Relates to the special powers of the environmental facilities corporation

1) obligations issued or fully insured or guaranteed by the State of New York (the "State"),

2) obligations issued by a municipal corporation; school district or district corporation of the State, or

3) obligations of a public benefit corporation that under a specific state statute may be accepted as security for deposit of public moneys.

Section 2 of the bill would amend PAL § 1285-m(6) to make consistent amendments in relation to the allowable investments for DWSRF moneys.

Section 3 of the bill would provide the effective date and expiration of the legislation.

Justification

The CWSRF and DWSRF provide low-cost financing to municipalities and other eligible entities to construct clean water and drinking water infrastructure projects. With combined assets of more than $11.9 billion, the two funds are the largest state revolving funds in the country.

The PAL authorizes EFC to invest CWSRF and DWSRF moneys not required for immediate use or disbursement. The income from these investments contributes to the growth of the funds, enhances bondholder security, and helps to preserve EFC's AAA credit ratings. EFC's investment portfolio exceeds $2.5 billion.

Under PAL §§ 1285-j(6) and 1285-m(6), EFC may invest in obligations that are specifically identified in GML § 10, which lists the securities eligible to be pledged by a bank or trust company as security for a local government's deposit of public funds. GML § 10 does not itself impose a universal "AA" rating requirement for these "eligible securities," but the PAL requires that the obligations be rated "AA" by at least one nationally recognized rating agency.

The bill would amend PAL §§ 1285 j(6) and 1285-m(6) to allow an "A" rating standard for the obligations listed in GML § 10(1)(0(iv): obligations issued or fully insured by the State, those issued by municipal corporations, school districts and district corporations of the State and those issued by any public benefit corporation which under a specific State statute may be accepted as security for deposit of public funds. With this change, EFC could more efficiently invest in, and earn additional investment income from, a broader group of New York State municipal and public entities. EFC would continue to be restricted to purchasing investment-grade securities, while increasing the potential for program growth and further diversification of its New York-based investment portfolio. The additional rating requirement comes with risk that is manageable given EFC's experience and competence assessing the creditworthiness of governmental entities in the State. Moreover, it is consistent with the scope of securities in which the State Treasury may invest as agent for certain public authorities, including the Housing Finance Agency, the State University Construction Fund, the Job Development Authority, and the Homeless Housing and Assistance Corporation.

By allowing CWSRF and DWSRF assets to be invested in these obligations, the SRF programs (including the participating municipalities) could benefit from higher investment returns which would benefit municipalities throughout the State by making more capital available to finance critical environmental infrastructure projects.

Prior legislative history

S.6985-A/A.9789-A of 2014 included similar provisions.

Fiscal implications

None identified.

Effective date

The bill would take effect immediately.