Extends certain provisions relating to refunding bonds

Summary of provisions

Section 1 of the bill extends the "sunset" provision of Chapter 629 of the Laws of 2005 to extend through September 30, 2014, the authority of municipalities to sell their refunding bonds to EFC without requiring a showing of savings in order to receive hardship financing from the CWSRF or DWSRF at zero percent interest.

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

Existing law

Pursuant to LFL § 90.00(c)(2), municipalities refunding notes or bonds within five years of issuance are required to show net present value savings computed in accordance with LFL § 90.10(b)(2)(a), unless such notes or bonds are sold to EFC in connection with a hardship loan at zero percent interest.

Prior legislative history

Chapter 629 of the Laws of 2005, which was set to expire on September 30, 2008, was extended until September 30, 2011 by Chapter 277 of the Laws of 2008.

Statement in support

Municipalities refunding serial bonds are subject to the requirements of LFL § 90.00. Pursuant to LFL § 90.00(c)(2), municipalities refunding within five years of issuance are required to show net present value savings computed in accordance with LFL § 90.10 (b)(2)(a). LFL § 90.10(b)(2)(a) states that refunding bonds shall only be issued in the event that the present value of the total payments of both principal and interest to become due on the refunding bonds shall be less than the present value of the principal and interest to become due at their stated maturities on the principal amount of the bonds to be refunded. Because this provision prevented municipalities from refinancing zero percent loans from the CWSRF and

DWSRF, LFL § 90.00 was amended by Chapter 629 of the Laws of 2005 to exempt such refinancing from the requirements of LFL § 90.10(b) (2)(a). Chapter 629 will be deemed repealed on September 30, 2011. This bill is necessary to continue providing fiscal relief to financially distressed municipalities.

EFC, together with the Department of Environmental Conservation (DEC), administers the CWSRF. 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), also administers the DWSRF. 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 to recipients for the purpose of financing or refinancing such projects.

Recipients with high-cost projects that serve residential areas may qualify for a reduced interest rate or interest-free financing through the CWSRF and DWSRF. EFC's reduced interest rate financings also assist recipients facing financial hardship.

In order to expand options available to the recipients of financial assistance from the CWSRF and DWSRF, EFC expanded the forms of financing offered through the programs including investing in, or purchasing of, municipal debt/bond obligations. Through this additional form of financing, EFC is able to extend the term of the recipient's payment obligation of the EFC financing to up to 30 years for all CWSRF and DWSRF recipients facing fiscal hardship. Therefore, fiscally distressed municipalities that qualify for hardship financings under the CWSRF and DWSRF extended-term financing at a zero percent interest rate may reduce their annual debt service by refinancing for a period of greater than 20 years.

However, prior to Chapter 629, it was impossible for the fiscally distressed municipality to show present value savings because this type of refinancing merely trades one zero interest financing for another. However, the reduction in annual debt service can be substantial. Therefore, these fiscally distressed municipalities were forced to delay valuable refinancing opportunities, which would provide them with fiscal relief with a longer term, and lower annual debt service payments. Chapter 629 provided a valuable and important financing mechanism for municipalities that this bill would continue for an additional three years.

Budget implications

The bill would have no impact on the State budget.

Effective date

The bill would take effect immediately.