S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7718
 
                        2019-2020 Regular Sessions
 
                           I N  A S S E M B L Y
 
                               May 17, 2019
                                ___________
 
 Introduced  by M. of A. PRETLOW -- read once and referred to the Commit-
   tee on Governmental Employees
 
 AN ACT to provide for the payment of the annual contributions  owed  and
   to  be  owed  on  behalf of the New York city off-track betting corpo-
   ration to the New York city employees' retirement system

   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1. Statement of legislative findings and intent. The legisla-
 ture hereby finds that the state  has  a  statutory  and  constitutional
 obligation  to  protect  and  fund  the  pension  benefits of the former
 employees and retirees of the defunct New York  city  off-track  betting
 corporation.
   The  New  York  city off-track betting corporation is a public benefit
 corporation created pursuant to state law and is a participating employ-
 er in the New York city employees' retirement system. The pension  bene-
 fits  of  the  corporation's former employees and retirees are protected
 from impairment under article V, section 7 of the state constitution.
   In 2008, the state legislatively enhanced its role with respect to the
 New York city off-track betting corporation due to its financial  diffi-
 culties, thus becoming its successor for purposes of assuming the statu-
 tory  and  constitutional  obligation to make pension contributions. The
 corporation ceased operations in 2010 and has since failed to make annu-
 al contributions to the New York city employees'  retirement  system  as
 required under the administrative code of the city of New York.
   Sections 13-130 and 13-638.2 of the administrative code of the city of
 New  York  provide  that  the  employer  liabilities of a public benefit
 corporation that participates in the New York city employees' retirement
 system, such as the New York city off-track betting corporation, are  to
 be  paid  by the corporation or a successor. On March 8, 2018, the board
 of trustees of the New York city employees' retirement system adopted  a
 resolution  recognizing  the  state  as a successor to the New York city
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD10757-02-9

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 off-track betting corporation and a responsible obligor with respect  to
 its required contributions.
   As a successor to the New York city off-track betting corporation, and
 in  the  interest of properly funding the pension benefits of its former
 employees and retirees in compliance with the  state  constitution,  the
 state  will fulfill the past, present, and future obligations of the New
 York city off-track betting corporation to the New York city  employees'
 retirement system as follows:
   §  2. Definitions. The following words and phrases as used in this act
 shall have the following meanings unless a different meaning is  plainly
 required by context.
   1. "Actuary" shall mean the actuary appointed by the board of trustees
 of  the  New  York city employees' retirement system pursuant to section
 13-121 of the administrative code of the city of New York.
   2. "City fiscal year" shall mean a fiscal year of the city of New York
 as defined in section 226 of the New York city charter.
   3. "Executive director" shall mean the executive director appointed by
 the board of trustees of the New York city employees' retirement  system
 pursuant to paragraph 2 of subdivision a of section 13-103 of the admin-
 istrative code of the city of New York.
   4.  "Interest"  shall  mean  the rate per centum per annum of interest
 specified in paragraph 2 of subdivision b of  section  13-638.2  of  the
 administrative code of the city of New York.
   5. "NYC administrative code" shall mean the administrative code of the
 city of New York.
   6. "NYCERS" shall mean the New York city employees' retirement system,
 as established by chapter 427 of the laws of 1920.
   7.  "NYCOTB"  shall  mean  the  New York city off-track betting corpo-
 ration, as established by chapter 144 of the laws of 1970 and  continued
 pursuant  to  article 6 of the racing, pari-mutuel wagering and breeding
 law.
   8. "State fiscal year" shall mean  a  fiscal  year  of  the  state  as
 defined in section 3 of the state finance law.
   §  3.  Payment of the future annual contributions to be owed by NYCOTB
 to NYCERS. Notwithstanding the provisions  of  any  general  or  special
 state law or local law to the contrary, in state fiscal year 2021 and in
 each  state  fiscal year thereafter, the department of audit and control
 shall take actions necessary to pay in full, subject  to  appropriation,
 the  annual contribution determined to be owed by NYCOTB to NYCERS under
 the provisions of the NYC administrative code, including but not limited
 to sections 13-127, 13-130, 13-133, and 13-638.2 thereof, for the corre-
 sponding city fiscal year. On or prior to the date specified in  section
 13-133 of the NYC administrative code for the payment of annual contrib-
 utions  by  NYCOTB,  such  moneys,  to the extent of such appropriation,
 shall be payable to NYCERS on the audit and warrant of  the  comptroller
 of the state of New York on vouchers certified or approved by the execu-
 tive  director of NYCERS in the manner prescribed by law.  Notwithstand-
 ing the provisions of any general or special state law or local  law  to
 the  contrary,  an  annual  contribution  determined and paid under this
 section shall not include any amount attributable to any annual contrib-
 ution previously determined to be owed by NYCOTB to NYCERS for any  city
 fiscal  year  prior  to  the  2021  city fiscal year and not yet paid by
 NYCOTB or the state.
   § 4. Payment of overdue annual contributions owed by NYCOTB to NYCERS.
 a. Notwithstanding the provisions of any general or special state law or
 local law to the contrary, on or before January  2,  2020,  the  actuary

