Senate Bill S4240A

2013-2014 Legislative Session

Prohibits municipalities from forming limited liability companies to finance operations or acquisitions of assets

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Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions 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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Actions

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 08, 2014	referred to corporations, authorities and commissions
May 21, 2013	print number 4240a
May 21, 2013	amend and recommit to corporations, authorities and commissions
Mar 15, 2013	referred to corporations, authorities and commissions

Bill Amendments

Original

A (Active)

2013-S4240 - Details

See Assembly Version of this Bill:: A3631
Current Committee:: Senate Corporations, Authorities And Commissions
Law Section:: Limited Liability Company Law
Laws Affected:: Amd §§102 & 201, add §202-a, Lim Lil L; amd §§101.00 & 176.00, Loc Fin L; amd §§102, 204 & 1411, N-PC L
Versions Introduced in 2011-2012 Legislative Session:: S7583, A7510

2013-S4240 - Summary

Prohibits municipalities from forming limited liability companies to finance operations or acquisitions of assets.

2013-S4240 - Sponsor Memo

                                BILL NUMBER:S4240

TITLE OF BILL:  An act to amend the limited liability company law and
the not-for-profit corporation law, in relation to the purposes,
powers and duties of limited liability companies, and local
development corporations and other not-for-profit corporations; and to
amend the local finance law, in relation to loans of credit and the
exclusivity of such law

PURPOSE: To limit and regulate the use of local development
corporations (LDCs), limited liability companies (LLCs) and certain
other private entities by local governments.

SUMMARY OF PROVISIONS: Section 1 of this bill adds a new Subdivision
(r-1) to Section 102 of the Limited Liability Company Law to define
the term "municipality" for the purposes of such law.

Section 2 of this bill amends Section 201 of the Limited Liability
Company Law to expressly prohibit the formation of limited liability
companies to finance directly or indirectly over a period of time a
municipality's operations, or the acquisition or improvement of an
asset by or for the use of a municipality.

Section 3 of this bill adds a new Section 202-a to the Limited
Liability Company Law to provide that, with certain exceptions, a
limited liability company shall not participate in any transaction or

series of related transactions involving the payment of money over a
period of time by or on behalf of a municipality located in this state
and having as a purpose the direct or indirect financing of the
municipality's operations or the acquisition or improvement of an
asset by or for the use of the municipality.

Section 4 of this bill amends Subdivision 1 of Paragraph a of Section
101.00 of the Local Finance Law to clarify that no municipality,
school district or district corporation shall guarantee or assume the
indebtedness or obligations of any not-for-profit corporation or
limited liability company formed by, on behalf of, for the benefit of,
or under the control of the municipality, school district or district
corporation.

Section 5 of this bill amends Section 176.00 of the Local Finance Law
to provide that the Local Finance Law shall be the exclusive law
governing. the manner in which municipalities, school districts and
district corporations finance over a period of time their operations
and the acquisition or improvement of an asset by or for the use of a
municipality, school district or district corporation, unless
expressly or specifically otherwise provided by general or special
law.

Section 6 of this bill adds a new Subparagraph 19 to Paragraph (a) of
Section 102 of the Not-For-Profit Corporation Law to define the term
"municipality" for the purposes of such law.

Section 7 of this bill amends Section 204 of the Not-For-Profit
Corporation Law to provide that no corporation to which the
Not-For-Profit Corporation Law applies shall participate in any


transaction or series of related transactions involving the payment of
money over a period of time by or on behalf of a municipality and
having as a purpose the direct or indirect financing of the
municipality's operations or the acquisition or improvement of an
asset by or for the use of the municipality.

Section 8 of this bill amends Paragraphs (a), (c), (d) and (i) of
Section 1411 of the Not-For-Profit Corporation Law to:

* provide that no LDC shall participate in any sale or lease of real
property, or generally any other transaction or series of related
transactions involving the payment of money over a period of time by
or on behalf of a municipality and having as a purpose the direct or
indirect financing of the municipality's operations or the acquisition
or improvement of an asset by or for the use of the municipality;

* prohibit any additional compensation for board members, other
officers and employees of LDCs in instances when a municipality caused
the formation of the LDC if those individuals serve or have served as
officers or employees of the municipality;

* require that any contract between a local government and an LDC be
for fair and adequate consideration, subject to the requirements of
Article 5-A of the General Municipal Law; and

* require that the public notice of any sale or lease of municipally
owned real property to an LDC include a description of the property to
be sold or leased, the estimated full market value of the property,
the consideration to be received by the municipality, and a statement
of the intended use or disposition of the property by the LDC.

These amendments in Section 8 of the bill would apply to both newly
formed and existing LDCs.

Section 9 of this bill provides that this act shall take effect
immediately and shall apply to any transaction occurring on or after
the effective date of this act.

PRIOR LEGISLATIVE HISTORY:  S. 7583 and A. 7510-A (Passed Assembly) of
2011-2012

JUSTIFICATION: As a rule, local governments lack specific statutory
authority to create private entities. One exception to the rule is
found in Section 1411 of the Not-For-Profit Corporation Law, which
authorizes counties, cities, towns and villages to create LDCs. There
are currently 279 known LDCs operating in the State. It is not clear
how many of these LDCs were created for or at the behest of a local
government.

With limited exceptions, the governing body of a county, city, town or
village may determine that any real property owned by the municipality
is no longer required for municipal use and authorize the sale or
lease of the property to a LDC. The sale or lease may be made without
appraisal, public notice, or public bidding, although the municipality
is required to hold a public hearing at least 10 days before the sale
or lease is authorized. The LDC must use the property for the purposes
set forth in its certificate of incorporation unless the LDC obtains


written approval from the municipality to use the property for another
purpose.

The primary purpose of this bill is to limit the use of LDCs, LLCs and
other not-for-profit corporations by local governments by, among other
things, expressly prohibiting the use of these private entities to
directly or indirectly finance a municipality's operations or the
acquisition or improvement of an asset by or for the use of a
municipality, with limited exceptions. For those transactions that do
not fall within the prohibition, the bill would help ensure that
transactions between an LDC and a municipality are done in the best
interests of the municipality, at "arm's length," and not to avoid
statutory or constitutional restrictions applicable to municipal
transactions. For example, the bill would provide that any contract
between an LDC and a municipality provide for the municipality to
receive fair and adequate consideration, making clear that the
constitutional gift prohibition in Article VIII, Section 1 of the
State Constitution may not be contravened in the context of a
municipal contract with an LDC.

