pledge  and  agreement
of the state of New York in any agreement made by the city or such state
financing  agency with holders or guarantors of such notes or bonds that
the state will not take any action which will (a)  substantially  impair
the authority of the board during a control period, as defined in subdi-
vision  twelve  of section two of this act as in effect on the date such
notes or bonds are issued (i) to  approve,  disapprove,  or  modify  any
financial  plan  or  financial  plan modification, including the revenue
projections (or any item thereof)  contained  therein,  subject  to  the
standards set forth in paragraphs a, c, d, e and f of subdivision one of
section  eight  of this act as in effect on the date such notes or bonds
are issued and paragraph b of such subdivision as in effect from time to
time, (ii) to disapprove a contract of the city or a  covered  organiza-
tion  if the performance of such contract would be inconsistent with the

S. 7185                             4

financial plan or to approve or disapprove proposed short-term or  long-
term borrowing of the city or a covered organization or any agreement or
other  arrangement  referred  to in subdivision four of section seven of
this act, or (iii) to establish and adopt procedures with respect to the
deposit  in  and  disbursement from the board fund of city revenues; (b)
substantially impair the authority of  the  board  to  review  financial
plans,  financial  plan  modifications,  contracts  of  the  city or the
covered organizations and proposed short-term or long-term borrowings of
the city and the covered organizations;  (c)  substantially  impair  the
independent  maintenance  of  a  separate  fund  for the payment of debt
service on bonds and notes of the city; (d) alter the composition of the
board so that the majority of the voting members of the  board  are  not
officials  of  the state of New York elected in a state-wide election or
appointees of the governor; (e) terminate the  existence  of  the  board
prior  to  the time to be determined in accordance with section thirteen
of this act as in effect on the date such notes or bonds are issued; (f)
substantially modify the requirement that the  city's  financial  state-
ments be audited by a nationally recognized independent certified public
accounting  firm  or consortium of firms and that a report on such audit
be furnished to the board; or (g) alter  the  definition  of  a  control
period set forth in subdivision twelve of section two of this act, as in
effect  on  the  date  such  notes or bonds are issued, or substantially
alter the authority of the board, as set forth in  said  subdivision  to
reimpose  or  terminate  a  control  period; provided, however, that the
foregoing pledge and agreement shall be of no further force  and  effect
if  at any time (i) there is on deposit in a separate trust account with
a bank, trust company or other fiduciary  sufficient  moneys  or  direct
obligations of the United States or obligations guaranteed by the United
States, the principal of and/or interest on which will provide moneys to
pay  punctually when due at maturity or prior to maturity by redemption,
in accordance with their terms, all principal of  and  interest  on  all
outstanding  notes  and bonds of the city or such state financing agency
containing this pledge and agreement and irrevocable  instructions  from
the  city  or such state financing agency to such bank, trust company or
other fiduciary for such payment of such  principal  and  interest  with
such moneys shall have been given, or (ii) such notes and bonds, togeth-
er  with  interest  thereon,  have been paid in full at maturity or have
otherwise been refunded, redeemed, defeased, or discharged; and provided
further that the foregoing pledge and agreement shall be of  full  force
and effect upon its inclusion in any agreement made by the city or state
financing agency with holders or guarantors of such notes or bonds.
  Upon  payment  for such obligations issued pursuant to this act by the
original and all subsequent holders inclusion of the foregoing  covenant
shall  be  deemed conclusive evidence of valuable consideration received
by the state and city for such covenant and of reliance upon such pledge
and agreement by any such holder. The state hereby grants any such bene-
fited holder the right to sue the state in a court of  competent  juris-
diction and enforce this covenant and agreement and waives all rights of
defense based on sovereign immunity in such an action or suit.
  S  8. Section 5 of chapter 142 of the laws of 2004, amending the local
finance law relating to interest rate exchange agreements of the city of
New York and refunding bonds of such city, as amended by chapter  79  of
the laws of 2013, is amended to read as follows:
  S  5.  This  act shall take effect immediately, provided, that section
three of this act shall expire and be deemed repealed  July  15,  [2014]
2015.

S. 7185                             5

  S 9. Separability. If any clause, sentence, paragraph, section or part
of  this act shall be adjudged by any court of competent jurisdiction to
be invalid, such judgment shall not affect,  impair  or  invalidate  the
remainder thereof, but shall be confined in its operation to the clause,
sentence,  paragraph,  section  or part thereof directly involved in the
controversy in which such judgment shall have been rendered.
  S 10. This act shall take effect immediately.

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