Authorizes the Patchogue-Medford Union Free School District to establish a reserve fund to liquidate serial bonds

BILL NUMBER:S5692

Title of bill

An act in relation to establishing a reserve fund to liquidate certain serial bonds issued to the Patchogue-Medford Union Free School District

Purpose or general idea of bill

To authorize Patchogue-Medford Union Free School District to establish a reserve fund to liquidate serial bonds.

Summary of provisions

Section One authorizes the Patchogue-Medford Union Free School District to establish a reserve fund for the purpose of liquidating any serial bonds issued pursuant to chapter 109 of the law of 2006.

Section Two allows the Patchogue-Medford Union Free School District to transfer monies from the general fund of such school district to the reserve fund created by this act, provided that the amount transferred from the general fund shall not exceed the amount necessary to liquidate the serial bonds issued pursuant to chapter 109 of the laws of 2006.

Section Three requires that before the reserve fund may be established, a majority of qualified voters must approve a proposition at a special or regular school district meeting and this section also requires that notice of the meeting shall state that this proposition would be submitted and other information regarding the proposition. This section also provides that voters may direct school authorities to pay monies derived from another source into this fund.

Section Four is the effective date.

Justification

In June 2006, Governor Pataki signed Section 109 of the Laws of 2006 which allowed Patchogue-Medford Schools to issue bonds in order to finance a $6 million deficit. The District issued the bonds and has been faithfully paying them down since then. The bonds which were issued contain no provision for pre-payment. The current administration has led the district with prudent financial management and is in a position to liquidate the bonds by paying them off. Establishing a reserve fund would enable the District to pay off the bonds in a one-shot transaction and take the debt service on these bonds out of the annual budget. This would allow more of the current resources to fund the day to day operations of the district while paying the bonds from savings.

However, the terms of the bonds do not contain the mechanism, with which this can be achieved. This legislation would allow the District to legally establish a reserve fund. Certain guidelines are outlined in the bill that require a majority of qualified voters to vote in favor of a proposition at a special or regular school board meeting. Notice of the meeting must state that this proposition would be up for a vote at the meeting in addition to the purpose of the fund, the amount of the fund, as well as the probable term and the source. The purpose of

the fund, the ultimate amount, the probable term and the source from which the funds will be obtained shall be specified in the proposition. An annual amount that is sufficient to meet the requirements set forth in the proposition shall be paid into the fund and voters from time to time may direct school authorities to pay monies into the fund derived from some other source.

Legislative history

2009-2010 A.10600/S.7415

Fiscal implications

To Be Determined.

Effective date

This act shall take effect immediately.