Senate Bill S4263

2009-2010 Legislative Session

Increases the limit which may be invested in any one company or agency of the federal government which issues certain bonds, notes or other evidences of indebtedness

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Archive: Last Bill Status - In Senate Committee Finance Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 06, 2010	referred to finance
Apr 20, 2009	referred to finance

co-Sponsors

2009-S4263 (ACTIVE) - Details

Current Committee:: Senate Finance
Law Section:: State Finance Law
Laws Affected:: Amd §§98, 56, 57, 60, 69-c & 98-a, St Fin L; amd §423, R & SS L; amd §51, Chap 57 of 2008; amd §90.10, Loc Fin L; amd §§3234 & 2976, Pub Auth L

2009-S4263 (ACTIVE) - Summary

Increases the limit on certain state investment limits from two hundred fifty million dollars to five hundred million dollars; relates to holding of investments of the common retirement fund in the name of the common retirement fund; relates to variable rate refunding and authorized investments for the state's short term investment pool; and relates to the administration of the local government assistance corporation.

2009-S4263 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S4263

 TITLE OF BILL :

An act to amend the state finance law, in relation to increasing the
limit on certain investments from two hundred fifty to five hundred
million dollars; to amend the retirement and social security law, in
relation to the holding of investments of the common retirement fund
in the name of the common retirement fund; to amend the state finance
law and the local finance law, in relation to variable rate refunding
and in relation to authorized investments for the state's short term
investment pool; to amend chapter 57 of the laws of 2008 amending the
state finance law and other laws relating to variable bond rates, in
relation to making certain provisions thereof permanent; and to amend
the public authorities law, in relation to administration of the local
government assistance corporation and to exempting public authorities
and industrial development agencies from the bond issuance charge in
certain instances

 PURPOSE :

This bill would allow for increased dollar amounts the Comptroller is
permitted to hold in certain agencies, corporations and bank or trust
companies. This bill would also provide the comptroller the option of
holding investments of the common retirement fund in the name of such
fund or in the name of the trustee of such fund. Finally, this bill

would make various amendments to the State Finance Law and the Local
Finance Law in order to make it easier for the State its local
governments and public authorities that issue State supported debt to
refund variable rate bonds.

 SUMMARY OF PROVISIONS :;

Section 1 would amend subdivisions 3-a, 18 and 19 of section 98 of the
State Finance Law to increase from $250 million to $500 million the
maximum investment that the Comptroller may hold in (i) the debt of a
single federal agency which receives the highest rating of all
independent rating agencies that rate its obligations; (ii)
investments of a certain defined corporation; and (iii) investments in
banker's acceptance of anyone bank or trust company.

Section 2 would amend subdivision a of section 423 of the Retirement
and Social Security Law to allow the comptroller to hold investments
in the name of the common retirement fund in addition to his or her
name as trustee of the fund.

Section 3 would amend paragraph (a) of subdivision 2 of section 56 of
the State Finance Law to provide that when the State issues fixed rate
bonds to refund variable rate bonds, the determinations as to whether
there is a present value savings or an actual savings in any year
shall be made assuming that interest will be paid on the variable rate
bonds being refunded at the maximum rate permissible under the
variable rate documents.

Section 4 would remove from paragraph (a) of subdivision 4 of section
57 of the State Finance Law the current limitations on the amount of
premium that the State can receive on its sale of bonds, and section 5
would make a similar amendment to paragraph (a) of subdivision 4 of
section 60 of the State Finance Law with respect to bonds issued for
housing and urban renewal purposes.

Section 6 of the bill would amend section 69-c of the State Finance
Law governing public authorities issuing State-supported debt to
clarify that the new provisions assuming present value savings on
variable to fixed rate refundings would also apply to the
determination of whether there is a savings in every year.
Section 7 of the bill would remove the sunset on certain other
provisions relating to the refunding of variable rate debt by public
authorities that issue State-supported debt.

Section 8 of the bill would amend section 98-a of the State Finance
Law to provide that (a) the Comptroller can invest monies in the
States short-term investment pool ("STIP") in public authority
obligations in which he is authorized to invest State moneys pursuant
to Section 98 or the State Finance Law and to authorize the
Comptroller to invest up to 5% of the proceeds of the short-term
investment pool in obligations of the State, local governments and
certain public authorities that have a maturity in excess of 12 years.

Sections 9 and 10 of this bill would amend subparagraph (a) of
subdivision 2 of paragraph b of section 90.10 of the Local Finance Law
to make amendments relating to local government refundings similar to
those made for the State in section 6 of this act.

Section 11 of this bill would amend subdivision 5 of section 3234 of
the public authorities law to establish the majority of directors
present and voting in favor of approving a resolution authorizing the
issuance of bonds or notes or any supplemental or amendatory
resolution by the New York Local Government Assistance Corporation
shall include the Director of the Budget, the Comptroller and the
chairperson of the New York Local Government Assistance Corporation.

Section 12 of the bill would amend subdivision 1 of section 2976 of
the public authorities law to provide that refundings of variable rate
debt, either with other variable rate debt or with fixed rate debt,
will not be subject to the to the State's bond issuance charge.

Section 13 of this bill provides for an immediate effective date.

