Exempts the NYC Housing Development Corporation from the state bond issuance charge

Title of bill

An act to amend the public authorities law, in relation to exempting the New York city housing development corporation from the state bond issuance charge

Summary of provisions

This proposed legislation would amend Subdivision 1 of section 2976 of the public authorities law, as amended by section 1 of part C of chapter 19 of the laws of 2010 to exempt the New York City Housing Development Corporation from the state bond issuance charge.

Justification

The imposition of the Bond Issuance Charge (the "BIC") on bonds issued by the New York City Housing Development Corporation ("HDC" or the "Corporation") will result in an additional cost of approximately $10-15 million per year incurred by the Corporation and its affordable housing projects. For instance, if the existing BIC (which ranges from .17% to .84% for each bond issuance) had been in place over the course of 2009, HDC would have been subject to a State imposed issuance charge of $14.4 million.

To date, over 90% of the units HDC has financed under the Mayor's housing plan target low and moderate income residents. Given the nature of HDC's projects-the high cost it takes to build in New York City and the relatively low rents tenants can afford to pay--these transactions require HDC to draw upon our corporate reserves to subsidize the projects and make them affordable to low and moderate income tenants. In many instances, the New York City Department of Housing Preservation and Development must also provide subsidies for the developments.

The BIC will have the effect of increasing project costs, thereby creating financing gaps which will be incumbent upon HDC to fill. These are costs that can be passed through to projects only if additional subsidy is incorporated into the projects' financing. In some instances, where HDC issues bonds in order to raise money for subsidies or to securitize assets of New York City, there is no borrower to pay such charge so the costs can't be passed on, and will simply have to be paid "out of pocket" by HDC.

In short, an average annual State issuance charge of approximately $10-$15 million per year will correlate directly with $10-$15 million less being available in HDC project subsidy for low and moderate income developments.

Not only will the State imposed issuance charge diminish the volume of HDC's prospective financings, it will also threaten the feasibility of existing, multi-year transactions which HDC has already committed to, but for which additional bonds must still be issued. For example, HDC has committed to issue the bonds for NYCHA's historic, mixed-finance "Federalization" transaction, which will result in the upgrading of approximately 20,000 units of public housing, as well as the ability of NYCHA to transfer responsibility for the operating and capital budgets of over 14,000 units to the Federal government.

While HDC has issued the initial series of bonds required to finance the transaction, over the course of the next two years, the project will require HDC to issue an additional $230 million in bonds. The imposition of a State issuance charge will imperil this transaction by leading to unanticipated fees of up to $2 million, for which no budgeted sources exist.

This legislation will enable HDC to maintain its resources so that it can continue to run programs that develop and maintain affordable housing in New York City.

Legislative history

New bill.

Fiscal implications

None.

Effective date

This act shall take effect immediately.