Similarly, so that LDCs are not used as vehicles to avoid municipal
procurement rules, the bill would provide that contracts between
municipalities and LDCs are subject to the municipal contracting
requirements of Article 5-A of the General Municipal Law. To
facilitate periodic review and re-evaluation by municipal governing
boards of leases and other contracts with LDCs, the bill would limit
the term of such agreements to five years, subject to subsequent
renewals, each up to five years, upon mutual consent of the parties.

In transactions involving the sale or lease of municipal real property
to an LDC, the bill would provide for increased transparency by
requiring the notice of public hearing to include the estimated fair
market value of the property, the consideration to be received by the
municipality, and a statement of the intended use or disposition of
the property by the LDC.

The amendments to the Local Finance Law in this bill would clarify
that a guarantee or assumption of the debt of an LDC or other
not-for-profit corporation, or a limited liability company, formed by,
on behalf of, for the benefit of, or controlled by, a local government
constitutes an unauthorized loan of credit by the local government.
This would ensure that the dicta in the Summers case (60 AD3d 1271
(2009),Fourth Department ) is not used as precedent to justify a local
government's agreement to guarantee or assume the debt of such a
private entity. In addition, these changes would make clear that the
issuance of bonds and notes under the Local Finance Law is intended to
be exclusive means for a local governments to finance over time their
operations and the acquisition of or improvement of an asset for use
by or for the local government, unless expressly and specifically
otherwise provided for in a general or special law.

We are mindful that many LDCs have been determined by the Authorities
Budget Office to be "local authorities" and, therefore, subject to
requirements of the Public Authorities Accountability Act of 2005 (L.
2005, ch. 766 as amended by L. 2009, ch. 505, 506). However, the
ream's in that Act did not address the concerns that would be


addressed in this bill, such as the use of LDCs to finance municipal
operations and assets.

The Comptroller urges the passage of this proposed legislation.

BUDGET IMPLICATIONS:  This bill has no significant fiscal impact.

EFFECTIVE DATE: This bill would take effect immediately and shall
apply to any transaction occurring on or after the effective date of
this act.

2013-S4240 - Bill Text download pdf

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

                                  4240

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                             March 15, 2013
                               ___________

Introduced  by  COMMITTEE  ON  RULES  --  (at request of the State Comp-
  troller) -- read twice and ordered printed, and  when  printed  to  be
  committed  to  the  Committee on Corporations, Authorities and Commis-
  sions

AN ACT to amend the limited liability company law and the not-for-profit
  corporation law, in relation to the purposes,  powers  and  duties  of
  limited  liability  companies,  and local development corporations and
  other not-for-profit corporations; and to amend the local finance law,
  in relation to loans of credit and the exclusivity of such law

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

  Section 1. Section 102 of the limited liability company law is amended
by adding a new subdivision (r-1) to read as follows:
  (R-1)  "MUNICIPALITY"  MEANS  A  COUNTY,  CITY,  TOWN, VILLAGE, SCHOOL
DISTRICT, BOARD OF COOPERATIVE EDUCATIONAL SERVICES, COMMUNITY  COLLEGE,
PUBLIC LIBRARY OR LIBRARY DISTRICT, DISTRICT CORPORATION, TOWN OR COUNTY
IMPROVEMENT  DISTRICT,  OR  OTHER  SPECIAL  DISTRICT ESTABLISHED FOR THE
PURPOSE OF CARRYING ON, PERFORMING OR FINANCING ONE OR MORE IMPROVEMENTS
OR SERVICES FOR BENEFITED PROPERTIES  OR  PROPERTY  OWNERS  WITHIN  SUCH
SPECIAL DISTRICT.
  S  2.  Section  201 of the limited liability company law is amended to
read as follows:
  S 201. Purpose. A limited liability company may be formed  under  this
chapter for any lawful business purpose or purposes except: (A) to do in
this  state any business for which another statute specifically requires
some other business entity or natural person to be formed  or  used  for
such business; OR (B) TO FINANCE DIRECTLY OR INDIRECTLY OVER A PERIOD OF
TIME A MUNICIPALITY'S OPERATIONS OR THE ACQUISITION OR IMPROVEMENT OF AN
ASSET BY OR FOR THE USE OF A MUNICIPALITY.
  S  3.  The  limited  liability  company law is amended by adding a new
section 202-a to read as follows:

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD04649-01-3

S. 4240                             2

  S 202-A. LIMITATION  ON  POWERS.  NOTWITHSTANDING  THE  PROVISIONS  OF
SECTION  TWO  HUNDRED  TWO  OF THIS ARTICLE, A LIMITED LIABILITY COMPANY
SHALL NOT PARTICIPATE IN ANY TRANSACTION OR  SERIES  OF  RELATED  TRANS-
ACTIONS  INVOLVING  THE  PAYMENT OF MONEY OVER A PERIOD OF TIME BY OR ON
BEHALF  OF  A MUNICIPALITY LOCATED IN THIS STATE AND HAVING AS A PURPOSE
THE DIRECT OR INDIRECT FINANCING OF THE MUNICIPALITY'S OPERATIONS OR THE
ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR THE USE OF THE  MUNICI-
PALITY. PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION SHALL PROHIBIT A
LIMITED LIABILITY COMPANY FROM ENTERING INTO A TRUE LEASE WITH A MUNICI-
PALITY,  ENTERING  INTO  AN  INSTALLMENT  PURCHASE  CONTRACT PURSUANT TO
SECTION ONE HUNDRED NINE-B OF THE GENERAL MUNICIPAL  LAW  OR  PURCHASING
BONDS OR NOTES ISSUED PURSUANT TO THE LOCAL FINANCE LAW.
  S  4.  Subdivision  1  of  paragraph  a of section 101.00 of the local
finance law, as amended by chapter 200 of the laws of 1960,  is  amended
to read as follows:
  1.  Give  or loan its credit to or in aid of any individual, or public
or private corporation or association, or private  undertaking,  INCLUD-
ING,  BUT  NOT  LIMITED TO, GUARANTEEING OR ASSUMING THE INDEBTEDNESS OR
OBLIGATIONS OF  ANY  NOT-FOR-PROFIT  CORPORATION  OR  LIMITED  LIABILITY
COMPANY  FORMED  BY,  ON  BEHALF  OF,  FOR  THE BENEFIT OF, OR UNDER THE
CONTROL OF THE MUNICIPALITY, SCHOOL DISTRICT OR DISTRICT CORPORATION, or
  S 5. Section 176.00 of the local finance law, as  amended  by  chapter
837 of the laws of 1945, is amended to read as follows:
  S  176.00  Local  finance  law  to  be the exclusive law. A. Except as
otherwise provided in this article,  all  statutes,  local  laws,  ordi-
nances,  rules  and  regulations,  insofar as they relate to the matters
herein contained, are hereby superseded, it being the legislative intent
that this chapter shall constitute the exclusive law on such matters.
  B. UNLESS EXPRESSLY AND SPECIFICALLY OTHERWISE PROVIDED IN  ANY  OTHER
GENERAL LAW OR IN A SPECIAL LAW, THE PROVISIONS OF THIS CHAPTER SHALL BE
THE  EXCLUSIVE  LAW GOVERNING THE MANNER IN WHICH MUNICIPALITIES, SCHOOL
DISTRICTS AND DISTRICT CORPORATIONS FINANCE OVER A PERIOD OF TIME  THEIR
OPERATIONS  AND THE ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR THE
USE OF A MUNICIPALITY, SCHOOL DISTRICT OR DISTRICT CORPORATION.
  S 6. Paragraph (a) of section 102 of  the  not-for-profit  corporation
law is amended by adding a new subparagraph 19 to read as follows:
  (19)  "MUNICIPALITY"  MEANS  A  COUNTY,  CITY,  TOWN,  VILLAGE, SCHOOL
DISTRICT, BOARD OF COOPERATIVE EDUCATIONAL SERVICES, COMMUNITY  COLLEGE,
PUBLIC LIBRARY OR LIBRARY DISTRICT, DISTRICT CORPORATION, TOWN OR COUNTY
IMPROVEMENT  DISTRICT,  OR  OTHER  SPECIAL  DISTRICT ESTABLISHED FOR THE
PURPOSE OF CARRYING ON, PERFORMING OR FINANCING ONE OR MORE IMPROVEMENTS
OR SERVICES FOR BENEFITED PROPERTIES  OR  PROPERTY  OWNERS  WITHIN  SUCH
SPECIAL DISTRICT.
  S  7.  Section 204 of the not-for-profit corporation law is amended to
read as follows:
S 204. Limitation on activities.
  Notwithstanding any other provision  of  this  chapter  or  any  other
general  law,  a  corporation  of any type or kind to which this chapter
applies shall: (A) conduct no activities for pecuniary profit or  finan-
cial  gain,  whether  or  not  in furtherance of its corporate purposes,
except to the extent that such activity supports its other lawful activ-
ities then being conducted; AND (B) NOT PARTICIPATE IN  ANY  TRANSACTION
OR  SERIES OF RELATED TRANSACTIONS INVOLVING THE PAYMENT OF MONEY OVER A
PERIOD OF TIME BY OR ON BEHALF OF A MUNICIPALITY AND HAVING AS A PURPOSE
THE DIRECT OR INDIRECT FINANCING OF THE  MUNICIPALITY'S  OPERATIONS,  OR
THE  ACQUISITION  OR  IMPROVEMENT  OF  AN ASSET BY OR FOR THE USE OF THE

S. 4240                             3

MUNICIPALITY, PROVIDED, HOWEVER, THAT  NOTHING  IN  THIS  SECTION  SHALL
PROHIBIT SUCH A CORPORATION FROM ENTERING INTO A TRUE LEASE WITH A MUNI-
CIPALITY  OR  PURCHASING  BONDS  OR  NOTES  ISSUED PURSUANT TO THE LOCAL
FINANCE LAW.
  S  8. Paragraphs (a), (c), (d) and (i) of section 1411 of the not-for-
profit corporation law, paragraph (a) as amended by chapter 847  of  the
laws  of 1970, are amended and a new paragraph (d-1) is added to read as
follows:
  (a) Purposes.
  This section shall provide  an  additional  and  alternate  method  of
incorporation  or reincorporation of not-for-profit corporations for any
of the purposes set forth in this paragraph [and shall not be deemed  to
alter,  impair or diminish the purposes, rights, powers or privileges of
any corporation heretofore or hereafter incorporated under this  section
or  under  the stock or business corporation laws].  Corporations may be
incorporated or reincorporated  under  this  section  as  not-for-profit
local  development  corporations operated for the exclusively charitable
or public purposes of relieving and reducing unemployment, promoting and
providing for additional and maximum employment, bettering and maintain-
ing job opportunities, instructing or training individuals to improve or
develop  their  capabilities  for  such  jobs,  carrying  on  scientific
research  for  the purpose of aiding a community or geographical area by
attracting new industry to the community or area or by  encouraging  the
development  of,  or retention of, an industry in the community or area,
and lessening the burdens of government and acting in the public  inter-
est,  and  any  one  or  more counties, cities, towns or villages of the
state, or any combination thereof,  or  the  New  York  job  development
authority  in  exercising  its power under the public authorities law to
encourage the organization of local development corporations, may  cause
such corporations to be incorporated by public officers or private indi-
viduals  or reincorporated upon compliance with the requirements of this
section, and it is hereby found, determined and declared that in  carry-
ing  out  said  purposes and in exercising the powers conferred by para-
graph (b) such corporations will be performing an essential governmental
function.
  (c) Powers.
  In furtherance of its purposes set forth in paragraph (a) but not  for
any  other  purposes,  a  local  development corporation incorporated or
reincorporated under this section shall have the following powers:    to
construct,  acquire,  rehabilitate  and improve for use by others indus-
trial or manufacturing plants in the territory in which  its  operations
are   principally  to  be  conducted,  to  assist  financially  in  such
construction, acquisition, rehabilitation and improvement,  to  maintain
such plants for others in such territory, to disseminate information and
furnish advice, technical assistance and liaison with federal, state and
local  authorities  with respect thereto, to acquire by purchase, lease,
gift, bequest, devise or otherwise real or personal property  or  inter-
ests  therein,  to borrow money and to issue negotiable bonds, notes and
other obligations therefor, and notwithstanding section 510 (Disposition
of all or substantially all assets) without leave of the court, to sell,
lease, mortgage or otherwise dispose of or encumber any such  plants  or
any  of  its real or personal property or any interest therein upon such
terms as it may determine and, in connection with  loans  from  the  New
York  job  development authority, to enter into covenants and agreements
and to comply with all the terms, conditions and provisions thereof, and
otherwise to carry out its corporate purposes and to foster and  encour-