 A. 7718                             3
 
 shall  determine  the  sum of all annual contributions previously deter-
 mined to be owed by NYCOTB to NYCERS for any city fiscal year  prior  to
 the  2021  city  fiscal  year and not yet paid by NYCOTB, with interest.
 Such interest, compounded annually, shall be computed on each such over-
 due  annual contribution from the date such contribution was required to
 be paid pursuant to  section  13-133  of  the  NYC  administrative  code
 through  January  1,  2020. This sum shall be known as the "amount to be
 amortized".
   b. Notwithstanding the provisions of any general or special state  law
 or  local law to the contrary, on or before January 2, 2020, the actuary
 shall further determine an amount that if paid in fifteen  equal  annual
 installments beginning on January 1, 2021, would be sufficient to pay in
 full  the  amount  to  be  amortized with interest, compounded annually,
 computed from January 2, 2020, to January 1, 2035. This amount shall  be
 known  as  the  "annual  amortization  payment". Any annual amortization
 payment subsequent to the initial annual amortization payment payable on
 January 1, 2021, shall include the unpaid balance of  any  prior  annual
 amortization  payment, with interest, compounded annually, computed from
 the date such prior annual amortization payment was required to be  paid
 to  the  date  that  such  subsequent  annual  authorization  payment is
 required to be paid.
   c. Notwithstanding the provisions of any general or special state  law
 or  local  law  to  the  contrary, in state fiscal year 2021 and in each
 state fiscal year thereafter until the  amount  to  be  amortized,  with
 interest,  is  paid  in  full, the department of audit and control shall
 take actions necessary to pay in full the annual  amortization  payment,
 subject  to appropriation. On or prior to January 1st of each such state
 fiscal year, such moneys, to the extent of such appropriation  shall  be
 payable  to  NYCERS  on  the audit and warrant of the comptroller of the
 state of New York on vouchers certified or  approved  by  the  executive
 director of NYCERS in the manner prescribed by law.
   §  5.  Deposit  of  moneys.   NYCERS shall deposit all moneys received
 pursuant to this act in the contingent reserve fund specified in section
 13-127 of the NYC administrative code.
   § 6. This act shall take effect immediately.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   SUMMARY OF BILL: The proposed legislation  provides  a  funding  mech-
 anism,  through  unconsolidated  provisions of law, for the State of New
 York (State), as a successor obligor, to appropriate funds to pay  past,
 present, and future New York City Off-Track Betting Corporation (NYCOTB)
 employer  contributions,  with applicable interest, to the New York City
 Employees' Retirement System (NYCERS) on behalf of  former  and  retired
 NYCOTB employees.
   Effective Date: Upon enactment.
   BACKGROUND:  NYCOTB  is  a defunct public benefit corporation and is a
 participating employer in NYCERS. NYCOTB retirees currently receive full
 retirement benefits from NYCERS even though  NYCOTB  last  made  partial
 employer  contributions  to  NYCERS  in  fiscal  years 2010 and 2011 and
 completely ceased making employer contributions thereafter. Unpaid  past
 and  future  annual  employer  contributions,  with applicable interest,
 continue to accrue.
   FINANCIAL IMPACT - ANNUAL EMPLOYER CONTRIBUTIONS: The proposed  legis-
 lation  would  require  the Actuary of the City of New York (Actuary) to
 calculate the cumulative owed past and current NYCOTB employer  contrib-
 utions,  with  applicable interest, through and inclusive of fiscal year
 2020 (the Amount to be Amortized), on or before  January  2,  2020,  and

