Enacts into law major components of legislation necessary for the efficient operation of local governments; repealer

* facilitating highway shared services agreements among municipalities, and between municipalities and State agencies;

* allowing multiple counties to employ a single public health director that would report to a single board of health;

* increasing the local competitive bidding thresholds on public works contracts;

* equalizing the treatment of collateral sources in tort actions against public employers; and,

* protecting parties to the settlement of a tort claim from certain unwarranted lien, reimbursement and subrogation claims.

This bill will also authorize the State of New York Municipal Bond Bank Agency ("MBBA") to issue bonds, notes or other obligations to purchase bonds issued by municipalities in New York State to provide for public improvements afforded by the American Recovery and Reinvestment Act of 2009 ("Recovery Act"), thus enabling municipalities to lower their borrowing costs which will generate fiscal relief and contribute to economic growth

Summary of provisions

Part A: Municipal cooperative health benefit plans

Section 1 and 2 of the bill would amend Insurance Law §§ 3231(d) and 4317(d), respectively, to require insurers to provide no more than three years claims experience to a municipal corporation when it requests such information for the purposes of forming or joining a municipal cooperative health benefit plan pursuant to Insurance Law Article 47.

Section 3 of the bill would amend Insurance Law § 4704(a)(2) to reduce from five to three the minimum number of participants to establish a municipal cooperative health benefit plan.

Section 4 of the bill would require the Insurance Department to order a study, to be completed by September 1, 2010, of the impact on the community-rated health insurance market of allowing municipalities with 50 or fewer employees to join with larger municipalities to purchase experience-rated policies.

Sections 5 requires the Superintendent of insurance to conduct a study of the impact of the current municipal cooperative health benefit plan reserve requirements and make recommendations for changes by October 1, 2009.

Section 6 is the effective date.

Part B: Highway Services Sharing

Section 1 of the bill would amend GML § 99-r to provide for agreements among municipalities and between municipalities and State agencies to provide or receive fuel, equipment, maintenance and repair, supplies, water supply, street sweeping and maintenance, right-of-way maintenance, storm water and other drainage, sewage disposal, landscaping , mowing, or any other services of government.

Section 2 of the bill would amend Highway Law § 10 to include a new provision authorizing agreements pursuant to GML § 99-r.

Section 3 of the bill would amend Highway Law § 12 to allow the State Department of Transportation to contract with municipalities for terms of up to five years for the control of snow and ice and other highway maintenance activities on improved state highways in towns and incorporated villages.

Section 4 is the effective date.

Part C: Shared Public Health Directors

Section 1 of the bill would amend Public Health Law (Pub. H. L.) § 351 to allow certain county and part-county health districts to share the same commissioner or director and, under such circumstances, to also have common health district board members, subject to the approval of the State Department of Health.

Section 2 is the effective date.

Part D: Procurement Reform

Section 1 of the bill would amend GML § 103(1) to raise local competitive bidding thresholds on public works contracts from 520,000 to 535,000.

Part E: Authorizing the Municipal Bond Bank to issue Bond for Municipalities under the American Recovery and Reinvestment Act

Section 1 of the bill would amend Public Authorities Law ("PAL") § 2431 to add to the legislative findings in support of expanding the powers of MBBA to include the purchase of obligations issued by municipalities to take advantage of the Recovery Act.

Section 2 of the bill would amend PAL § 2432(2) to add definitions and clarify existing definitions to include bonds issued under the Recovery Act.

Section 3 of the bill would amend PAL § 2434 to add a new subdivision 7-b to create an additional power for MBBA to acquire obligations issued by municipalities, to provide for public improvements afforded by the Recovery Act.

Section 4 of the bill would amend PAL § 2435(1) and (2) to eliminate certain requirements contained therein as to the maximum amount of bonds that MBBA may acquire from any one. municipality at any one time, in connection with the issuance of Recovery Act bonds.

Section 5 of the bill adds a new section PAL § 2436-b to provide for access by MBBA, pursuant to the procedures specified therein, to certain sales tax revenues and mortgage recording tax revenues at local option in the event municipalities fail to pay principal or interest on obligations of municipalities purchased by MBBA with the proceeds of recovery act bonds, and provides that access to such monies shall be in addition to the state aid guarantee found in PAL § 2436.

Section 6 of the bill would amend PAL § 2437 to provide that Recovery Act bonds can be issued in public or private sales

Section 7 of the bill would amend PAL 2438(1) to exclude Recovery Act bonds from the limitation on the aggregate amount of bonds that can be issued by MBBA.

Section 8 of the bill would amend PAL 2442(1) to provide that the State may amend, modify, repeal or otherwise alter laws that relate to state aid, taxes, fees, or appropriations without impairing bond holders.

Section 9 of the bill would amend Local Finance Law § 85.80 to prevent any municipality whose local ARRA bonds are secured by tax revenues and purchased by MBBA from filing for bankruptcy while local Recovery Act bonds remain outstanding.

Section 10 of the bill would require MBBA to submit an application for approval to the New York State Public Authorities Control Board when issuing Recovery Bonds and that the bond issuance charge would be waived.

