Relates to refunding bonds and extending the provisions thereof

The bill would extend for three years, to September 30, 2017, authorization for financially distressed municipalities to sell certain bonds to the Environmental Facilities Corporation ("EFC") in connection with hardship state revolving loan financing.

Summary of Provisions:

Section 1 of the bill would extend the "sunset" provision of Section 2 of Chapter 629 of the Laws of 2005, thereby extending until September 30, 2017 certain provisions of Local Finance Law ("LFL") § 90.00, which authorize municipalities with hardship State Revolving Fund financing, who are seeking to extend the term of their zero percent loans through refinancing and whose current bonds or notes are within 5 years of issuance, to sell their refunding bonds to EFC without requiring a showing of savings.

Section 2 of the bill provides for an immediate effective date.

Existing Law:

Currently, under LFL § 90.00(c)(2) a municipality may sell their refunding bonds or notes to EFC within five years of issuance without requiring a showing of savings. This provision, however, will be deemed repealed as of September 30, 2014.

Prior Legislative History:

These provisions were extended until September 30, 2011 by Chapter 277 of the Laws of 2008, and until September 30, 2014 by Chapter 72 of the Laws of 2011.

Statement in Support:

The purpose of this legislation is to continue to provide critical fiscal relief to financially distressed municipalities. The legislation will continue certain zero interest financing opportunities available to fiscally distressed municipalities through the Clean Water State Revolving Fund ("CWSRF") and the Drinking Water State Revolving Fund ("DWSRF").

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, 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 either State Revolving Fund ("SRF") program. Additionally, EFC's reduced interest rate financings assist those 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 SRF recipients facing fiscal hardship. Therefore, fiscally distressed municipalities that qualify for hardship financing 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.

Municipalities wishing to refund serial bonds are subject to the requirements of LFL § 90.00. Prior to enactment of Chapter 629 of the Laws of 2005, pursuant to LFL § 90.00 (c)(2), municipalities refunding notes or bonds within five years of issuance were required to show net present value savings computed in accordance with LFL 90.10(b)(2)(a), which 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. 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 dramatic. 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. By remedying this anomaly, Chapter 629 provided a valuable and important financing mechanism for municipalities that this bill would continue for an additional three years.

EFC's mission is to provide low-cost capital and expert technical assistance for environmental projects in New York State. It is important that communities with critical fiscal needs are adequately assisted in maintaining financing for necessary clean and drinking water projects. This legislation will continue to provide these communities with the necessary assistance to reduce their costs.

Budget Implications:

None.

Local Impact:

None.

Effective Date:

The bill would take effect immediately.