S. 4240                             4

age  the  location or expansion of industrial or manufacturing plants in
the territory in which the operations of such corporation are principal-
ly to be conducted, provided, however, that no such  corporation  shall:
(1)  attempt  to  influence  legislation  by propaganda or otherwise, or
participate or intervene,  directly  or  indirectly,  in  any  political
campaign  on  behalf  of  or  in  opposition to any candidate for public
office; (2) PARTICIPATE IN ANY TRANSACTION OR SERIES OF  RELATED  TRANS-
ACTIONS  INVOLVING  THE  PAYMENT OF MONEY OVER A PERIOD OF TIME BY OR ON
BEHALF OF A MUNICIPALITY AND HAVING AS A PURPOSE THE DIRECT OR  INDIRECT
FINANCING  OF  THE  MUNICIPALITY'S  OPERATIONS,  OR  THE  ACQUISITION OR
IMPROVEMENT OF AN ASSET BY OR FOR THE USE OF THE MUNICIPALITY, PROVIDED,
HOWEVER, THAT NOTHING IN THIS SECTION SHALL PROHIBIT A LOCAL DEVELOPMENT
CORPORATION FROM ENTERING INTO A  TRUE  LEASE  WITH  A  MUNICIPALITY  OR
PURCHASING  BONDS OR NOTES ISSUED PURSUANT TO THE LOCAL FINANCE LAW; AND
(3) IN THE CASE OF A LOCAL DEVELOPMENT CORPORATION, THE INCORPORATION OF
WHICH WAS CAUSED BY A COUNTY, CITY, TOWN  OR  VILLAGE,  PROVIDE  COMPEN-
SATION TO A PERSON WHO SERVES AS A DIRECTOR, OFFICER OR EMPLOYEE OF SUCH
CORPORATION WHEN THE PERSON SERVES OR HAS SERVED WITHIN THE PREVIOUS TWO
YEARS AS AN OFFICER OR EMPLOYEE OF SUCH COUNTY, CITY, TOWN OR VILLAGE.
  (d)   Purchase or lease of real property owned by a county, city, town
or village.
  (1)  The local legislative body of a county,  city,  town  or  village
[or,  if there is a board of estimate in a city, then the board of esti-
mate,] may by resolution  determine  that  specifically  described  real
property  owned by the county, city, town or village is not required for
use by such county, city, town or  village  and  authorize  the  county,
city,  town  or  village  to sell or lease such real property to a local
development corporation incorporated or reincorporated under this  arti-
cle;  provided,  however,  that:  (I) title to such land be not declared
inalienable as a forest preserve or a parkland; AND (II)  THAT  NO  SUCH
SALE  OR  LEASE SHALL HAVE AS A PURPOSE THE DIRECT OR INDIRECT FINANCING
OVER A PERIOD OF TIME OF THE OPERATIONS OF THE  COUNTY,  CITY,  TOWN  OR
VILLAGE, OR THE ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR THE USE
OF THE COUNTY, CITY, TOWN OR VILLAGE.
  (2)    Notwithstanding the provisions of any general, special or local
law, charter or ordinance to the contrary, such sale  or  lease  may  be
made  without  appraisal, public notice, (except as provided in subpara-
graph (4)) or public  bidding  for  [such  price  or  rental]  FAIR  AND
ADEQUATE  CONSIDERATION  and upon such OTHER terms as may be agreed upon
between the county, city, town or village  and  said  local  development
corporation; provided, however, that in case of a lease the term may not
exceed  ninety-nine years and provided, further, that in cities having a
population of one million or more, no such sale or lease shall  be  made
without  the  approval  of  a  majority  of  the  members of the borough
[improvement] board of the  borough  in  which  such  real  property  is
located.
  (3)    Before  any  sale  or  lease to a local development corporation
incorporated or reincorporated under this article shall be authorized, a
public hearing shall be held by the local legislative body[, or  by  the
board of estimate, as the case may be,] to consider the proposed sale or
lease.
  (4)    Notice  of  such  hearing  shall be published at least ten days
before the date set for the hearing in  such  publication  and  in  such
manner as may be designated by the local legislative body[, or the board
of estimate as the case may be]. SUCH NOTICE SHALL INCLUDE A DESCRIPTION
OF  THE  REAL PROPERTY PROPOSED TO BE SOLD OR LEASED, AND A STATEMENT OF

S. 4240                             5

(I) THE ESTIMATED FAIR MARKET VALUE OF THE REAL PROPERTY PROPOSED TO  BE
SOLD  OR  LEASED,  (II)  THE CONSIDERATION TO BE RECEIVED BY THE COUNTY,
CITY, TOWN OR VILLAGE ON ACCOUNT OF SUCH SALE  OR  LEASE,  AND  (III)  A
STATEMENT  OF  THE  INTENDED USE OR DISPOSITION OF SUCH REAL PROPERTY BY
THE LOCAL DEVELOPMENT CORPORATION.
  (5)  A local development corporation, incorporated  or  reincorporated
under this section, which purchases or leases real property from a coun-
ty,  city,  town  or village, shall not, without the written approval of
the county, city, town or  village,  use  such  real  property  for  any
purpose  except  the  purposes  set forth in the certificate of incorpo-
ration or reincorporation of said local development corporation.  In the
event such real property is used in violation  of  the  restrictions  of
this  paragraph,  the  attorney-general  may  bring an action or special
proceeding to enjoin the unauthorized use.
  (D-1) CONTRACTS WITH MUNICIPALITIES.
  ANY CONTRACT OR OTHER AGREEMENT BETWEEN  A  LOCAL  DEVELOPMENT  CORPO-
RATION  AND  A  MUNICIPALITY  SHALL: (I) PROVIDE FOR THE MUNICIPALITY TO
RECEIVE FAIR AND ADEQUATE CONSIDERATION, (II) BE SUBJECT TO THE REQUIRE-
MENTS OF ARTICLE FIVE-A OF THE GENERAL MUNICIPAL LAW, (III) EXCEPT FOR A
REAL PROPERTY LEASE AGREEMENT, HAVE A TERM NOT  TO  EXCEED  FIVE  YEARS,
SUBJECT TO ONE OR MORE RENEWALS FOR A TERM NOT TO EXCEED FIVE YEARS UPON
THE MUTUAL CONSENT OF THE PARTIES, AND (IV) BE MADE FOR A PROPER MUNICI-
PAL  PURPOSE,  WHICH  SHALL NOT INCLUDE THE DIRECT OR INDIRECT FINANCING
OVER A PERIOD OF TIME OF THE MUNICIPALITY'S OPERATIONS OR  THE  ACQUISI-
TION OR IMPROVEMENT OF AN ASSET BY OR FOR THE USE OF THE MUNICIPALITY.
  (i) Effect of section.
  Corporations  incorporated  or reincorporated under this section shall
be organized and operated exclusively for  the  purposes  set  forth  in
paragraph (a), shall have, in addition to the powers otherwise conferred
by  law,  the  powers conferred by paragraph (c) and shall be subject to
all the restrictions and limitations imposed by  [paragraph]  PARAGRAPHS
(C),  (D),  (D-1), (e) and [paragraph] (g).  In so far as the provisions
of this section are inconsistent with the provisions of any  other  law,
general  or special, the provisions of this section shall be controlling
as to corporations incorporated or reincorporated hereunder.
  S 9.  This act shall take effect immediately and shall  apply  to  any
transaction occurring on or after such effective date.