 JUSTIFICATION :

The following issues are dealt with by this legislation:

1) In the late 1980's, legislation was enacted that expanded the list
of investments that the Comptroller may invest in for the State's
Short Term Investment Pool (STIP). At that time the maximum balance in
STIP was under $5 billion and the limit for each investment was set at
$250 million which represented approximately 5% of the total pool.
Since that time the STIP balance has more than tripled, at times
exceeding $16 billion, while the limits have remained unchanged. At
current levels, the investment limits are met very quickly resulting
in a large portion of STIP being invested in lower yielding Treasury
bills. Increasing the limits to $500 million (which would be less than
5% of the total portfolio) will allow STIP to earn additional
investment income. In these times of impending budget gaps over the
next few years, STIP could potentially earn an additional $15 million
yearly due to the difference in spreads between Treasury bills and
those investments that currently are limited to $250 million.

2) RSSL 423 requires that the Comptroller hold the assets of the CRF
in his own name.  For some time public equity and fixed income have
been registering assets in the name of the New York State Common
Retirement Fund, due to issues with how Treasury securities can be
held. We are now having a similar problem with reregistering the hedge
funds; some administrators won't register in the name of the
Comptroller as Trustee, and we either have to register in the name of
the CRF or will have to reregister when the Comptroller changes.

3) There is currently significant turmoil in the variable rate
municipal bond market resulting from concerns about the liquidity of
auction rate securities and the downgrade and potential for further
downgrades of municipal bond insurers. Many auction rate securities
are not finding purchasers even at maximum interest rates, thus
resulting in failed auctions. Interest rates on those auction rate
bonds that can be resold and on variable rate demand obligations
insured by downgraded insurers have increased significantly. One way
of removing the uncertainty of interest rate fluctuations in the
variable rate market is to refund variable rate bonds with fixed rate
bonds. While such refundings automatically reduce uncertainty, it is
sometimes difficult to meet present value and annual savings
requirements because it is hard to predict whether high interest rates
will continue in the future. This bill would allow certain State and
local issuers to assume that interest would be paid at the maximum
rate permitted under variable rate documents when variable rate debt
is refunded with fixed rate debt. While this assumes the worst case
scenario for the variable debt, it allows issuers to remove the
vagaries of the variable rate market. They would no longer be
dependant on either auctions or the ratings of insurers or liquidity
providers.

Local governments and public authorities can issue their debt at a
discount or at a premium of any amount. Only State general obligation
bonds are limited in the amount of premium that can be received.
Currently it is often more cost effective to raise the same amount of
money with premium bonds than it is with par bonds or discount bonds.
There is no reason why the State should be precluded from achieving
the best overall interest cost on its debt. Removing the premium
limitations will make refunding existing variable rate debt more cost
effective and will give the State the same options already available
to public authorities and local governments.

Currently, if variable rate debt is remarketed under existing bond
documents no bond issuance charge is collected. However, if the same
result is achieved through a refunding, the bond issuance charge is
collected. Interest rates on many existing variable rate bond issues
are high because the bonds are insured by bond insurers that have been
downgraded or are at risk of being downgraded. In many cases the only
way to timely remove the existing insurer from the bonds is by
refunding them. Yet the bond issuance charge makes it significantly
more expensive to refund the bonds. Issuers should be encouraged to
take whatever actions are necessary to reduce bon-owing costs
resulting from the current variable rate tax-exempt bond market
turmoil, and removing the bond issuance charge will serve this end.

The Comptroller is currently authorized to invest monies in STIP in
obligations of the State, local governments and certain public
authorities the securities of which, by virtue of their enabling
legislation, may be held by any officer who is authorized to invest in
state obligations. The securities of certain other public authorities
are eligible investments for other monies held by the Comptroller
pursuant to section 98 of the State Finance Law, but not for STIP
which is invested pursuant to section 98-a By making securities of
those public authorities specifically enumerated in section 98
eligible investments for STIP monies, these obligations would be
treated the same as those of other public authorities the Comptroller
is authorized to invest in. This would allow the Comptroller to invest
monies in STIP in the variable rate securities of these authorities at
a time when interest rates are unstable.

Additionally, monies in STIP may only be invested in securities
maturing or redeemable at the option of the holder within 12 years of
the investment date. While this provision authorizes STIP to invest in
variable rate demand bonds which have a put feature, it would not
authorize it to invest in auction rate securities that require
investors to continue to hold bonds if another purchaser cannot be
found. By allowing up to 5% of the moneys in STIP to be invested in
securities of the State, local governments or certain public
authorities with a maturity longer than 12 years, this bill would make
auction rate securities of these entities eligible for investment of
STIP monies. This could help provide liquidity for these auction rate
securities.

