What's happening
This bill updates the powers of the NY Municipal Bond Bank Agency to include bonds and notes issued after the MBBA Technical Corrections Act of 2018.
Why it matters
Expands the scope of the Municipal Bond Bank Agency (MBBA). by allowing it to handle bonds and notes issued after the passage of this 2018 Act, potentially increasing the Agency's relevance and flexibility for future municipal finance needs.
Provides greater flexibility in how the MBBA can structure, sell, and manage municipal bonds and notes. , including allowing certain sales at private sale with oversight, which could result in more tailored financing options and improved responsiveness to market conditions.
Adjusts debt service reserve fund requirements and purchase limits. for these newly included bonds and notes, which could impact the risk profile and borrowing capacity for municipalities seeking MBBA assistance.
Raises the potential for increased municipal borrowing. by clarifying and updating the aggregate limits on outstanding bonds and notes, possibly enabling more infrastructure or community investment projects across New York State.
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Who cares
New York State Municipal Bond Bank Agency
The bill would exempt newly issued bonds and notes from its $1 billion outstanding debt cap and allow their sale through public or private offerings.
Municipalities borrowing through the agency
The bill would exempt bonds and notes issued after its effective date from limits on how much of the agency’s municipal bond purchases may come from one municipality.
Municipal bond underwriters and investors
The bill would allow private sales of newly issued agency bonds and notes and exclude them from the existing formula-based debt service reserve requirement.
State comptroller and budget director
Private sales of newly issued agency bonds and notes would require written approval from the comptroller, or from the budget director when the comptroller is the buyer.
Headline styles
Fix Bond Agency Rules
Plain English, a few words. Used as the page title.
Sponsors
Senator · Senate District 61
No co-sponsors yet.
History
- Referred to corporations, authorities and commissions
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
7929
IN SENATE
March 9, 2018
Introduced by Sen. RANZENHOFER -- (at request of the New York State Homes and Community Renewal) -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions
AN ACT to amend the public authorities law, in relation to the powers of the state of New York municipal bond bank agency
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Short title. This act shall be known and may be cited as the "MBBA Technical Corrections Act of 2018".
§ 2. Subdivisions 2 and 10 of section 2432 of the public authorities law, as amended by section 2 of part N of chapter 56 of the laws of 2010, are amended to read as follows:
(2) "Bonds" and "Notes". The bonds and notes, including any special program bonds, special school purpose bonds, recovery act bonds, [and] public safety communications bonds, and any bonds and notes issued after the effective date of the MBBA technical corrections act of two thousand eighteen, respectively issued by the agency pursuant to this title. Bonds and notes shall not include any tax lien collateralized securities issued pursuant to this title.
(10) "Debt Service Reserve Fund Requirement". With respect to any debt service reserve fund created by section twenty-four hundred thirty-nine of this title relating to bonds other than special program bonds or special school purpose bonds or special school deficit program bonds or recovery act bonds or public safety communications bonds or bonds or notes issued after the effective date of the MBBA technical corrections act of two thousand eighteen, as of any particular date of computation, an amount of money equal to the greatest of the respective amounts, for the then current or any succeeding calendar year, of annual debt service payments required to be made to the agency on all municipal bonds purchased with the proceeds of bonds which bonds are secured by such debt service reserve fund, such annual debt service payments for any calendar year being an amount of money equal to the aggregate of (a) all interest payable during such calendar year on all municipal bonds
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD14351-01-8
S. 7929 2
purchased by the agency and then outstanding on said date of computation which are secured by such debt service reserve fund, plus (b) the principal amount of all municipal bonds purchased by the agency and then outstanding on said date of computation which mature during such calendar year and are secured by such debt service reserve fund; and with respect to any debt service reserve fund created by section twenty-four hundred thirty-nine of this title relating to an issue or issues of special program bonds or special school purpose bonds or special school deficit program bonds or recovery act bonds or public safety communications bonds, such amount as shall be determined by the agency.