2013-S4240A (ACTIVE) - Details

See Assembly Version of this Bill:: A3631
Current Committee:: Senate Corporations, Authorities And Commissions
Law Section:: Limited Liability Company Law
Laws Affected:: Amd §§102 & 201, add §202-a, Lim Lil L; amd §§101.00 & 176.00, Loc Fin L; amd §§102, 204 & 1411, N-PC L
Versions Introduced in 2011-2012 Legislative Session:: S7583, A7510

2013-S4240A (ACTIVE) - Summary

Prohibits municipalities from forming limited liability companies to finance operations or acquisitions of assets.

2013-S4240A (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S4240A

TITLE OF BILL:  An act to amend the limited liability company law and
the not-for-profit corporation law, in relation to the purposes,
powers and duties of limited liability companies, and local
development corporations and other not-for-profit corporations; and to
amend the local finance law, in relation to loans of credit and the
exclusivity of such law

PURPOSE:

To limit and regulate the use of local development corporations
(LDCs), limited liability companies (LLCs) and certain other private
entities by local governments.

SUMMARY OF PROVISIONS:

Section 1 of this bill adds a new subdivision (r-1) to Section 102 of
the Limited Liability Company Law to define the term "municipality"
for the purposes of such law.

Section 2 of this bill amends Section 201 of the Limited Liability
Company Law to expressly prohibit the formation of limited liability
companies to finance over a period of time a municipality's
operations, or the acquisition or improvement of an asset by or for
the use of a municipality.

Section 3 of this bill adds a new Section 202-a to the Limited
Liability Company Law to provide that, with certain exceptions, a
limited liability company shall not participate in any transaction or
series of related transactions involving the payment of money over a
period of time by or on behalf of a municipality located in this state
and having as a purpose the financing of the municipality's operations
or the acquisition or improvement of an asset by or for the use of the
municipality.

Section 4 of this bill amends Subdivision 1 of Paragraph a of Section
101.00 of the Local Finance Law to clarify that no municipality,
school district or district corporation shall guarantee or assume the
indebtedness or obligations of any not-for-profit corporation or
limited liability company fowled by, on behalf of, for the benefit of,
or under the control of the municipality, school district or district
corporation.

Section 5 of this bill amends Section 176.00 of the Local Finance Law
to provide that the Local Finance Law shall be the exclusive law
governing the manner in which municipalities, school districts and
district corporations finance over a period of time their operations
and the acquisition or improvement of an asset by or for the use of a
municipality, school district or district corporation, unless
expressly or specifically otherwise provided by general or special
law.

Section 6 of this bill adds a new Subparagraph 19 to Paragraph (a) of
Section 102 of the Not-For-Profit Corporation Law to define the term
"municipality" for the purposes of such law.


Section 7 of this bill amends Section 204 of the Not-For-Profit
Corporation Law to provide that no corporation to which the
Not-For-Profit Corporation Law applies shall participate in any
transaction or series of related transactions involving the payment of
money over a period of time by or on behalf of a municipality and
having as a purpose the financing of the municipality's operations or
the acquisition or improvement of an asset by or for the use of the
municipality.

Section 8 of this bill amends Paragraphs (a), (c), (d) and (i) of
Section 1411 of the Not-For-Profit Corporation Law to:

*provide that no LDC shall participate in any sale or lease of real
property, or generally any other transaction or series of related
transactions involving, the payment of money over a period of time by
or on behalf of a municipality and having as a purpose the financing
of the municipality's operations or the acquisition or improvement of
an asset by or for the use of the municipality;
*prohibit any additional compensation for board members, other
officers and employees of LDCs in instances when a municipality caused
the formation of the LDC if those individuals serve or have served as
officers or employees of the municipality;
*require that any contract between a local government and an LDC be
for fair and adequate consideration, subject to the requirements of
Article 5-A of the General Municipal Law; and
*require that the public notice of any sale or lease of municipally
owned real property to an LDC include a description of the property to
be sold or leased, the estimated full market value of the property,
the consideration to be received by the municipality, and a statement
of the intended use or disposition of the property by the LDC.

These amendments in Section 8 of the bill would apply to both newly
formed and existing LDCs.

Section 9 of this bill provides that this act shall take effect
immediately and shall apply to any transaction occurring on or after
the effective date of this act.

PRIOR LEGISLATIVE HISTORY:

S. 7583 and A. 7510-A (Passed Assembly) of 2011-2012

JUSTIFICATION:

As a rule, local governments lack specific statutory authority to
create private entities. One exception to the rule is found in Section
1411 of the Not-For-Profit Corporation Law, which authorizes counties,
cities, towns and villages to create LDCs. There are currently 279
known LDCs operating in the State. It is not clear how many of these
LDCs were created for or at the behest of a local government.

With limited exceptions, the governing body of a county, city, town or
village may determine that any real property owned by the municipality
is no longer required for municipal use and authorize the sale or
lease of the property to a LDC. The sale or lease may be made without
appraisal, public notice, or public bidding, although the municipality
is required to hold a public hearing at least 10 days before the sale


or lease is authorized. The LDC must use the property for the purposes
set forth in its certificate of incorporation unless the LDC obtains
written approval from the municipality to use the property for another
purpose.

The primary purpose of this bill is to limit the use of LDCs, LLCs and
other not-for-profit corporations by local governments by, among other
things, expressly prohibiting the use of these private entities to
finance a municipality's operations or the acquisition or improvement
of an asset by or for the use of a municipality, with limited
exceptions.

For those transactions that do not fall within the prohibition, the
bill would help ensure that transactions between an LDC and a
municipality are done in the best interests of the municipality, at
"arm's length," and not to avoid statutory or constitutional
restrictions applicable to municipal transactions. For example, the
bill would provide that any contract between an LDC and a municipality
provide for the municipality to receive fair and adequate
consideration, malting clear that the constitutional gift prohibition
in Article VIII, Section 1 of the State Constitution may not be
contravened in the context of a municipal contract with an LDC.

Similarly, so that LDCs are not used as vehicles to avoid municipal
procurement rules, the bill would provide that contracts between
municipalities and LDCs are subject to the municipal contracting
requirements of Article 5-A of the General Municipal Law. To
facilitate periodic review and re-evaluation by municipal governing
boards of leases and other contracts with LDCs, the bill would limit
the term of such agreements to five years, subject to subsequent
renewals, each up to five years, upon mutual consent of the parties.