2009-S4263 (ACTIVE) - Bill Text download pdf

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

                                  4263

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                             April 20, 2009
                               ___________

Introduced  by  Sen.  KRUGER -- (at request of the State Comptroller) --
  read twice and ordered printed, and when printed to  be  committed  to
  the Committee on Finance

AN  ACT  to  amend  the state finance law, in relation to increasing the
  limit on certain investments from two hundred fifty  to  five  hundred
  million  dollars;  to amend the retirement and social security law, in
  relation to the holding of investments of the common  retirement  fund
  in  the name of the common retirement fund; to amend the state finance
  law and the local finance law, in relation to variable rate  refunding
  and  in  relation to authorized investments for the state's short term
  investment pool; to amend chapter 57 of the laws of 2008 amending  the
  state  finance  law and other laws relating to variable bond rates, in
  relation to making certain provisions thereof permanent; and to  amend
  the public authorities law, in relation to administration of the local
  government  assistance corporation and to exempting public authorities
  and industrial development agencies from the bond issuance  charge  in
  certain instances

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

  Section 1. Subdivisions 3-a, 18 and 19 of  section  98  of  the  state
finance  law,  subdivisions  3-a and 18 as amended by chapter 219 of the
laws of 1999 and subdivision 19 as amended by chapter 201 of the laws of
1996, are amended to read as follows:
  3-a. Notes,  bonds,  debentures,  mortgages  and  other  evidences  of
indebtedness  of  the United States Postal Service; the federal national
mortgage association; federal home loan  mortgage  corporation;  student
loan  marketing  association;  federal  farm  credit system or any other
United States government sponsored agency, provided that at the time  of
the  investment  such agency or its obligations are rated and the agency
receives, or its obligations receive, the highest rating  of  all  inde-
pendent  rating  agencies  that  rate  such  agency  or its obligations,

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10316-03-9

S. 4263                             2

provided, however, that no more than [two hundred  fifty]  FIVE  HUNDRED
million dollars may be invested in the obligations of any one agency.
  18.  Obligations  of  any  corporation organized under the laws of any
state in the United States maturing  within  two  hundred  seventy  days
provided  that  such obligations receive the highest rating of two inde-
pendent rating services designated  by  the  comptroller  and  that  the
issuer  of such obligations has maintained such ratings on similar obli-
gations during the preceding six  months  provided,  however,  that  the
issuer of such obligations need not have received such rating during the
prior six month period if such issuer has received the highest rating of
two  independent rating services designated by the state comptroller and
is the successor or wholly owned subsidiary of an issuer that has  main-
tained  such  ratings  on  similar  obligations during the preceding six
month period or if the issuer is the product of a merger of two or  more
issuers, one of which has maintained such ratings on similar obligations
during  the  preceding six month period, provided, however, that no more
than [two hundred fifty] FIVE HUNDRED million dollars may be invested in
such obligations of any one corporation.
  19. Bankers' acceptances maturing within ninety days which are  eligi-
ble  for  purchase in the open market by federal reserve banks and which
have been accepted by a bank or trust company, which is organized  under
the  laws  of  the  United States or of any state thereof and which is a
member of the federal reserve system and  whose  short-term  obligations
meet  the  criteria  outlined  in  subdivision eighteen of this section.
Provided, however, that no more than [two hundred  fifty]  FIVE  HUNDRED
million  dollars  may be invested in such bankers' acceptance of any one
bank or trust company.
  S 2. Subdivision a of section 423 of the retirement and social securi-
ty law, as amended by chapter 770 of the laws of  1970,  is  amended  to
read as follows:
  a.  On  and after April first, nineteen hundred sixty-seven, the comp-
troller shall invest the available monies of the common retirement  fund
in  any investments and securities authorized by law for each retirement
system and shall hold such investments in THE NAME OF THE COMMON RETIRE-
MENT FUND OR IN his OR HER name as trustee of such fund, notwithstanding
any other provision of this chapter.  Participating  interests  in  such
investments  shall  be  credited to each retirement system in the manner
and at the time specified in [paragraph] SUBDIVISION two of section four
hundred twenty-two of this article.
  S 3. Paragraph (a) of subdivision 2 of section 56 of the state finance
law, as amended by chapter 11 of the laws of 1994, is amended to read as
follows:
  (a) Refunding bonds shall be issued only when  the  comptroller  shall
have  certified that, as a result of the refunding, there will be a debt
service savings to the state on a present value basis as a result of the
refunding transaction and that either (i)  the  refunding  will  benefit
state  taxpayers  over  the  life of the refunding bonds by achieving an
actual debt service savings each year during the term to maturity of the
refunding bonds when debt service on the refunding bonds is expected  to
be  paid  from  legislative  appropriations  or (ii) debt service on the
refunding bonds shall be payable in annual installments of principal and
interest which result in substantially level or declining  debt  service
payments  pursuant to paragraph (b) of subdivision two of section fifty-
seven of this chapter. Such certification by the  comptroller  shall  be
conclusive  as  to  matters  contained therein after the refunding bonds
have been issued.

