Authorizes the Monroe-Woodbury central school district to establish a reserve fund for the specific purpose of liquidating certain serial bonds

Summary of provisions

Section 1 authorizes the establishment of the reserve funds by the Monroe-Woodbury Central School District. Section 2 authorizes the transfer of monies from the general fund of the Monroe- Woodbury Central School District to the reserve fund created by this act, provided that the amount so transferred does not exceed the amount necessary to liquidate the serial bonds issued in 2004 by the Monroe- Woodbury Central School District pursuant to chapter 158 of the laws of 2003. Section 3 restricts the use of the monies deposited in the fund to the payment of the principal of and interest on said serial bonds and provides for the in vestment of monies deposited in the fund in accordance with the provisions of the General Municipal Law. Section 4 removes the fiscal oversight measures imposed on the Monroe-Woodbury Central School District by Chapter 158 of the Laws of 2003.

Justification

In the seven years since the District issued bonds to finance an operating deficit in its General fund, the District's financial condition has vastly improved. This is clearly evident upon review of the independent auditor's report for the fiscal year ended June 30, 2011 and the recent rating reports released by Moody's Investor Services.

Currently, the District has approximately $80 million of outstanding debt. The annual budgetary appropriation needed to pay the principal of and interest on such indebtedness is $9.2 million, which equates to over 6% of the District's annual spending. The Board of Education and the administration of the District have embarked on a multi-year plan to restructure and reduce the District's liabilities, thus allowing the District to dedicate more of its resources to the education of the students of the District. As a part of this effort, the District would like to lower the outstanding debt burden of the District.

During the past twelve months the District has retired existing indebtedness, and refinanced several of its outstanding debt obligations at significantly lower interest rates. As a result of such transactions, the District has saved its taxpayers significant dollars in debt service costs. The bonds issued by the District to finance it deficit are not callable prior to maturity, which prevents the District from retiring such debt now with available funds or refinancing it at lower interest rates. In addition, under existing law the District is not authorized to establish a reserve or escrow fund with available funds for the specific purpose of liquidating the deficit bonds. As such, special legislation is required to permit the District to liquidate the bonds issued to finance its deficit. The benefits associated with such action are as follows:

The liquidation of the District's deficit bonds will serve to advance the District's effort to restructure and reduce the District's liabilities.

The liquidation of the deficit bonds will relieve the District of future budgetary appropriations of $2.1 million that would be needed to pay the debt service on the deficit bonds.

The liquidation will reduce the overall debt burden on the Monroe- Woodbury community and also eliminate the costly and time-consuming reporting requirements required by Chapter 158 of the Laws of2003. As demonstrated by improved financial condition of the District since the issuance of the bonds discussed above, the District is no longer in need of fiscal oversight.

While credit ratings are not judged by anyone single factor, the liquidation of the District's deficit bond would be viewed positively by the credit rating agencies and may serve to move the District's credit rating even higher.

This legislation would allow the Monroe-Woodbury community to close the door on a dark chapter in the District's financial history.

Legislative history

New Bill.

Fiscal implications

None.

Effective date

This act shall take effect immediately.