senate Bill S6483

Signed By Governor
2011-2012 Legislative Session

Relates to limitations on insurers that may provide certain surety bonds by changing the claims-paying ability rating needed for eligibility

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Archive: Last Bill Status - Signed by Governor


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

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Aug 17, 2012 signed chap.416
Aug 06, 2012 delivered to governor
Jun 14, 2012 returned to senate
passed assembly
ordered to third reading rules cal.210
substituted for a9676
Mar 06, 2012 referred to local governments
delivered to assembly
passed senate
Mar 05, 2012 advanced to third reading
Mar 01, 2012 2nd report cal.
Feb 29, 2012 1st report cal.234
Feb 15, 2012 referred to local government

Votes

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Feb 29, 2012 - Local Government committee Vote

S6483
7
0
committee
7
Aye
0
Nay
0
Aye with Reservations
0
Absent
1
Excused
0
Abstained
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Local Government Committee Vote: Feb 29, 2012

excused (1)

S6483 - Bill Details

See Assembly Version of this Bill:
A9676
Law Section:
Local Finance Law
Laws Affected:
Amd ยง58.00, Loc Fin L

S6483 - Bill Texts

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Relates to limitations on insurers that may provide certain surety bonds by changing the claims-paying ability rating needed for eligibility.

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BILL NUMBER:S6483

TITLE OF BILL:
An act
to amend the local finance law, in relation to limitations on insurers
that may provide certain surety bonds

PURPOSE:
The purpose of the bill is to amend the local finance law to
allow highly rated insurers to provide surety bonds in support of
municipal bond underwriting bids.

SUMMARY OF PROVISIONS:
This bill would amend paragraph three of
subsection (c) of section 58 of the local finance law to expand the
range of ratings of insurers authorized to provide surety bonds to
entities bidding to underwrite municipal bonds from those rated
triple-A to those with a rating in the single-A category or higher.

JUSTIFICATION:
The bill would expand the range of insurers that may
provide an "eligible surety bond" in support of underwriter bids on
new municipal bond issues.

Currently, Section 58 of the Local Finance Law authorizes an entity
bidding to underwrite new municipal bond issues to provide an
"eligible surety bond" in lieu of a certified or cashier's check,
cash, or letter of credit that would otherwise be required as a "good
faith" deposit in connection with its bid.

Such surety bonds save prospective municipal bond underwriters time
and money in the bidding process, and can increase the number of bids
on any given municipal bond issue - particularly issuances from
smaller municipalities that might otherwise be neglected by some
underwriters.
Increased competition in underwriting bids should generate borrowing
cost savings for municipal issuers and local taxpayers and increase
their access to the capital markets.

Section 58, in its present form, requires that "eligible surety bonds"
be executed by an insurance company licensed to do business in New
York with a claims-paying ability "in the highest rating category by
at least two nationally recognized statistical rating organizations."

In view of Standard & Poor's downgrade of the United States' long-term
sovereign credit rating to AA+ from AAA, Section 58's requirement
that a surety bond provider be rated "in the highest rating category"
(AAA or triple-A) is overly restrictive. Financial guaranty insurers,
which are also authorized to write surety bonds under Article 69 of
the Insurance Law, have historically offered this product in New

York, but are presently unable to do so because none are rated
triple-A.

This bill would allow for a highly rated insurer with a rating in the
single-A category or higher to provide an "eligible surety bond."

An expansion of the ratings range for insurers providing surety bonds
in support of municipal bond underwriting bids is appropriate because:

o it would reflect the changed credit ratings landscape in today's
financial markets; and

o it would facilitate the return of an important product to municipal
bond underwriting - a product that can save New York State's
municipal issuers and taxpayers money through increased competition
in the bond issuance process.

LEGISLATIVE HISTORY:
None.

FISCAL IMPLICATIONS:
Borrowing cost reduction for issuers of municipal
bonds in New York State.

EFFECTIVE DATE:
This act will take effect immediately.

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

                                  6483

                            I N  S E N A T E

                            February 15, 2012
                               ___________

Introduced  by  Sen. MARTINS -- 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  limitations  on
  insurers that may provide certain surety bonds

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

  Section 1. Subdivision 3 of paragraph c of section 58.00 of the  local
finance  law,  as amended by chapter 386 of the laws of 2010, is amended
to read as follows:
  3. A requirement that as a condition precedent to the consideration of
his or her bid, each bidder shall deposit  with  such  official  as  the
agency  in  charge  of  the sale may designate, a certified or cashier's
check drawn upon an incorporated bank or trust company to the  order  of
the  municipality, school district or district corporation or such offi-
cial, for the amount specified in the notice, but in no event less  than
one-half  of  one       per centum of the amount of bonds to be bid for.
Such notice may also provide that, in lieu of a certified  or  cashier's
check,  bidders  may furnish as security cash in such amount remitted by
wire transfer to an account specified in the notice or an eligible sure-
ty bond or an eligible letter of credit, approved by such official as to
form, sufficiency,  and  manner  of  execution.  For  purposes  of  this
section,  "eligible surety bond" shall mean a bond executed by an insur-
ance company authorized to do business in this state, the  claims-paying
ability  of which is rated in ONE OF the THREE highest rating [category]
CATEGORIES by at  least  [two]  ONE  nationally  recognized  statistical
rating  [organizations]  ORGANIZATION;  and  "eligible letter of credit"
shall mean an irrevocable letter of credit issued in favor of the  muni-
cipality,  school  district  or  district corporation, for a term not to
exceed ninety days by a bank, as that term is defined in section two  of
the  banking  law, whose commercial paper and other unsecured short-term
debt obligations (or, in the case of  a  bank  which  is  the  principal
subsidiary  of  a  holding  company,  whose holding company's commercial
paper and other unsecured short-term debt obligations) are rated in  one
of the three highest rating categories (based on the credit of such bank

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD14664-01-2

S. 6483                             2

or  holding  company)  by at least one nationally recognized statistical
rating organization or by a bank that is in compliance  with  applicable
federal minimum risk-based capital requirements.
  S 2. This act shall take effect immediately.

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