S. 4263                             3

  For purposes of determining whether there is a debt service savings on
a present value basis the present value of the total  payments  of  both
principal  and  interest  to  become  due  on the refunding bonds, after
deducting any accrued interest or premium received by the state and  not
used  to pay the principal of or interest on the bonds to be refunded or
costs of issuance of the refunding bonds, excluding all  such  principal
and interest payments to be made from income received as a result of the
investment  of  the proceeds from the sale of the refunding bonds, shall
be less than the present value of the principal and interest payments to
become due at their stated maturities on the principal amount  of  bonds
to  be refunded which are outstanding as of the date of the issue of the
refunding bonds after deducting therefrom all costs and  expenses  inci-
dental to the issuance of the refunding bonds, including the development
of  the  refunding  plan,  and of executing and performing the terms and
conditions of the escrow contract and all fees and charges of the escrow
holder, but only to the extent such costs and expenses are not paid from
the proceeds of the refunding bonds. The present value of  debt  service
payments  pursuant to the foregoing provisions of this subdivision shall
be computed by discounting the principal and interest payments  on  both
the  refunding  bonds  and  the bonds to be refunded from the respective
maturities thereof to the date of issue of the refunding bonds at a rate
equal to the effective interest cost of the refunding bonds. The  effec-
tive  interest  cost  of the refunding bonds shall be that rate which is
arrived at by doubling the semi-annual interest rate  (compounded  semi-
annually) necessary to discount the debt service payments on the refund-
ing  bonds  from  the maturity dates thereof to the date of issue of the
refunding bonds and to the  bona  fide  initial  public  offering  price
including  estimated  accrued interest, or, if there is no public offer-
ing, to the price bid including estimated accrued interest.  IN THE CASE
OF A REFUNDING OF BONDS WHERE THE INTEREST RATE VARIES PERIODICALLY WITH
BONDS THAT BEAR INTEREST AT A FIXED RATE, THE PRESENT VALUE OF THE BONDS
TO BE REFUNDED SHALL BE DETERMINED ASSUMING THAT INTEREST WOULD BE  PAID
AT  THE MAXIMUM RATE OF INTEREST PERMITTED ON SUCH REFUNDED BONDS BY THE
DOCUMENTS PURSUANT TO WHICH SUCH BONDS WERE ISSUED,  PROVIDED  THAT  THE
BONDS TO BE REFUNDED SHALL BE FULLY PAID AND CANCELLED WITHIN SIXTY DAYS
OF  THE  DATE  OF  ISSUANCE OF THE REFUNDING BONDS. THE DETERMINATION OF
WHETHER THERE IS AN ACTUAL SAVINGS IN ANY YEAR SHALL ALSO BE MADE ASSUM-
ING THAT THE MAXIMUM INTEREST RATE WILL BE PAID ON VARIABLE  RATE  BONDS
THAT ARE BEING REFUNDED BY FIXED RATE REFUNDING BONDS.
  S  4.  Paragraph a of subdivision 4 of section 57 of the state finance
law, as amended by chapter 437 of the laws of 2004, is amended  to  read
as follows:
  a.  Such  bonds  shall  be  sold at par, at par plus a premium [not to
exceed five percent in the case of refunding bonds or five-tenths of one
percent in the case of all other bonds], or at a discount to the  bidder
offering  the  lowest  interest cost to the state, taking into consider-
ation any premium or discount and, in the case of refunding  bonds,  the
bona  fide  initial  public  offering price, not less than four nor more
than fifteen days, Sundays excepted, after a notice  of  such  sale  has
been  published  at  least once in a definitive trade publication of the
municipal bond industry published on each business day in the  state  of
New  York  which is generally available to participants in the municipal
bond industry, which notice shall state the terms  of  the  sale.    The
comptroller  may  not change the terms of the sale unless notice of such
change is sent via a definitive trade wire service of the municipal bond
industry which, in general, makes available information regarding activ-

S. 4263                             4

ity and sales of municipal bonds and is generally available  to  partic-
ipants  in the municipal bond industry, at least one [day] HOUR prior to
the [date] TIME of the sale as set forth in the original notice of sale.
In  so  changing  the  terms or conditions of a sale the comptroller may
send notice by such wire service that the sale will be delayed by up  to
thirty  days,  provided  that  wire  notice of the new sale date will be
given at least one business day prior to the new time when bids will  be
accepted.  In  such event, no new notice of sale shall be required to be
published. Notwithstanding the provisions of section three hundred  five
of  the  state  technology  law  or any other law, if the notice of sale
contains a provision that bids will only be accepted  electronically  in
the manner provided in such notice of sale, the comptroller shall not be
required to accept non-electronic bids in any form. Advertisements shall
contain  a provision to the effect that the state comptroller, in his OR
HER discretion, may reject any or all bids made  in  pursuance  of  such
advertisements,  and  in  the  event  of such rejection, the state comp-
troller is authorized to negotiate a private  sale  or  readvertise  for
bids  in the form and manner above described as many times as, in his OR
HER judgment, may be necessary to effect a satisfactory sale.   Notwith-
standing  the  foregoing  provisions  of this paragraph, whenever in the
judgment of the comptroller the interests of the state  will  be  served
thereby,  he  OR SHE may sell state bonds at private sale at par, at par
plus a premium [not to exceed five percent  in  the  case  of  refunding
bonds  or five-tenths of one percent in the case of all other bonds], or
at a discount. The comptroller shall  promulgate  regulations  governing
the  terms  and  conditions of any such private sales, which regulations
shall include a provision that he OR SHE give notice  to  the  governor,
the  temporary president of the senate, and the speaker of the assembly,
of his OR HER intention to conduct a private sale of obligations  pursu-
ant  to  this  section not less than five days prior to such sale or the
execution of any binding agreement to effect such sale.
  S 5. Paragraph (a) of subdivision 4 of section 60 of the state finance
law, as amended by chapter 437 of the laws of 2004, is amended  to  read
as follows:
  (a)  Such  bonds  shall  be sold at par, at par plus a premium [not to
exceed five percent in the case of refunding bonds or five-tenths of one
percent in the case of all other bonds], or at a discount to the  bidder
offering  the  lowest  interest cost to the state, taking into consider-
ation any premium or discount and, in the case of refunding  bonds,  the
bona  fide  initial  public  offering price, not less than four nor more
than fifteen days, Sundays excepted, after a notice  of  such  sale  has
been  published  at  least once in a definitive trade publication of the
municipal bond industry published on each business day in the  state  of
New  York  which is generally available to participants in the municipal
bond industry, which notice shall state the terms  of  the  sale.    The
comptroller  may  not change the terms of the sale unless notice of such
change is sent via a definitive trade wire service of the municipal bond
industry which, in general, makes available information regarding activ-
ity and sales of municipal bonds and is generally available  to  partic-
ipants  in the municipal bond industry, at least one [day] HOUR prior to
the [date] TIME of the sale as set forth in the original notice of sale.
In so changing the terms or conditions of a  sale  the  comptroller  may
send  notice by such wire service that the sale will be delayed by up to
thirty days, provided that wire notice of the  new  sale  date  will  be
given  at least one business day prior to the new time when bids will be
accepted. In such event, no new notice of sale shall be required  to  be