In transactions involving the sale or lease of municipal real property
to an LDC, the bill would provide for increased transparency by
requiring the notice of public hearing to include the estimated fair
market value of the property, the consideration to be received by the
municipality, and a statement of the intended use. or disposition of
the property by the LDC.

The amendments to the Local Finance Law in this bill would clarify
that a guarantee or assumption of the debt of an LDC or other
not-for-profit corporation, or a limited liability company, formed by,
on behalf of, for the benefit of, or controlled by, a local government
constitutes an unauthorized loan of credit by the local government.
This would ensure that the dicta in the Summers case (60 AD3d 1271
(2009). Fourth Department) is not used as precedent to justify a local
government's agreement to guarantee or assume the debt of such a
private entity. In addition, these changes would make clear that the
issuance of bonds and notes under the Local Finance Law is intended to
be exclusive means for a local governments to finance over time their
operations and the acquisition of or improvement of an asset for use
by or for the local government, unless expressly and specifically
otherwise provided for in a general or special law.

We are mindful that many LDCs have been determined by the Authorities
Budget Office to be "local authorities" and, therefore, subject to
requirements of the Public Authorities Accountability Act of 2005 (L.


2005, ch. 766 as amended by L. 2009, ch. 505, 506). However, the
reforms in that Act did not address the concerns that would be
addressed in this bill, such as the use of LDCs to finance municipal
operations and assets.

The Comptroller urges the passage of this proposed legislation.

BUDGET IMPLICATIONS:

This bill has no significant fiscal impact.

EFFECTIVE DATE:

This bill would take effect immediately and shall apply to any
transaction occurring on or after the effective date of this act.

2013-S4240A (ACTIVE) - Bill Text download pdf

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

                                 4240--A

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                             March 15, 2013
                               ___________

Introduced  by  COMMITTEE  ON  RULES  --  (at request of the State Comp-
  troller) -- read twice and ordered printed, and  when  printed  to  be
  committed  to  the  Committee on Corporations, Authorities and Commis-
  sions -- committee discharged,  bill  amended,  ordered  reprinted  as
  amended and recommitted to said committee

AN ACT to amend the limited liability company law and the not-for-profit
  corporation  law,  in  relation  to the purposes, powers and duties of
  limited liability companies, and local  development  corporations  and
  other not-for-profit corporations; and to amend the local finance law,
  in relation to loans of credit and the exclusivity of such law

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

  Section 1. Section 102 of the limited liability company law is amended
by adding a new subdivision (r-1) to read as follows:
  (R-1) "MUNICIPALITY" MEANS  A  COUNTY,  CITY,  TOWN,  VILLAGE,  SCHOOL
DISTRICT,  BOARD OF COOPERATIVE EDUCATIONAL SERVICES, COMMUNITY COLLEGE,
PUBLIC LIBRARY OR LIBRARY DISTRICT, DISTRICT CORPORATION, TOWN OR COUNTY
IMPROVEMENT DISTRICT, OR OTHER  SPECIAL  DISTRICT  ESTABLISHED  FOR  THE
PURPOSE OF CARRYING ON, PERFORMING OR FINANCING ONE OR MORE IMPROVEMENTS
OR  SERVICES  FOR  BENEFITED  PROPERTIES  OR PROPERTY OWNERS WITHIN SUCH
SPECIAL DISTRICT.
  S 2. Section 201 of the limited liability company law  is  amended  to
read as follows:
  S  201.  Purpose. A limited liability company may be formed under this
chapter for any lawful business purpose or purposes except: (A) to do in
this state any business for which another statute specifically  requires
some  other  business  entity or natural person to be formed or used for
such business; OR (B) TO FINANCE OVER A PERIOD OF TIME A  MUNICIPALITY'S
OPERATIONS  OR  THE ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR THE
USE OF A MUNICIPALITY.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD04649-03-3

S. 4240--A                          2

  S 3. The limited liability company law is  amended  by  adding  a  new
section 202-a to read as follows:
  S  202-A.  LIMITATION  ON  POWERS.  NOTWITHSTANDING  THE PROVISIONS OF
SECTION TWO HUNDRED TWO OF THIS ARTICLE,  A  LIMITED  LIABILITY  COMPANY
SHALL  NOT  PARTICIPATE  IN  ANY TRANSACTION OR SERIES OF RELATED TRANS-
ACTIONS INVOLVING THE PAYMENT OF MONEY OVER A PERIOD OF TIME  BY  OR  ON
BEHALF  OF  A MUNICIPALITY LOCATED IN THIS STATE AND HAVING AS A PURPOSE
THE FINANCING OF THE MUNICIPALITY'S OPERATIONS  OR  THE  ACQUISITION  OR
IMPROVEMENT OF AN ASSET BY OR FOR THE USE OF THE MUNICIPALITY. PROVIDED,
HOWEVER, THAT NOTHING IN THIS SECTION SHALL PROHIBIT A LIMITED LIABILITY
COMPANY  FROM  ENTERING  INTO A TRUE LEASE WITH A MUNICIPALITY, ENTERING
INTO AN INSTALLMENT PURCHASE CONTRACT PURSUANT TO  SECTION  ONE  HUNDRED
NINE-B  OF THE GENERAL MUNICIPAL LAW OR PURCHASING BONDS OR NOTES ISSUED
PURSUANT TO THE LOCAL FINANCE LAW.
  S 4. Subdivision 1 of paragraph a  of  section  101.00  of  the  local
finance  law,  as amended by chapter 200 of the laws of 1960, is amended
to read as follows:
  1. Give or loan its credit to or in aid of any individual,  or  public
or  private  corporation or association, or private undertaking, INCLUD-
ING, BUT NOT LIMITED TO, GUARANTEEING OR ASSUMING  THE  INDEBTEDNESS  OR
OBLIGATIONS  OF  ANY  NOT-FOR-PROFIT  CORPORATION  OR  LIMITED LIABILITY
COMPANY FORMED BY, ON BEHALF OF,  FOR  THE  BENEFIT  OF,  OR  UNDER  THE
CONTROL OF THE MUNICIPALITY, SCHOOL DISTRICT OR DISTRICT CORPORATION, or
  S  5.  Section  176.00 of the local finance law, as amended by chapter
837 of the laws of 1945, is amended to read as follows:
  S 176.00 Local finance law to be  the  exclusive  law.  A.  Except  as
otherwise  provided  in  this  article,  all statutes, local laws, ordi-
nances, rules and regulations, insofar as they  relate  to  the  matters
herein contained, are hereby superseded, it being the legislative intent
that this chapter shall constitute the exclusive law on such matters.
  B.  UNLESS  EXPRESSLY AND SPECIFICALLY OTHERWISE PROVIDED IN ANY OTHER
GENERAL LAW OR IN A SPECIAL LAW, THE PROVISIONS OF THIS CHAPTER SHALL BE
THE EXCLUSIVE LAW GOVERNING THE MANNER IN WHICH  MUNICIPALITIES,  SCHOOL
DISTRICTS  AND DISTRICT CORPORATIONS FINANCE OVER A PERIOD OF TIME THEIR
OPERATIONS AND THE ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR  THE
USE OF A MUNICIPALITY, SCHOOL DISTRICT OR DISTRICT CORPORATION.
  S  6.  Paragraph  (a) of section 102 of the not-for-profit corporation
law is amended by adding a new subparagraph 19 to read as follows:
  (19) "MUNICIPALITY"  MEANS  A  COUNTY,  CITY,  TOWN,  VILLAGE,  SCHOOL
DISTRICT,  BOARD OF COOPERATIVE EDUCATIONAL SERVICES, COMMUNITY COLLEGE,
PUBLIC LIBRARY OR LIBRARY DISTRICT, DISTRICT CORPORATION, TOWN OR COUNTY
IMPROVEMENT DISTRICT, OR OTHER  SPECIAL  DISTRICT  ESTABLISHED  FOR  THE
PURPOSE OF CARRYING ON, PERFORMING OR FINANCING ONE OR MORE IMPROVEMENTS
OR  SERVICES  FOR  BENEFITED  PROPERTIES  OR PROPERTY OWNERS WITHIN SUCH
SPECIAL DISTRICT.
  S 7. Section 204 of the not-for-profit corporation law is  amended  to
read as follows:
S 204. Limitation on activities.
  Notwithstanding  any  other  provision  of  this  chapter or any other
general law, a corporation of any type or kind  to  which  this  chapter
applies  shall: (A) conduct no activities for pecuniary profit or finan-
cial gain, whether or not in  furtherance  of  its  corporate  purposes,
except to the extent that such activity supports its other lawful activ-
ities  then  being conducted; AND (B) NOT PARTICIPATE IN ANY TRANSACTION
OR SERIES OF RELATED TRANSACTIONS INVOLVING THE PAYMENT OF MONEY OVER  A
PERIOD OF TIME BY OR ON BEHALF OF A MUNICIPALITY AND HAVING AS A PURPOSE