 A. 7718                             4
 
 amortize  such  cumulative  Amount  in  fifteen equal installments, with
 applicable interest, to be paid by the  State  Comptroller,  subject  to
 appropriation,  commencing  on  or  before January 1, 2021 and ending by
 January  1,  2035 (the Annual Amortization Payment). The proposed legis-
 lation would further require  the  calculation  and,  subject  to  State
 appropriation,  annual payment of future annual NYCOTB employer contrib-
 utions in accordance with applicable provisions  of  the  Administrative
 Code of the City of New York (ACCNY).
   FINANCIAL  IMPACT  -  SUMMARY:  Based on the actuarial assumptions and
 methods described herein, the enactment  of  this  proposed  legislation
 would,  assuming  full  and  timely payment, result in a potential total
 present value cost to the State of approximately $289.9  million  as  of
 January 1, 2021. Any amount appropriated and paid by the State to NYCERS
 would  be  applied as a credit to NYCOTB and relieve any potential addi-
 tional successor or any potential guarantor of such amounts paid.
   The following Table presents an estimate of the annual cost for Fiscal
 Years 2021 through 2025 as of January 1, 2021.
 
                Cost Attributable to     Cost Attributable
               Employer Contribut-     to Employer Contribut-
               ions for Fiscal Years   ions for Fiscal Years
  Fiscal Year     Prior to 2021*        Subsequent to 2020**     Total
 
    2021           $16,933,668             $13,378,824        $30,312,492
    2022           $16,933,668             $13,715,186        $30,648,854
    2023           $16,933,668             $14,060,844        $30,994,512
    2024           $16,933,668             $14,417,094        $31,350,762
    2025           $16,933,668             $14,783,804        $31,717,472
 
 * Equal to a 15-year amortization of $165,026,521 as of January 1, 2021.
 ** Estimates of future employer contributions for OTB based on the actu-
 arial assumptions and methods in effect for  the  June  30,  2018  (Lag)
 actuarial  valuation, including an assumed investment return of 7.0% per
 annum.
   OTHER COSTS: Not measured in this Fiscal Note are the following:
   * The initial, additional administrative costs of  NYCERS,  other  New
 York City agencies and the State to implement the proposed legislation.
   * The  impact  of  this  proposed  legislation on Other Postemployment
 Benefit (OPEB) costs.
   CENSUS DATA: The estimates presented herein are based  on  the  census
 data  used in the Preliminary June 30, 2018 (Lag) actuarial valuation of
 NYCERS to determine the Preliminary Fiscal Year 2020  employer  contrib-
 utions.
   As  of  June  30,  2018, OTB had 1,187 retirees with an average age of
 approximately 74.5 years, 370 terminated vested members with an  average
 age  of approximately 52.7 years, and 81 active off payroll members with
 an average age of approximately 45.0 years.
   ACTUARIAL ASSUMPTIONS AND METHODS: The estimates  of  annual  employer
 contributions presented herein have been calculated based on the actuar-
 ial  assumptions and methods in effect for the June 30, 2018 (Lag) actu-
 arial valuations used to determine  the  Preliminary  Fiscal  Year  2020
 employer contributions of NYCERS.
   RISK  AND  UNCERTAINTY: The costs presented in this Fiscal Note depend
 highly on the actuarial assumptions and methods used and are subject  to
 change  based  on  the realization of potential investment, demographic,
 contribution, and other risks. If actual experience deviates from  actu-

 A. 7718                             5
 
 arial  assumptions,  the  actual costs could differ from those presented
 herein. Costs are also dependent on  the  actuarial  methods  used,  and
 therefore  different  actuarial methods could produce different results.
 Quantifying these risks is beyond the scope of this Fiscal Note.
   STATEMENT  OF ACTUARIAL OPINION: I, Sherry S. Chan, am the Chief Actu-
 ary for, and independent of, the New York City  Retirement  Systems  and
 Pension  Funds.  I  am a Fellow of the Society of Actuaries, an Enrolled
 Actuary under the Employee Retirement Income and Security Act of 1974, a
 Member of the American Academy of Actuaries, and a Fellow of the Confer-
 ence of Consulting Actuaries. I meet the Qualification Standards of  the
 American  Academy of Actuaries to render the actuarial opinion contained
 herein.  To the best of my knowledge, the results contained herein  have
 been prepared in accordance with generally accepted actuarial principles
 and  procedures  and  with the Actuarial Standards of Practice issued by
 the Actuarial Standards Board.
   FISCAL NOTE IDENTIFICATION: This Fiscal Note 2019-03 dated  March  21,
 2019  was prepared by the Chief Actuary for the New York City Employees'
 Retirement System. This estimate is intended for  use  only  during  the
 2019 Legislative Session.