S. 4263                             5

published.  Notwithstanding the provisions of section three hundred five
of the state technology law or any other law,  if  the  notice  of  sale
contains  a  provision that bids will only be accepted electronically in
the manner provided in such notice of sale, the comptroller shall not be
required to accept non-electronic bids in any form. Advertisements shall
contain  a provision to the effect that the state comptroller, in his OR
HER discretion, may reject any or all bids made  in  pursuance  of  such
advertisements,  and  in  the  event  of such rejection, the state comp-
troller is authorized to negotiate a private  sale  or  readvertise  for
bids  in the form and manner above described as many times as, in his OR
HER judgment, may be necessary to effect a satisfactory sale.   Notwith-
standing  the  foregoing provisions of this subdivision, whenever in the
judgment of the comptroller the interests of the state  will  be  served
thereby,  he  OR SHE may sell state bonds at private sale at par, at par
plus a premium [not to exceed five percent  in  the  case  of  refunding
bonds  or five-tenths of one percent in the case of all other bonds], or
at a discount. The comptroller shall  promulgate  regulations  governing
the  terms  and  conditions of any such private sales, which regulations
shall include a provision that he OR SHE give notice  to  the  governor,
the  temporary  president of the senate, and the speaker of the assembly
of his OR HER intention to conduct a private sale of obligations  pursu-
ant  to  this  section not less than five days prior to such sale or the
execution of any binding agreement to effect such sale.
  S 6. Section 69-c of the state finance law, as amended by  section  35
of  part  PP  of  chapter  56 of the laws of 2009, is amended to read as
follows:
  S 69-c. Variable rate bonds. Notwithstanding any  other  provision  of
law  to the contrary, any State-supported debt may be issued as variable
rate bonds.
  Notwithstanding any other  provision  of  law  to  the  contrary,  for
purposes  of calculating the present value of debt service and calculat-
ing savings in connection with the issuance of  refunding  indebtedness,
(i)  the  effective  interest  rate and debt service payable on variable
rate bonds in connection with which, and to the extent that, an  author-
ized issuer has entered into an interest rate exchange or similar agree-
ment  pursuant  to which the authorized issuer makes payments based on a
fixed rate and receives payments  based  on  a  variable  rate  that  is
reasonably expected by such authorized issuer to be equivalent over time
to  the  variable rate paid on the related variable rate bonds, shall be
calculated assuming that the rate of  interest  on  such  variable  rate
bonds  is the fixed rate payable by the authorized issuer on such inter-
est rate exchange or similar agreement for the scheduled  term  of  such
agreement; (ii) the effective interest rate and debt service on variable
rate  bonds in connection with which, and to the extent that, an author-
ized issuer has not entered into such an interest rate exchange or simi-
lar agreement shall be calculated assuming that interest on  such  vari-
able  interest  rate  bonds  is  payable  at  a rate or rates reasonably
assumed by the authorized issuer; (iii) the effective interest rate  and
debt  service on any bonds subject to optional or mandatory tender shall
be a rate or rates reasonably assumed by the authorized issuer; (iv) any
variable rate bonds that are converted or  refunded  to  a  fixed  rate,
whether  or  not  financed  on  an  interim basis with bond anticipation
notes, shall be  assumed  to  generate  a  present  value  savings  AND,
PROVIDED  THAT  NO  PRINCIPAL  PAYMENT  ON  THE FIXED RATE CONVERSION OR
REFUNDING BONDS EXCEEDS THE AMOUNT OF THE PRINCIPAL DUE IN THE SAME YEAR
ON THE VARIABLE RATE REFUNDED OR  CONVERTED  BONDS  BY  MORE  THAN  FIVE

