TITLE OF BILL: An act to amend chapter 629 of the laws of 2005,
amending the local finance law relating to refunding bonds, in
relation to extending the provisions thereof
Purpose of the Bill:
The bill would extend for three years, to September 30, 2017,
authorization for financially distressed municipalities to sell
certain bonds to the Environmental Facilities Corporation ("EFC") in
connection with hardship state revolving loan financing.
Summary of Provisions:
Section 1 of the bill would extend the "sunset" provision of Section 2
of Chapter 629 of the Laws of 2005, thereby extending until September
30, 2017 certain provisions of Local Finance Law ("LFL") § 90.00,
which authorize municipalities with hardship State Revolving Fund
financing, who are seeking to extend the term of their zero percent
loans through refinancing and whose current bonds or notes are within
5 years of issuance, to sell their refunding bonds to EFC without
requiring a showing of savings.
Section 2 of the bill provides for an immediate effective date.
Currently, under LFL § 90.00(c)(2) a municipality may sell their
refunding bonds or notes to EFC within five years of issuance without
requiring a showing of savings. This provision, however, will be
deemed repealed as of September 30, 2014.
Prior Legislative History:
These provisions were extended until September 30, 2011 by Chapter 277
of the Laws of 2008, and until September 30, 2014 by Chapter 72 of the
Laws of 2011.
Statement in Support:
The purpose of this legislation is to continue to provide critical
fiscal relief to financially distressed municipalities. The
legislation will continue certain zero interest financing
opportunities available to fiscally distressed municipalities through
the Clean Water State Revolving Fund ("CWSRF") and the Drinking Water
State Revolving Fund ("DWSRF").
EFC, together with the Department of Environmental Conservation
("DEC"), administers the CWSRF. The CWSRF was established to provide
financial assistance to various recipients in acquiring, constructing
and upgrading eligible water pollution control projects. EFC, together
with the Department of Health, also administers the DWSRF. The DWSRF
was established to provide financial assistance for acquiring,
constructing and upgrading eligible water supply projects. Under both
the CWSRF and the DWSRF, EFC is authorized to provide assistance to
recipients for the purpose of financing or refinancing such projects.
Recipients with high cost projects that serve residential areas may
qualify for a reduced interest rate or interest-free financing through
either State Revolving Fund ("SRF") program. Additionally, EFC's
reduced interest rate financings assist those recipients facing
In order to expand options available to the recipients of financial
assistance from the CWSRF and DWSRF, EFC expanded the forms of
financing offered through the programs including investing in, or
purchasing of, municipal debt/bond obligations. Through this
additional form of financing, EFC is able to extend the term of the
recipient's payment obligation of the EFC financing to up to 30 years
for all SRF recipients facing fiscal hardship. Therefore, fiscally
distressed municipalities that qualify for hardship financing under
the CWSRF and DWSRF extended-term financing at a zero percent interest
rate may reduce their annual debt service by refinancing for a period
of greater than 20 years.
Municipalities wishing to refund serial bonds are subject to the
requirements of LFL § 90.00. Prior to enactment of Chapter 629 of the
Laws of 2005, pursuant to LFL § 90.00 (c)(2), municipalities refunding
notes or bonds within five years of issuance were required to show net
present value savings computed in accordance with LFL
90.10(b)(2)(a), which states that refunding bonds shall only be issued
in the event that the present value of the total payments of both
principal and interest to become due on the refunding bonds shall be
less than the present value of the principal and interest to become
due at their stated maturities on the principal amount of the bonds to
be refunded. It was impossible for the fiscally distressed
municipality to show present value savings because this type of
refinancing merely trades one zero interest financing for another.
However, the reduction in annual debt service can be dramatic.
Therefore, these fiscally distressed municipalities were forced to
delay valuable refinancing opportunities, which would provide them
with fiscal relief with a longer term, and lower annual debt service
payments. By remedying this anomaly, Chapter 629 provided a valuable
and important financing mechanism for municipalities that this bill
would continue for an additional three years.
EFC's mission is to provide low-cost capital and expert technical
assistance for environmental projects in New York State. It is
important that communities with critical fiscal needs are adequately
assisted in maintaining financing for necessary clean and drinking
water projects. This legislation will continue to provide these
communities with the necessary assistance to reduce their costs.
The bill would take effect immediately.