Extends certain provisions relating to installment loans and obligations evidencing installment loans

Summary of provisions

Section 1 of the bill would extend the "sunset" provision of Chapter 492 of the Laws of 1993 thereby extending through September 30, 2014, the authority of municipalities to issue their grid bonds or notes to EFC evidencing installment loans from the CWSRF and DWSRF.

Section 2 of the bill would provide an immediate effective date.

Existing law

LFL § 169.00 authorizes municipalities to sell to EFC bonds or notes evidencing installment loans from the CWSRF or DWSRF. Under section 169.00, a single municipal bond or note is executed at closing for the maximum principal amount of the loan. The bond or note provides, however, that the municipality is only obligated to repay amounts that are actually advanced under such instrument. Advances of moneys under the bond or note are evidenced by endorsements on a "grid" or table attached to such instrument. LFL § 169.00 will be deemed repealed as of September 30, 2011.

Prior legislative history

Chapter 492 of the Laws of 1993 enacted LFL § 169.00 and applied initially only to the CWSRF. Chapter 304 of the Laws of 1997 extended the application of LFL § 169.00 to the DWSRF. By its terms, Chapter 304 of the Laws of 1997 expires the same date as Chapter 492 of the Laws of 1993. Chapter 492 of the Laws of 1993, which would have expired on June 30, 1996, was extended until June 30, 1999 by Chapter 250 of the Laws of 1996. It was further extended every three years thereafter, until September 30, 2002 by Chapter 122 of the Laws of 1999; until

September 30, 2005 by Chapter 339 of the Laws of 2002; until September 30, 2008 by Chapter 628 of the Laws of 2005; and most recently until September 30, 2011 by Chapter 212 of the Laws of 2008.

Statement in support

EFC, together with the Department of Environmental Conservation (DEC), administers the CWSRF, created by Chapter 565 of the Laws of 1989. The CWSRF was established to provide financial assistance to various recipients in acquiring, constructing and upgrading eligible water pollution control projects.

EFC, together with the Department of Health (DOH), administers the DWSRF, created by Chapter 413 of the Laws of 1996. The DWSRF was established to provide financial assistance for acquiring, constructing and upgrading eligible water supply projects.

Under both the CWSRF and the DWSRF, EFC is authorized to provide assistance in several forms to recipients for the purpose of financing or refinancing such projects. The Federal monies used by EFC for the making of financings/loans are first made available to the CWSRF and DWSRF under a letter of credit, upon which the State draws in accordance with certain rules prescribed by the United States Environmental Protection Agency (EPA). Under these rules, Federal funds can be drawn only as eligible costs are incurred by the recipient.

Typically, when financing is provided to a municipality under either the CWSRF or the DWSRF, EFC receives a general obligation bond or note from the municipality as evidence of its obligation to repay such financing. Installment loans, through the use of a grid note, allow municipalities to draw financing proceeds on a cost-incurred basis without having to issue a separate bond or note to EFC for each amount advanced. Without grid notes, a municipality would be required to "close" a new loan each time it requested funds. The resultant transactional costs could be prohibitive, as financing closing costs typically range between $5,000 and $10,000. The use of such grid notes for the CWSRF was authorized by Chapter 492 of the Laws of 1993, and for the DWSRF by Chapter 304 of the Laws of 1997.

The use of grid notes in EFC's short-term CWSRF financing program has been an unqualified success in saving municipalities money. Hundreds of counties, cities, towns and villages throughout New York have successfully utilized grid notes to secure short-term CWSRF financing. The use of grid notes has provided recipients with flexibility and savings, and helped make low-cost CWSRF financing readily available for financing planning and design costs, as well as actual construction, and, in many cases, interest-free "bridge" financing for municipalities which anticipate receiving grants for a project.

Because of the substantial benefits grid notes provide to municipal financing recipients, the installment loan, or grid note, authorization contained in LFL § 169.00 of the LFL should be continued.

Budget implications

The bill would have no impact on the State budget.

Effective date

The bill would take effect immediately.