Relates to statutory installment bonds and extending the effectiveness thereof

The bill would extend for three years to September 30, 2017 provisions relating to statutory installment bonds issued to the New York State Environmental Facilities Corporation ("EFC").

Summary of Provisions:

Section 1 of the bill would extend the "sunset" provision of Section 2 of Chapter 581 of the Laws of 2005, thereby extending until September 30, 2017 the provisions of Local Finance Law ("LFL") § 62.10(c) which authorize local governments to issue statutory installment bonds in an amount not to exceed $20 million to EFC at a fixed rate or, if issued in serial maturities, at a set rate for each individual maturity.

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

Existing Law:

LFL § 62.10(c) allows municipalities to issue a single statutory installment bond for the full principal amount, not to exceed $20 million, to EFC at a fixed rate or, if issued in serial maturities, at a set rate for each individual maturity. Under existing law, LFL 62.10(c) will be deemed repealed as of September 30, 2014.

Prior Legislative History:

LFL § 62.10(c) was extended until September 30, 2011 by Chapter 213 of the Laws of 2008, and until September 30, 2014 by Chapter 69 of the Laws of 2011.

Statement in Support:

EFC promotes environmental quality by providing low cost capital and expert technical assistance to municipalities, businesses and State agencies for environmental projects in New York State. In this role, EFC administers the Clean Water State Revolving Fund ("CWSRF") and the Drinking Water State Revolving Fund ("DWSRF"). Under these revolving fund programs, EFC offers both leveraged and direct loans.

As of November 30, 2012, EFC has issued approximately $15.0 billion in State Revolving Fund Bonds under the CWSRF program and the DWSRF program to fund loans to local governments and public benefit corporations. Before 2005, in accordance with LFL, when a borrower receiving an EFC financing issued serial bonds to EFC for each maturity; i.e., for a 20 year financing, EFC would receive 20 separate bonds from the community. The issuance of serial bonds caused EFC, and those providing trustee services, excessive servicing cost and substantial time in handling and processing of multiple bonds. For example, for EFC pooled financings, since most loans from the State Revolving Fund are for periods of 20 years, EFC would receive at loan

closing up to 20 separate bonds. For pooled financings, where 30 to 50 borrowers may participate at one time, this would require receiving 600 to 1000 separate individual bonds. This process also resulted in unnecessary bonding costs to borrowing entities.

A single debt instrument for financings at or under $20 million, such as a statutory installment bond, reduces the costs associated with printing, processing and storage. Reduced paper usage also achieves environmental benefits, while also reducing the chance of error associated with multiple printed bonds. This simplified approach also benefits borrowers in making the financing process more "user friendly" while enhancing the efficient preparation and execution of the bonds. Additional allowances for either a fixed or, if issued in serial maturities, at a set rate of interest, for each individual maturity, will enable financing options more reflective of the budgetary realities of the borrowing entity.

Budget Implications:

This bill would have no budget implications to the State but would provide greater flexibility in local government and public benefit corporation financing options, while reducing costs associated with the issuance and sale of bonds to EFC.

Local Impact:

None.

Effective date:

The bill would take effect immediately.