Relates to the effectiveness of the sale of bonds and notes of the city of NY; NYS financial emergency act

Section two would amend LFL § 57.00(a) to extend until 2010 the City's authority to sell bonds at private sale.

Section three would amend LFL § 90.00(g)(3) to extend until 2010 the City's authorization to exchange refunding bonds for outstanding bonds under certain circumstances.

Section four would amend LFL § 107.00(d)(8) to extend until 2010 the inapplicability of the down payment provisions of that section to certain bonds and notes of the City.

Section five of the bill would amend LFL § 54.90 (a) to extend through July 15, 2010 the authorization for the City to issue bonds or notes with variable rates of interest.

Section six of the bill would amend LFL § 54.90(d)(1) to extend through July 15, 2010 the authorization for the City to enter into interest rate exchange agreements (commonly referred to as "swaps") or other similar agreements.

Section seven would amend § 10-a(1) of the New York State Financial Emergency Act for the City of New York ("FEA") to extend until 2010 the authority of the City to include the pledge and agreement of the State in agreements with holders or guarantors of City obligations.

Section eight would amend § 5 of Ch. 142 of the laws of 2004 to extend until 2010 the amendment to section 90.10(b)(2)(a) of the LFL providing

that for purposes of calculating present value savings in a refund tran- saction, the interest payments on variable rate bonds may be the fixed rate payable by the City in a related interest rate exchange agreement, if any, or as found by the Finance Board of the City of New York ("Finance Board"); and in the case of refunding of variable rate bonds with variable rate bonds, if determined by the Finance Board, present value savings would not need to be demonstrated.

Justification

This bill includes several elements that will be instrumental in ensur- ing that the City of New York has efficient and cost-effective access to the capital markets, which have been experiencing unprecedented turmoil over the past year. First, in 1978, the Legislature enacted various provisions of the LFL and the FEA to respond to the financial emergency existing in the City and to improve marketability of City obligations by authorizing their sale on terms consistent with current market prac- tices. Certain of these provisions contained sunset provisions, and in 1982, the Legislature extended certain sunset provisions and introduced other changes necessary for the continued successful marketing of City obligations, some of which were applicable to other municipal issuers as well. Since 1986, the Legislature has extended these sunset provisions annually.

This network of legislation has enabled the City to continue to sell its obligations in the public credit markets during these difficult times. Indeed, the size of the City's capital program and the current market environment, in which competitive sales of debt have, on occasion, failed to attract any bidders, makes the ability to sell debt through negotiated sales crucial to the City. If the City is to continue to undertake necessary capital projects, it is essential that it retain its ability to utilize modern financing techniques. The extension of these sunset provisions therefore is essential to the City's fiscal health, especially in light of the current economic downturn.

Second, by extending through July 15, 2010 the authorization of the City to enter into interest rate exchange agreements or "swaps", whether or not relating to variable-rate bonds, the Legislature would be confirming the utility of these agreements that it recognized when it created this swap authorization in Chapter 93 of the Laws of 2002.

Third, with respect to interest on variable rate bonds used in a refund- ing, by extending through July 15, 2010 the amendment made to section 90.10(b)(2)(a) of the LFL, the City would continue to be able to demon- strate present value savings by permitting the rate on variable rate bonds to be the fixed rate payable in a related interest rate exchange agreement or as found by the Finance Board. Furthermore, this would extend the City's ability to refund variable rate bonds with other vari- able rate bonds without reference to the present value savings test. The extension of these provisions and the enhanced flexibility in entering into exchange agreements are essential if the City is to efficiently access the public credit markets.

Fiscal implications

To be determined

Effective date

Immediately