§ 3. Subdivision 1 of section 2435 of the public authorities law, as amended by section 4 of part N of chapter 56 of the laws of 2010, is amended to read as follows:
1. The agency may purchase, and contract to purchase, municipal bonds from municipalities at such price or prices, upon such terms and conditions and in such manner, not inconsistent with the provisions of the local finance law, as the agency shall deem advisable; provided, however, that the average interest rate payable on all municipal bonds (taken as a group) purchased with the proceeds of an issue of bonds shall equal or exceed the interest rate on such issue of bonds. The agency shall not purchase the municipal bonds of any municipality if (i) the aggregate principal amount thereof, together with the aggregate principal balances of the municipal bonds of such municipality then outstanding and held by the agency, exceed an amount equal to ten percent of the aggregate principal amount of the statutory authorization at the time for the issuance of bonds and notes, as provided in section twenty-four hundred thirtyeight of this title, and (ii) the aggregate principal amount thereof exceeds an amount equal to fifty percent of the aggregate principal amount of all municipal bonds proposed to be so purchased at the time; provided, however, that this sentence shall not apply to local ARRA bonds or local public safety communications bonds or bonds or notes issued after the effective date of the MBBA technical corrections act of two thousand eighteen.
§ 4. Subdivision 5 of section 2437 of the public authorities law, as amended by section 6 of part N of chapter 56 of the laws of 2010, is amended to read as follows:
(5) Any bonds or notes of the agency other than special program bonds, special school purpose bonds, special school deficit program bonds, recovery act bonds [or], public safety communications bonds or bonds or notes issued after the effective date of the MBBA technical corrections act of two thousand eighteen shall be sold at public sale and from time to time upon such terms and at such prices as may be determined by the agency, and the agency may pay all expenses, premiums and commissions which it may deem necessary or advantageous in connection with the issuance and sale thereof. Any special program bonds, special school purpose bonds, special school deficit program bonds, recovery act bonds [or], public safety communications bonds or bonds or notes issued after the effective date of the MBBA technical corrections act of two thousand eighteen shall be sold at public or private sale and from time to time upon such terms and at such prices as may be determined by the agency, and the agency may pay all expenses, premiums and commissions which it may deem necessary or advantageous in connection with the issuance and sale thereof provided, however, that special program bonds relating to a special program agreement entered for the purpose described in paragraph (b) of subdivision one of section twenty-four hundred thirty-five-a of this title shall be sold on or before June thirtieth, two thousand one.
S. 7929 3
No special program bonds, special school purpose bonds, special school deficit program bonds, or recovery act bonds, or public safety communications bonds or bonds or notes issued after the effective date of the MBBA technical corrections act of two thousand eighteen of the agency may be sold by the agency at private sale, however, unless such sale and the terms thereof have been approved in writing by (a) the comptroller, where such sale is not to the comptroller, or (b) the director of the budget, where such sale is to the comptroller.
§ 5. Subdivision 1 of section 2438 of the public authorities law, as amended by chapter 355 of the laws of 2016, is amended to read as follows:
(1) The agency shall not issue bonds and notes in an aggregate principal amount at any one time outstanding exceeding one billion dollars, excluding tax lien collateralized securities, special school purpose bonds, special school deficit program bonds, special program bonds issued to finance the reconstruction, rehabilitation or renovation of an educational facility pursuant to the provisions of subdivision (b) of section sixteen of chapter six hundred five of the laws of two thousand, special program bonds issued to finance the cost of a project for design, reconstruction or rehabilitation of a school building pursuant to the provisions of section fourteen of the city of Syracuse and the board of education of the city school district of the city of Syracuse cooperative school reconstruction act, special program bonds issued to finance the cost of a project for design, construction, reconstruction or rehabilitation of a school building pursuant to the provisions of section thirteen of the Yonkers city school district joint schools construction and modernization act, recovery act bonds, public safety communications bonds, bonds or notes issued after the effective date of the MBBA technical act of two thousand eighteen and bonds and notes issued to refund outstanding bonds and notes.