S. 4240--A                          3

THE  FINANCING  OF  THE MUNICIPALITY'S OPERATIONS, OR THE ACQUISITION OR
IMPROVEMENT OF AN ASSET BY OR FOR THE USE OF THE MUNICIPALITY, PROVIDED,
HOWEVER, THAT NOTHING IN THIS SECTION SHALL PROHIBIT SUCH A  CORPORATION
FROM  ENTERING INTO A TRUE LEASE WITH A MUNICIPALITY OR PURCHASING BONDS
OR NOTES ISSUED PURSUANT TO THE LOCAL FINANCE LAW.
  S 8. Paragraphs (a), (c), (d) and (i) of section 1411 of the  not-for-
profit  corporation  law, paragraph (a) as amended by chapter 847 of the
laws of 1970, are amended and a new paragraph (d-1) is added to read  as
follows:
  (a) Purposes.
  This  section  shall  provide  an  additional  and alternate method of
incorporation or reincorporation of not-for-profit corporations for  any
of  the purposes set forth in this paragraph [and shall not be deemed to
alter, impair or diminish the purposes, rights, powers or privileges  of
any  corporation heretofore or hereafter incorporated under this section
or under the stock or business corporation laws].   Corporations may  be
incorporated  or  reincorporated  under  this  section as not-for-profit
local development corporations operated for the  exclusively  charitable
or public purposes of relieving and reducing unemployment, promoting and
providing for additional and maximum employment, bettering and maintain-
ing job opportunities, instructing or training individuals to improve or
develop  their  capabilities  for  such  jobs,  carrying  on  scientific
research for the purpose of aiding a community or geographical  area  by
attracting  new  industry to the community or area or by encouraging the
development of, or retention of, an industry in the community  or  area,
and  lessening the burdens of government and acting in the public inter-
est, and any one or more counties, cities,  towns  or  villages  of  the
state,  or  any  combination  thereof,  or  the New York job development
authority in exercising its power under the public  authorities  law  to
encourage  the organization of local development corporations, may cause
such corporations to be incorporated by public officers or private indi-
viduals or reincorporated upon compliance with the requirements of  this
section,  and it is hereby found, determined and declared that in carry-
ing out said purposes and in exercising the powers  conferred  by  para-
graph  [(b)]  (C)  such  corporations  will  be  performing an essential
governmental function.
  (c) Powers.
  In furtherance of its purposes set forth in paragraph (a) but not  for
any  other  purposes,  a  local  development corporation incorporated or
reincorporated under this section shall have the following powers:    to
construct,  acquire,  rehabilitate  and improve for use by others indus-
trial or manufacturing plants in the territory in which  its  operations
are   principally  to  be  conducted,  to  assist  financially  in  such
construction, acquisition, rehabilitation and improvement,  to  maintain
such plants for others in such territory, to disseminate information and
furnish advice, technical assistance and liaison with federal, state and
local  authorities  with respect thereto, to acquire by purchase, lease,
gift, bequest, devise or otherwise real or personal property  or  inter-
ests  therein,  to borrow money and to issue negotiable bonds, notes and
other obligations therefor, and notwithstanding section 510 (Disposition
of all or substantially all assets) without leave of the court, to sell,
lease, mortgage or otherwise dispose of or encumber any such  plants  or
any  of  its real or personal property or any interest therein upon such
terms as it may determine and, in connection with  loans  from  the  New
York  job  development authority, to enter into covenants and agreements
and to comply with all the terms, conditions and provisions thereof, and

