The New York State Senate

and reconstruction of facilities for the conveyance, treatment and
disposal of sewage.

 
JUSTIFICATION:

The exclusion of sewer debt from the constitutional debt limits of coun-
ties, cities, towns and villages was first authorized in 1963, for a
10-year period.

The purpose of the exclusion was to encourage and enable municipalities
to participate in the State's then-new sewer construction assistance
plan and issue debt for sewer facilities without reducing their capacity
to incur debt within the constitutional debt limit for other capital
improvements.

The intent in limiting the exclusion to debt incurred during a 10-year
period was to encourage municipalities to take action within that time-
frame; the exclusion would thereby assist in accomplishing the purposes
of the State's water anti-pollution program.

The exclusion has been extended for five successive ten-year periods,
reflecting the ongoing and fundamental need for municipal governments to
incur debt to finance critical sewer and water pollution control facili-
ties. Without this extension, the current debt exclusion will apply only
to debt issued through the end of 2023. This amendment would permit the
exclusion of indebtedness until January 1, 2034.

The need and rationale for the debt exclusion cited in 1963 and in each
subsequent extension remains relevant and valid today.

Local government finances continue to be strained by the need to repair
or replace aging sewer infrastructure. Indeed, the urgent need for
improvements and upgrades to municipal sewer facilities is well-docu-
mented as an ongoing concern for local governments.1

Currently, the State's primary programs to support improvements to sewer
facilities are the Clean Water State Revolving Fund ("CWSRF") (which is
capitalized with an annual grant from the U.S.  Environmental Protection
Agency) and the Water Infrastructure Improvement Act ("WIIA") grant
program administered by the State Department of Environmental Conserva-
tion ("DEC") and the Environmental Facilities Corporation ("EFC").

The CWSRF program provides interest-free or low interest financing to
municipalities for wastewater and sewer infrastructure projects.  Since
its inception in 1990, the CWSRF program has loaned more than $18.2
billion for 2,473 projects across the State. According to the 2022
intended use plan prepared with respect to the CWSRF, DEC and EFC antic-
ipate financing approximately $1 billion in various clean water/sewer
projects, including many for the conveyance, treatment and disposal of
sewage in New York State. While the State also provides grant funds to
municipalities from the CWSRF and the WIIA grant program (created by the
State in 2015 to provide an additional source of State funds to help
municipalities pay for water quality infrastructure projects), there is
clearly still a substantial need for municipalities to borrow (by issu-
ing debt) to finance sewer facilities. Moreover, this dynamic is also
present in relation to federal financing options for sewer facilities.
For example, the U.S. Department of Agriculture Rural Development, makes
loans at below-market rates, along with grants, available to qualifying
municipalities. As is the case under the CWSRF program, the USDARD
financing involves municipalities issuing their own bonds as the method
of borrowing.

In short, the debt contracting capacity under the constitutional debt
limit continues to be a critical issue for municipalities seeking to
improve and upgrade their sewer infrastructure.

The constitutional exclusion has been implemented by Local Finance Law §
124.10, which requires that applications for the exclusion of sewer
indebtedness be filed with the State Comptroller. The Office of the
State Comptroller's records indicate that from January of 2011 through
the close of 2021, municipalities have applied for and were granted 199
exclusions of sewer debt. Each applicant derived benefit from its exclu-
sion by virtue of protecting its debt contracting margin, thereby
preserving the ability to issue debt for other capital projects and
needs. This bill would continue the exclusion of sewer debt from debt
limitations and so maintain the resulting significant benefits to muni-
cipalities throughout the State.

1 Wastewater Infrastructure Needs of New York State, New York State
Department of Environmental Conservation, March 2008; Growing Cracks in
the Foundation: Local Governments are Losing Ground on Addressing Vital
Infrastructure Needs, Office of the New York State Comptroller, December
2012; Growing Cracks in the Foundation: Local Governments Still Chal-
lenged to Keep Up with Vital Infrastructure Needs, Office of the New
York State Comptroller, September 2014.

The current constitutional authorization to exclude debt issued for the
construction of sewage facilities from municipal debt limits, expires on
December 31, 2023. A constitutional amendment requires passage by two
consecutively elected legislatures and approval by the voters. The
Legislature passed the proposed amendment the first time during the 2022
legislative session. It must be approved again in the current 2023
legislative session in order to be submitted to the voters as a referen-
dum before the current authorization expires.  The Comptroller urges the
passage of this proposed legislation.
 
PRIOR LEGISLATIVE HISTORY:

The resolution was first passed as legislative bill S. 8931/A.9958 of
2022 and is now proposed for Second Passage.

 
FISCAL IMPLICATIONS:

This bill has no significant State fiscal impact.

 
EFFECTIVE DATE:
This amendment would become effective on the first day of January next
succeeding approval of both houses of two consecutively elected legisla-
tures and approval of the people in the subsequent general election.