§ 6. This act shall take effect immediately.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the public authorities law, in relation to the powers of the state of New York municipal bond bank agency
Summary of provisions
Section 1 of the bill states the title of the bill: "The MBBA Technical Corrections Act of 2018."
Section 2 of the bill expands the definition of "bonds and notes" set forth in New York Public Authorities Law ("PAL") PAL § 2432(2) to include any bonds and notes issued after the date of the MBBA Technical Corrections Act of 2018, and amends the definition of"debt service reserve fund requirement" set forth in PAL § 2432 (10) to exclude such bonds from the debt service reserve fund requirement found therein.
Read the full memo (809 words)
Section 3 of the bill amends subdivision (1) of PAL § 2435 to eliminate certain requirements contained therein as to the maximum amount of bonds that MBBA may acquire from any one municipality at any one time, in connection with the issuance of bonds under the MBBA Technical Corrections Act of 2018.
Section 4 of the bill amends section § 2437 of the PAL to provide that bonds issued pursuant to the MBBA Technical Corrections Act of 2018 shall be issued in public or private sale as provided therein.
Section 5 of the bill amends subdivision (1) of Section § 2438 of the PAL to exclude bonds issued pursuant to the MBBA Technical Corrections Act of 2018 from the limitation found therein on the aggregate amount of bonds that can be issued by MBBA.
Section 6 provides for an immediate effective date.
Justification
Since its inception, MBBA's purpose has been to make funds available at reduced interest costs to local governments to finance public improve- ments and projects, particularly for those municipalities not otherwise able to borrow for traditional public purposes, such as infrastructure needs. MBBA is there to streamline borrowing by local governments by issuing MBBA bonds, the proceeds of which are used to purchase obli- gations issued by municipalities. By purchasing the bonds of the munici- palities directly, MBBA generates interest rate savings to the munici- palities based on interest rate differentials attributable to the spread in market ratings between such municipalities and MBBA.
The existing statute, with provisions dealing with the purchase of municipal bonds of municipalities by MBBA date back to 1972, needs to be modernized in order to allow for maximum efficiency and additional support for public projects. The current statute contains certain provisions which hinder the efficient sale of MBBA bonds and the flow of capital to support necessary public projects. The purpose of this legis- lation is to remove those restrictions. The restrictions fall under two categories, one specific to the method for the sale of MBBA bonds and the other encompassing certain procedural obstacles to the efficient sale of MBBA bonds. The two can be summarized as follows: 1. PUBLIC SALE REQUIREMENT
The statute contains a provision, requiring that the sale of bonds not specifically excluded from this provision be done on a competitive basis. Over the years, as MBBA has created new programs for bond issu- ances, this provision has been excluded from applicability for the new programs, due to the fact that competitive sales would prevent MBBA from structuring the bonds to generate maximum efficiency by not permitting the bidders to focus in advance of the sales on the specifics of the particular municipalities. Negotiated bond sales are the preferred meth- od of sale for bonds issued by conduit issuers such as MBBA, particular- ly where the MBBA bonds are issued to purchase bonds issued by different municipalities throughout the State. The different underlying issuers present unique factors and it is unlikely that underwriters will have the necessary information to bid aggressively on a bond issue during a competitive sale that requires extensive investigation in order to fully understand the underlying issuers.
In addition, competitive bidding impedes customization of portions of the issue that may be needed to fit the needs of specific investors. This may mean something as common as modifying the maturity structure or the coupons to meet pockets of demand. Or it may mean having the flexi- bility to customize the debt to particular investors. The negotiated process also provides advantages in timing. In a negotiated sale, MBBA will be able to engage in market timing in order to place the issues during times when demand is likely to be relatively high or when market conditions are optimal.
This type of bond issue will also, because of its newness, require some form of pre-marketing in order to generate demand. When new structures or concepts are introduced to the market, a concerted effort from broad group that includes MBBBA and its banking team is the best way to market the bonds.
Legislative history
None.
Fiscal implications
None.
Effective date
The act takes effect immediately.
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