Section 11 provides for an immediate effective date.

Part F: Collateral source and anti-subrogation

Sections 1 through 9 would provide for the following:

* it will now be conclusively presumed that except with respect to payments made by a benefit provider for which there is a statutory right of reimbursement, the money paid in settlement of any personal injury or wrongful death action did not include compensation for the losses or expenses that were or will be paid by benefit providers;

* a plaintiff in a personal injury or wrongful death action who settles with one or more of the defendants in the action could henceforth not be charged with thereby violating the provisions of any contract between the plaintiff and a benefit provider;

* except for those payments made by a benefit provider for which there is a statutory right of reimbursement, no defendant that enters into a settlement with the personal injury or wrongful death plaintiff shall be thereafter subject to any benefit provider's claim for subrogation or reimbursement; and,

* those defendants who are "public employers" would now have the same rights as all other defendants to reduce their liability by virtue of collateral source payments that the plaintiff is reasonably certain to receive.

Existing law

Collateral Source: While under present law past and future awards in cases against private defendants may be reduced by collateral sources, CPLR § 4545(b) currently provides that only past awards may be so reduced in cases against public employers.

Local Procurement: GML § 103(1) currently provides that all contracts for public work involving an expenditure of more than $20,000 and all purchase contracts involving an expenditure of more than $10,000 must be awarded to the lowest responsible bidder.

Multi-County Positions: Pub. H. L. § 351 currently provides for a county or part-county health commissioner.

Shared Highway Services: GML § 99-r currently provides that any municipal corporation may enter into agreements with any state agency to provide fuel, equipment, maintenance and repair, supplies, water supply, street sweeping and maintenance, sidewalk maintenance or any other services of government. Highway Law § 12 currently provides that the maintenance of State highways includes the control of snow and ice on such highways. The work of such control of snow and ice may be done by any municipality. Any agreement authorized by this section shall be for a term of three years.

Municipal Bond Bank: MBBA is currently authorized to purchase obligations of municipalities for various purposes. Once those obligations are purchased, MBBA is subject to various requirements relating to: debt service reserve funds amounts of obligations that can be purchased from individual municipalities, the process to be used by MBBA in selling its bonds, and the type of state aid guarantees that are available to MBBA in situations where the municipalities fail to pay principal or interest on their obligations. Current law does not authorize MBBA to access sales tax revenues or mortgage recording taxes as available funding sources, in addition to the state aid guarantee, in situations where municipalities fail to pay principal or interest on their bonds.

Prior legislative history

Some of these provisions were included in Part HH and Part NN of A.156A/S.56A (2009-10 Executive Budget).

Statement in support

This bill seeks to modernize and reduce the cost of local government with the aim of reducing property taxes in New York. It would provide local governments relief from state mandates and mitigate governmental inefficiencies created by state law. This bill would give additional flexibility to local governments, empowering them to find operational efficiencies. This bill contains measures to make counties, municipalities and other local entities more affordable, accountable, and efficient.

Collateral Source and Subrogation Changes: The various collateral source provisions of the CPLR were enacted to eliminate the common law collateral source rule, which prohibited tortfeasors from reducing their obligations to a plaintiff by the amount of benefits the plaintiff receives from other sources, such as insurance. The statute's purpose is to eliminate the windfall of double recoveries to plaintiffs which often resulted from the common law collateral source rule, while still ensuring that uncompensated losses are fully compensated. Notwithstanding the trend to eliminate the windfalls that result from the common law rule, and to safeguard public monies, presently all defendants except public employers may offset against awards for future costs or expenses any amounts that would with reasonable certainty be replaced or indemnified. This bill would ensure that public employers are treated the same as private employers in tort actions. New York City estimates that it would save $14.5 million annually from this reform.

At present, there is no statutory authority that addresses or limits the extent to which a benefit provider may claim contractual reimbursement or subrogation with respect to medical expenses it has paid pursuant to an insurance contract or other agreement. Likewise, there is no statutory authority that specifies whether or under what circumstances such a benefit provider may intervene as a party in a personal injury or wrongful death action. For example, in a medical malpractice action, a health insurer which has provided coverage to the plaintiff may demand reimbursement for its expenses, often unnecessarily prolonging cases, thwarting settlement talks and making cases more expensive to litigate. Thus, it has become important that a statutory framework be established to facilitate settlement of cases and reduce expenses for litigants.

This bill would preclude a benefit provider to seek reimbursement or subrogation against a settling defendant for those benefits paid to or on behalf of plaintiff, unless specifically set forth by statute. In doing so, this bill would make the savings to defendants more tangible, and allow cases to settle more quickly and without unnecessary expense. This provision of the bill would be applicable to actions for personal injury, medical, dental, or podiatric malpractice, or wrongful death and would be inapplicable to the subrogation of property damage claims.

Local Procurement: Currently, all contracts for public work involving an expenditure of more than $20,000 must be awarded to the lowest responsible bidder.

Insurance: This bill would amend the Insurance Law to relax the requirements for forming a municipal cooperative health benefit plan pursuant to Insurance Law Article 47. These changes are necessary in light of the current stringent requirements, under which not a single municipal cooperative health benefit plan has been formed since the enactment of Article 47 in 1994.

