Relates to the general debt service fund of the city of New York and a statutory lien and pledge and agreement

BILL NUMBER:S5199

Title of bill

An act to amend the local finance law, in relation to the general debt service fund of the city of New York and a statutory lien and pledge and agreement in connection therewith

Purpose

To authorize the City to maintain a general debt services fund administered by the State Comptroller. This fund would be used to pay debt service obligations.

Summary of provisions

Section 1. Findings

Section 2. amends section 85.00 of the local finance law by making the new section 85.85 applicable to the City of New York and only applicable to the City of New York

Section 3. amends the local finance law by adding a new section 85.85. This section imports certain general debt service fund provisions from the Financial Emergency Act and makes those provisions permanent. In addition, the changes would create a statutory lien on the fund in favor of the City's bondholders, and would authorize a pledge and agreement of the State to the holder of City debt relating to preservation of the general debt service fund and the statutory lien.

Justification

The City of New York carries out a large capital program in order to maintain and improve its aging infrastructure and frequently issues debt in the capital markets in order to finance its capital programs. The funding mechanism for City general obligation debt service put in place by the Financial Emergency Act included the creation of a general debt service fund maintained by the State Comptroller. This bill would amend the Local Finance Law to provide for a permanent general debt service fund and create a statutory lien in favor of bondholders on that fund; it would also authorize a pledge and agreement of State in relation to the fund lien. These provisions would assist the City in the marketing of the bonds, improve the perception of the City's debt by the credit rating agencies and investors, and lower the City's cost of borrowing.

The general debt service fund is a unique feature of the City's credit and has long been viewed favorably by investors and rating agencies, the changes provided for in this bill would significantly enhance its value to the City bondholders.

Legislative history

None.

Fiscal implications

To be determined.

Local fiscal implications

To be determined.

Effective date

This act shall take effect immediately.