Senator Valesky Announces Reform Bill On Bond Disclosure
State Senator David Valesky has introduced legislation (S. 6024) that would disclose the hidden costs of State and local municipal bond sales, which often amount to millions of taxpayers’ dollars.
Attorney General Eliot Spitzer said "I applaud Senator Valesky for shining a light on an area of financing that has had little, if any, scrutiny. Greater transparency in these transactions can only serve to improve the accountability of government."
State Comptroller Alan Hevesi said "I commend Senator Valesky for turning his attention toward reforming the State’s debt practices. I support the goals of greater transparency, increased accountability and improved disclosure to the public with regard to the State’s many bond transactions and I urge the Legislature to enact my seven-point reform plan into law this session."
Last year, New York, its municipalities, school districts and public authorities issued $43 BILLION in new municipal bonds, an increase of 10.2 percent and more than any other State in the nation except California. Nationally, more than $408 BILLION in bonds were sold in 2005, a new national record.
Most New Yorkers are aware the State is awash in debt, mostly in the form of bonds. Few however, are aware of the hidden costs of the bond sales, including millions of dollars paid out to bond counsels, underwriters and financial advisors.
Issuance costs vary with the amount of the bond sale. For example, last year a $291 million bond issuance for rehabilitation of mental hygiene facilities included fees of $4.7 million, or 1.6 percent of the total sale. But a smaller issuance -- $20 million by the Dormitory Authority -- yielded fees of $1 million, or five percent of the bond sale.
Specific information on the issuance costs of the bonds is not readily available to the general public. And because many companies and individuals involved in bond sales are often big political contributors, an appearance of impropriety can taint the bond sale process.
"The public has a fundamental right to know how its money is spent," Valesky said. "The specific costs of each bond sale and the people benefiting from that sale should be public information and readily available."
Senate Democratic Leader David A. Paterson said Valesky’s bill "is the first plank of the Senate Democrats’ reform platform for 2006."
Paterson said the reform measures and on-time budget enacted last year "are positive steps, but they are baby steps. There is much work that remains to be done if we are to truly reform New York State Government."
State Senator Liz Krueger, (D-Manhattan) chair of the Senate Democrats’ Task Force on Legislative and Budget Reform, praised Valesky for his attempts to increase public scrutiny and accountability in State Government.
Valesky’s bill would require that each public bond offered in New York be filed with the Office of the State Comptroller. Each filing would be public information, available on the Comptroller’s website and would include the total cost of the bond sale, as well as an estimate of the fees paid to bond counsels, underwriters, counsels to the underwriters, trustees and financial advisors. The official statement and prospectus would also be made available.