Multi-County Positions: The bill would also amend the Pub. H. L. to allow certain county and part-county health districts to share the same commissioner/director and to have common district board members. This change would enable small county or part-county health districts to reduce their administrative expenses without lowering the quality of the services they provide.

Shared Highway Services: Currently, the State Department of Transportation may contract with municipalities only for three-year terms and may provide only snow and ice control services to municipalities in emergencies. The bill's amendments to the Highway Law would make the delivery of highway services more efficient and cost-effective at both the State and local levels.

Municipal Bond Bank: In 2009, the federal government passed the Recovery Act which enacted into law a number of changes relating to how municipalities could borrow to pay for public improvements. Specifically, the Recovery Act provided new categories of taxable bonds known as "Build America Bonds" and "Recovery Zone Economic Development Bonds" that could be issued in lieu of tax exempt bonds and that allow issuers to choose either to receive a direct federal subsidy or to offer bondholders a federal tax credit. Both Build America Bonds and Recovery Zone Economic Development Bonds may only be issued in 2009 and 2010. Recovery Zone Economic Development Bonds may only be issued for investment in "recovery zones." These new types of powers can be used by municipalities to fund public infrastructure improvements in their jurisdictions. Municipalities throughout the State, particularly in today's economic climate, are urgently looking to fund much-needed improvements through these new financing vehicles which can provide substantially reduced financing cost versus tax exempt bonds. As always, their goal is to do so in the most cost-efficient way possible, to ensure savings for their constituents.

The reason behind the proposed amendments to the MBBA statute is to make MBBA available to municipalities across the State, so they can participate and benefit from the new financing options authorized under the Recovery Act. This will allow municipalities to fund critical infrastructure and economic development projects in the most efficient, and cost-effective way. Since its inception, MBBA's purpose has been to make funds available at reduced interest costs to local governments to finance public improvements and purposes, particularly for those municipalities not otherwise able to borrow for such purposes. MBBA is there to streamline borrowing by local governments, by issuing bonds in the municipal credit markets and using the proceeds to purchase the obligations issued by municipalities. This process allows MBBA to provide interest rate savings to municipalities, as MBBA can sell bonds at lower interest rates due to their inherent credit protections and higher credit rating, and pass along the savings to municipalities. Given that both Build America Bonds and Recovery Zone Economic Development Bonds must be issued in taxable form, MBBA will also be able to take advantage of the market efficiencies that can be provided to larger size issues.

As municipalities throughout the State consider using the new types of obligations authorized under the Act, having access to MBBA financing will ensure that they receive the most favorable rates of interest. MBBA is a proven market participant, having issued bonds on behalf of various state entities over the years. Its market position allows it to issue bonds at lower rates of interest than those that can be issued by smaller, less well known issuers.

The current statute, whose provisions dealing with the purchase of municipal bonds of municipalities by MBBA date back to 1972, needs to be modernized in order to allow for maximum efficiency. The statute currently offers only one type of intercept (state aid) in situations where the municipalities fail to pay principal or interest on the bonds acquired by MBBA. The proposal is to add an additional source of funding, an intercept of sales tax and/or mortgage recording tax. The local tax revenue intercept option is proposed in order to allow municipalities to make optimal use of the Recovery Act bonding authorization. Additionally, certain clean-up changes are included, dealing with limitations on the amount of bonds of individual municipalities that can be purchased and on the way in which the MBBA bonds are sold.

Budget implications

The Local Government Commission on Efficiency and Competitiveness and the Property Tax Commission had extensive deliberations and produced comprehensive recommendations to reduce local costs and provide taxpayer savings. This bill would implement some of these provide significant fiscal relief and increased operational flexibility to local governments, enabling them to better control costs and provide: property tax relief.

Municipal Bond Bank: This bill would have no cost to the State. MBBA Recovery Act bonds would not be a debt of the State, and would be secured by municipalities' debt service payments on their local ARRA bonds or, in the event of municipal default, by the intercept of State aid and/or municipal tax revenues.

Municipalities participating in a pooled local ARRA bond issue through MBBA would be able to issue debt at a lower cost than otherwise possible. For the purposes of this.bill, local ARRA bonds would include two types of taxable bonds: Build America Bonds and Recovery Zone Economic Development Bonds. These boards, which municipalities may issue only in 2009 and 2010, offer federal interest subsidies of 35 percent and 45 percent, respectively. Build America Bonds are not subject to a volume cap, and the authority to issue such bonds is granted to any municipality. Recovery Zone bonds are subject to a volume cap, and the authority to issue such bonds is allocated among counties and large municipalities. The U.S. Treasury Department has allocated over $370 million to New York for Recovery Zone Economic Development Bonds. The net interest rate on such taxable bonds, after factoring in the subsidy, is currently lower than the interest rate on comparable tax-exempt bonds. However, since the taxable bond market prefers bond issues of at least $100 million, receiving the lowest possible rate on the ARRA bonds in effect requires multiple municipalities to participate in a pooled issue.

Effective date

This bill has various effective dates.