S. 4240--A                          4

otherwise to carry out its corporate purposes and to foster and  encour-
age  the  location or expansion of industrial or manufacturing plants in
the territory in which the operations of such corporation are principal-
ly  to  be conducted, provided, however, that no such corporation shall:
(1) attempt to influence legislation  by  propaganda  or  otherwise,  or
participate  or  intervene,  directly  or  indirectly,  in any political
campaign on behalf of or in  opposition  to  any  candidate  for  public
office;  (2)  PARTICIPATE IN ANY TRANSACTION OR SERIES OF RELATED TRANS-
ACTIONS INVOLVING THE PAYMENT OF MONEY OVER A PERIOD OF TIME  BY  OR  ON
BEHALF  OF  A  MUNICIPALITY AND HAVING AS A PURPOSE THE FINANCING OF THE
MUNICIPALITY'S OPERATIONS, OR THE ACQUISITION OR IMPROVEMENT OF AN ASSET
BY OR FOR THE USE OF THE MUNICIPALITY, PROVIDED, HOWEVER,  THAT  NOTHING
IN  THIS  SECTION  SHALL  PROHIBIT  A LOCAL DEVELOPMENT CORPORATION FROM
ENTERING INTO A TRUE LEASE WITH A MUNICIPALITY OR  PURCHASING  BONDS  OR
NOTES ISSUED PURSUANT TO THE LOCAL FINANCE LAW; AND (3) IN THE CASE OF A
LOCAL  DEVELOPMENT CORPORATION, THE INCORPORATION OF WHICH WAS CAUSED BY
A COUNTY, CITY, TOWN OR VILLAGE, PROVIDE COMPENSATION TO  A  PERSON  WHO
SERVES  AS  A DIRECTOR, OFFICER OR EMPLOYEE OF SUCH CORPORATION WHEN THE
PERSON SERVES OR HAS SERVED WITHIN THE PREVIOUS TWO YEARS AS AN  OFFICER
OR EMPLOYEE OF SUCH COUNTY, CITY, TOWN OR VILLAGE.
  (d)   Purchase or lease of real property owned by a county, city, town
or village.
  (1)  The local legislative body of a county,  city,  town  or  village
[or,  if there is a board of estimate in a city, then the board of esti-
mate,] may by resolution  determine  that  specifically  described  real
property  owned by the county, city, town or village is not required for
use by such county, city, town or  village  and  authorize  the  county,
city,  town  or  village  to sell or lease such real property to a local
development corporation incorporated or reincorporated under this  arti-
cle;  provided,  however,  that:  (I) title to such land be not declared
inalienable as a forest preserve or a parkland; AND (II)  THAT  NO  SUCH
SALE  OR  LEASE  SHALL  HAVE AS A PURPOSE THE FINANCING OVER A PERIOD OF
TIME OF THE OPERATIONS OF THE COUNTY, CITY,  TOWN  OR  VILLAGE,  OR  THE
ACQUISITION  OR IMPROVEMENT OF AN ASSET BY OR FOR THE USE OF THE COUNTY,
CITY, TOWN OR VILLAGE.
  (2)  Notwithstanding the provisions of any general, special  or  local
law,  charter  or  ordinance  to the contrary, such sale or lease may be
made without appraisal, public notice, (except as provided  in  subpara-
graph  (4))  or  public  bidding  for  [such  price  or rental] FAIR AND
ADEQUATE CONSIDERATION and upon such OTHER terms as may be  agreed  upon
between  the  county,  city,  town or village and said local development
corporation; provided, however, that in case of a lease the term may not
exceed ninety-nine years and provided, further, that in cities having  a
population  of  one million or more, no such sale or lease shall be made
without the approval of  a  majority  of  the  members  of  the  borough
[improvement]  board  of  the  borough  in  which  such real property is
located.
  (3)   Before any sale or lease  to  a  local  development  corporation
incorporated or reincorporated under this article shall be authorized, a
public  hearing  shall be held by the local legislative body[, or by the
board of estimate, as the case may be,] to consider the proposed sale or
lease.
  (4)   Notice of such hearing shall be  published  at  least  ten  days
before  the  date  set  for  the hearing in such publication and in such
manner as may be designated by the local legislative body[, or the board
of estimate as the case may be]. SUCH NOTICE SHALL INCLUDE A DESCRIPTION

S. 4240--A                          5

OF THE REAL PROPERTY PROPOSED TO BE SOLD OR LEASED, AND A  STATEMENT  OF
(I)  THE ESTIMATED FAIR MARKET VALUE OF THE REAL PROPERTY PROPOSED TO BE
SOLD OR LEASED, (II) THE CONSIDERATION TO BE  RECEIVED  BY  THE  COUNTY,
CITY,  TOWN  OR  VILLAGE  ON  ACCOUNT OF SUCH SALE OR LEASE, AND (III) A
STATEMENT OF THE INTENDED USE OR DISPOSITION OF SUCH  REAL  PROPERTY  BY
THE LOCAL DEVELOPMENT CORPORATION.
  (5)    A local development corporation, incorporated or reincorporated
under this section, which purchases or leases real property from a coun-
ty, city, town or village, shall not, without the  written  approval  of
the  county,  city,  town  or  village,  use  such real property for any
purpose except the purposes set forth in  the  certificate  of  incorpo-
ration or reincorporation of said local development corporation.  In the
event  such  real  property  is used in violation of the restrictions of
this paragraph, the attorney-general may  bring  an  action  or  special
proceeding to enjoin the unauthorized use.
  (D-1) CONTRACTS WITH MUNICIPALITIES.
  ANY  CONTRACT  OR  OTHER  AGREEMENT BETWEEN A LOCAL DEVELOPMENT CORPO-
RATION AND A MUNICIPALITY SHALL: (I) PROVIDE  FOR  THE  MUNICIPALITY  TO
RECEIVE FAIR AND ADEQUATE CONSIDERATION, (II) BE SUBJECT TO THE REQUIRE-
MENTS OF ARTICLE FIVE-A OF THE GENERAL MUNICIPAL LAW, (III) EXCEPT FOR A
REAL  PROPERTY  LEASE  AGREEMENT,  HAVE A TERM NOT TO EXCEED FIVE YEARS,
SUBJECT TO ONE OR MORE RENEWALS FOR A TERM NOT TO EXCEED FIVE YEARS UPON
THE MUTUAL CONSENT OF THE PARTIES, AND (IV) BE MADE FOR A PROPER MUNICI-
PAL PURPOSE, WHICH SHALL NOT INCLUDE THE FINANCING OVER A PERIOD OF TIME
OF THE MUNICIPALITY'S OPERATIONS OR THE ACQUISITION OR IMPROVEMENT OF AN
ASSET BY OR FOR THE USE OF THE MUNICIPALITY.
  (i) Effect of section.
  Corporations incorporated or reincorporated under this  section  shall
be  organized  and  operated  exclusively  for the purposes set forth in
paragraph (a), shall have, in addition to the powers otherwise conferred
by law, the powers conferred by paragraph (c) and shall  be  subject  to
all  the  restrictions and limitations imposed by [paragraph] PARAGRAPHS
(C), (D), (D-1), (e) and [paragraph] (g). In so far as the provisions of
this section are inconsistent with the  provisions  of  any  other  law,
general  or special, the provisions of this section shall be controlling
as to corporations incorporated or reincorporated hereunder.
  S 9.  This act shall take effect immediately and shall  apply  to  any
transaction occurring on or after such effective date.

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Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

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