S. 4263                             6

PERCENT  OF  THE  PRINCIPAL  PAYMENT THAT WOULD BE DUE IF ANY ADDITIONAL
PRINCIPAL ON THE FIXED RATE CONVERSION OR REFUNDING BONDS WERE  DISTRIB-
UTED  PROPORTIONATELY  (BY  AMOUNT OF PRINCIPAL DUE ON THE VARIABLE RATE
CONVERTED  OR  REFUNDED  BONDS)  AMONG  THE MATURITIES OF THE FIXED RATE
CONVERSION OR REFUNDING BONDS, A SAVINGS, OR NO DISSAVINGS, IN EACH YEAR
TO MATURITY OF THE REFUNDING BONDS; and  (v)  otherwise,  the  effective
interest  rate  and  debt  service on any bonds shall be calculated at a
rate or rates reasonably assumed by the  authorized  issuer.    Notwith-
standing any other provision of law to the contrary, for calculating the
present value of debt service and calculating savings in connection with
the  issuance  of refunding indebtedness, the refunding of variable rate
debt instruments with  new  variable  rate  debt  instruments  shall  be
excluded  from  any such requirements, if effectuated for sound business
purposes.
  S 7. Section 51 of part RR of chapter 57 of the laws of 2008, amending
the state finance law and other laws relating to variable bond rates, as
amended by section 13-a of part PP of chapter 56 of the laws of 2009, is
amended to read as follows:
  S 51. This act shall take effect immediately and shall  be  deemed  to
have been in full force and effect on and after April 1, 2008; provided,
however,  that the amendments to subdivision 6 of section 4 and subdivi-
sion 4 of section 40 of the state finance law made by  sections  fifteen
and  sixteen of this act shall expire on the same date such subdivisions
expire; and provided, further, however, that section thirty-four of this
act shall take effect on the same date as the reversion of section  69-c
of  the state finance law as provided in section 58 of part T of chapter
57 of the laws of 2007, as amended; [provided, further that such  amend-
ments shall expire and be deemed repealed March 31, 2010;] and provided,
further,  however,  that sections one, three, four, and eighteen through
twenty-seven of this act shall expire March 31, 2009 when upon such date
the provisions of such sections shall be deemed repealed;  and  provided
further  that  section  fourteen of this act shall expire March 31, 2010
when upon such date the provisions  of  such  section  shall  be  deemed
repealed.
  S  8.  The  opening  paragraph of subdivision 1 of section 98-a of the
state finance law, as amended by chapter 545 of the  laws  of  2005,  is
amended to read as follows:
  Except  as  otherwise provided in subdivision two of this section, any
moneys in the general fund of the state or moneys received from the sale
of any bonds or notes issued by the state, any moneys  in  any  fund  or
account  of  the state, heretofore or hereafter established, the invest-
ment of which is not otherwise authorized and which are not  immediately
required  may  be  invested  by  the  comptroller.    Such moneys may be
invested only in obligations of the categories specified in subdivisions
one to five, both inclusive, [and subdivision]  SUBDIVISIONS  seven  AND
ELEVEN,  subdivision  fourteen, as added by chapters seven hundred nine-
ty-seven and nine hundred thirty-two of the  laws  of  nineteen  hundred
sixty-three,  respectively,  subdivisions fifteen, sixteen and seventeen
of section ninety-eight of this article, maturing or redeemable  at  the
option of the holder within twelve years of the date of such investment,
subdivisions  two-a,  eighteen,  nineteen  and twenty of section ninety-
eight of this article or in a certificate of deposit of a bank or  trust
company in this state. Any certificate of deposit shall be fully secured
by  the issuer thereof depositing with the comptroller stocks, bonds, or
notes of any county,  town,  city,  village,  fire  district  or  school
district  of  this state issued pursuant to law and maturing within five

S. 4263                             7

years from the date of issuance of such certificate of deposit, bonds or
notes or direct or guaranteed obligation of the United States of America
or its agencies or of the state of New York or bonds  and  notes  issued
for  any  of  the  corporate purposes of the municipal assistance corpo-
ration for the city of New York in an amount equal to the amount of such
certificate of deposit. Any bonds,  notes  or  certificates  of  deposit
purchased  with  moneys of the general fund shall be available always to
pay any lawful appropriation in force. Any bonds, notes or  certificates
of  deposit purchased with moneys received from the sale of any bonds or
notes issued by the state shall be available always for the purposes  or
purpose  for which such bonds or notes were issued.  Any bonds, notes or
certificates of deposit purchased with moneys of any other  funds  shall
be  available  always  for  the purpose for which such fund was created.
Unless otherwise required by law, income received on any moneys invested
pursuant to this section shall be credited to the  fund  or  funds  from
which  such  moneys were invested, provided, however, the comptroller is
hereby precluded from  crediting  interest  earnings  to  funds/accounts
which:
  S 9. Subparagraph (a) of subdivision 2 of paragraph b of section 90.10
of the local finance law, as amended by chapter 142 of the laws of 2004,
is amended to read as follows:
  (a) Refunding bonds shall be issued only in the event that the present
value of the total payments of both principal and interest to become due
on  the  refunding  bonds, and deducting any accrued interest or premium
received by the issuer and not used to pay the principal of or  interest
on the bonds to be refunded or costs of issuance of the refunding bonds,
excluding  all  such  principal  and  interest  payments to be made from
income received as a result of the investment of the proceeds  from  the
sale of the refunding bonds, shall be less than the present value of the
principal and interest payments to become due at their stated maturities
on the principal amount of bonds to be refunded which are outstanding as
of  the  date of the issue of the refunding bonds after deducting there-
from all costs and expenses incidental to the issuance of the  refunding
bonds, including the development of the refunding financial plan, and of
executing and performing the terms and conditions of the escrow contract
and  all  fees  and charges of the escrow holder, but only to the extent
such costs and expenses are not paid from the proceeds of the  refunding
bonds.  The present value of debt service payments pursuant to the fore-
going provisions of this subdivision shall be  computed  by  discounting
the  principal and interest payments on both the refunding bonds and the
bonds to be refunded from the respective maturities thereof to the  date
of  issue of the refunding bonds at a rate equal to the effective inter-
est cost of the refunding bonds.  IN THE CASE OF A  REFUNDING  OF  BONDS
WHERE  THE INTEREST RATE VARIES PERIODICALLY WITH BONDS THAT BEAR INTER-
EST AT A FIXED RATE, THE PRESENT VALUE OF THE BONDS TO BE REFUNDED SHALL
BE DETERMINED ASSUMING THAT INTEREST WOULD BE PAID AT THE  MAXIMUM  RATE
OF  INTEREST  PERMITTED ON SUCH BONDS BY THE DOCUMENTS PURSUANT TO WHICH
SUCH BONDS WERE ISSUED, PROVIDED THAT THE BONDS TO BE REFUNDED SHALL  BE
FULLY  PAID  AND  CANCELLED WITHIN SIXTY DAYS OF THE DATE OF ISSUANCE OF
THE REFUNDING BONDS. The effective interest cost of the refunding  bonds
shall  be  that  rate  which  is  arrived at by doubling the semi-annual
interest rate (compounded semi-annually) necessary to discount the  debt
service  payments on the refunding bonds from the maturity dates thereof
to the date of issue of the refunding bonds and to the bona fide initial
public offering price including estimated accrued interest, or, if there
is no public offering, to the  price  bid  including  estimated  accrued

S. 4263                             8

interest. In the case of the city of New York, notwithstanding any other
provision  of law to the contrary, for purposes of calculating the pres-
ent value of debt service and calculating savings in connection with the
issuance  of  refunding  bonds, (i) the effective interest rate and debt
service payable on variable rate bonds in connection with which, and  to
the  extent that, the city of New York has entered into an interest rate
exchange or similar agreement pursuant to which such city makes payments
based on a fixed rate and receives payments based  on  a  variable  rate
that  shall  be found by the finance board of such city to be equivalent
over time to the variable rate paid on the related variable rate  bonds,
shall  be calculated assuming that the rate of interest on such variable
rate bonds is the fixed rate payable by such city on such interest  rate
exchange  or similar agreement for the scheduled term of such agreement;
(ii) the effective interest rate and debt service on variable rate bonds
in connection with which, and to the extent that, the city of  New  York
has not entered into such an interest rate exchange or similar agreement
shall  be  calculated  assuming  that interest on such variable interest
rate bonds is payable at a rate or  rates  as  shall  be  found  by  the
finance  board  of such city; (iii) the effective interest rate and debt
service on any bonds subject to optional or mandatory  tender  shall  be
calculated  assuming  that  such bonds are remarketed following any such
tender at a rate or rates as shall be found by the finance board of  the
city  of  New  York; and (iv) otherwise, the effective interest rate and
debt service on any bonds shall be calculated at a rate or rates  deter-
mined  by the finance board of the city of New York. Notwithstanding any
other provision of law to the contrary, in the case of the city  of  New
York,  for calculating the present value of debt service and calculating
savings in connection with the issuance of refunding bonds, the  refund-
ing  of  variable  rate  debt  instruments  with  new variable rate debt
instruments shall be excluded from any such requirements, if  so  deter-
mined by the finance board of such city.
  S  10.  Subparagraph  (a)  of  subdivision 2 of paragraph b of section
90.10 of the local finance law, as amended by chapter 413 of the laws of
1991, is amended to read as follows:
  (a) Refunding bonds shall be issued only in the event that the present
value of the total payments of both principal and interest to become due
on the refunding bonds, and deducting any accrued  interest  or  premium
received  by the issuer and not used to pay the principal of or interest
on the bonds to be refunded or costs of issuance of the refunding bonds,
excluding all such principal and  interest  payments  to  be  made  from
income  received  as a result of the investment of the proceeds from the
sale of the refunding bonds, shall be less than the present value of the
principal and interest payments to become due at their stated maturities
on the principal amount of bonds to be refunded which are outstanding as
of the date of the issue of the refunding bonds after  deducting  there-
from  all costs and expenses incidental to the issuance of the refunding
bonds, including the development of the refunding financial plan, and of
executing and performing the terms and conditions of the escrow contract
and all fees and charges of the escrow holder, but only  to  the  extent
such  costs and expenses are not paid from the proceeds of the refunding
bonds. The present value of debt service payments pursuant to the  fore-
going  provisions  of  this subdivision shall be computed by discounting
the principal and interest payments on both the refunding bonds and  the
bonds  to be refunded from the respective maturities thereof to the date
of issue of the refunding bonds at a rate equal to the effective  inter-
est  cost  of  the refunding bonds.  IN THE CASE OF A REFUNDING OF BONDS

S. 4263                             9

WHERE THE INTEREST RATE VARIES PERIODICALLY WITH BONDS THAT BEAR  INTER-
EST AT A FIXED RATE, THE PRESENT VALUE OF THE BONDS TO BE REFUNDED SHALL
BE  DETERMINED  ASSUMING THAT INTEREST WOULD BE PAID AT THE MAXIMUM RATE
OF  INTEREST  PERMITTED ON SUCH BONDS BY THE DOCUMENTS PURSUANT TO WHICH
SUCH BONDS WERE ISSUED, PROVIDED THAT THE BONDS TO BE REFUNDED SHALL  BE
FULLY  PAID  AND  CANCELLED WITHIN SIXTY DAYS OF THE DATE OF ISSUANCE OF
THE REFUNDING BONDS. The effective interest cost of the refunding  bonds
shall  be  that  rate  which  is  arrived at by doubling the semi-annual
interest rate (compounded semi-annually) necessary to discount the  debt
service  payments on the refunding bonds from the maturity dates thereof
to the date of issue of the refunding bonds and to the bona fide initial
public offering price including estimated accrued interest, or, if there
is no public offering, to the  price  bid  including  estimated  accrued
interest.
  S  11. Subdivision 5 of section 3234 of the public authorities law, as
amended by section 54 of part K of chapter 81 of the laws  of  2002,  is
amended to read as follows:
  5.  A  majority  of the whole number of directors then in office shall
constitute a quorum for the transaction of any business or the  exercise
of  any  power of the corporation. Except as otherwise specified in this
title, for the transaction of any business or the exercise of any  power
of the corporation, the corporation shall have power to act by a majori-
ty  of  the  directors  present  at  any meeting at which a quorum is in
attendance; provided that one or more directors  may  participate  in  a
meeting  by  means  of  conference  telephone  or similar communications
equipment allowing all directors participating in the  meeting  to  hear
each  other  at  the  same  time  and  participation by such means shall
constitute presence in person at a meeting. [A  unanimous  vote  of  all
directors  shall  be  required  for  approval] THE MAJORITY OF DIRECTORS
PRESENT AND VOTING IN FAVOR of APPROVING a  resolution  authorizing  the
issuance  of bonds or notes or any supplemental or amendatory resolution
SHALL INCLUDE THE DIRECTOR OF THE BUDGET, THE COMPTROLLER AND THE CHAIR-
PERSON OF THE CORPORATION.  The corporation may delegate to one or  more
of  its  directors,  or  officers, agents and employees, such powers and
duties as the directors may deem proper. Five days notice shall be given
to each director and nonvoting representative prior to  any  meeting  of
the corporation.
  S  12. Subdivision 1 of section 2976 of the public authorities law, as
amended by section 1 of part X of chapter 85 of the  laws  of  2002,  is
amended to read as follows:
  1.  (A)  Notwithstanding any other law to the contrary, public benefit
corporations (which for purposes of this section  shall  include  indus-
trial  development  agencies  created  pursuant  to title one of article
eighteen-A of the general municipal law or any other provision  of  law)
which  issue  bonds, notes or other obligations shall pay to the state a
bond issuance charge upon the issuance of such bonds in an amount deter-
mined pursuant to subdivision two of this section. Such charge shall  be
paid  to  the  state  department  of  taxation  and  finance, upon forms
prescribed therefor, no later than fifteen days  from  the  end  of  the
month within which such bonds are issued.
  (B)  PROVIDED,  HOWEVER, THAT NO PUBLIC BENEFIT CORPORATION, INCLUDING
ANY COVERED INDUSTRIAL DEVELOPMENT AGENCY, SHALL BE REQUIRED TO PAY  THE
BOND  ISSUANCE  CHARGE IMPOSED BY PARAGRAPH (A) OF THIS SUBDIVISION AS A
RESULT OF (I) ANY CONVERSION, WHETHER BY REFUNDING OR OTHERWISE, OF  ANY
ISSUE  OF  VARIABLE  RATE OBLIGATIONS TO FIXED RATE OBLIGATIONS; OR (II)
ANY REFUNDING OF VARIABLE RATE DEBT WITH OTHER VARIABLE RATE DEBT.

S. 4263                            10

  S 13. This act shall take effect immediately; provided, however,  that
the  amendments  to  subparagraph (a) of subdivision 2 of paragraph b of
section 90.10 of the local finance law made by section nine of this  act
shall  be  subject  to the expiration and reversion of such subparagraph
pursuant  to  section  5 of chapter 142 of the laws of 2004, as amended,
when upon such date the provisions of section ten of this act shall take
effect.
  FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
  This bill would increase the limit which may be invested  in  any  one
company  or agency of the federal government which issues certain notes,
bonds, debentures, mortgages and other evidences  of  indebtedness  from
$250  million  to  $500 million. It would also change the savings calcu-
lation in regards to the issuance of refunding bonds in cases where  the
issue to be refunded has a variable rate of interest. In such cases, the
present  value  of the refunded bonds shall be calculated at the maximum
interest rate permitted on such refunded bonds.
  If this bill is enacted, insofar as this bill  affects  the  New  York
State  and Local Employees' Retirement System and the New York State and
Local Police and Fire Retirement System, there will be no cost.
  This estimate, dated March 17, 2009, and intended for use only  during
the  2009  Legislative  Session, is Fiscal Note No. 2009-188 prepared by
the Actuary for the New York State and Local Police and Fire  Retirement
System and the New York State and Local Employees' Retirement System.

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Senate Bill S4263

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Sponsored By

Carl Kruger

Archive: Last Bill Status - In Senate Committee Finance Committee

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co-Sponsors

Liz Krueger

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