BILL NUMBER:S6987

TITLE OF BILL:  An act to amend chapter 492 of the laws of 1993,
amending the local finance law relating to installment loans and
obligations evidencing installment loans, in relation to extending the
effectiveness of such provisions

Purpose of the Bill:

The bill would extend for another three years, to September 30, 2017,
the authority of municipalities to issue their bonds or notes
evidencing installment loans from the Clean Water State Revolving Fund
("CWSRF") and the Drinking Water State Revolving Fund ("DWSRF") to the
Environmental Facilities Corporation ("EFC").

Summary of Provisions:

Section 1 of the bill would extend the "sunset" provision of Section 3
of Chapter 492 of the Laws of 1993, thereby extending until September
30, 2017 the provisions of Section 169.00 of the Local Finance Law
("LFL") authorizing municipalities to issue their bonds or notes
evidencing installment loans to EFC in order to obtain financial
assistance from the CWSRF and the DWSRF.

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

              

Existing Law:

LFL § 169.00 authorizes municipalities to sell to EFC bonds or notes
evidencing installment loans from the CWSRF or DWSRF. Under LFL
169.00, a single municipal bond or note is executed at closing for the
maximum principal amount of the loan. The bond or note provides,
however, that the municipality is only obligated to repay (and
interest, if any, only accrues on) amounts that are actually advanced
under such instrument. Advances of moneys under the bond or note are
evidenced by endorsements on a "grid" or table attached to such
instrument. Under existing law, LFL § 169.00 will be deemed repealed
as of September 30, 2014.

Prior Legislative History:

Chapter 492 of the Laws of 1993 enacted LFL § 169.00 and applied
initially only to the CWSRF. Chapter 304 of the Laws of 1997 extended
the application of LFL § 169.00 to the DWSRF. By its terms, Chapter
304 of the Laws of1997 expires the same date as Chapter 492 of the
Laws of 1993. Chapter 492 of the Laws of 1993, which would have
expired on June 30, 1996, was extended until June 30, 1999 by Chapter
250 of the Laws of 1996. It has been extended every three years since
1999, until September 30, 2002 by Chapter 122 of the Laws of 1999;
until September 30, 2005 by Chapter 339 of the Laws of 2002; until
September 30, 2008 by Chapter 628 of the Laws of 2005; until September
30, 2011 by Chapter 212 of the Laws of 2008, and until September 30,
2014 by Chapter 41 of the Laws of 2011.

Statement in Support:


EFC, together with the Department of Environmental Conservation,
administers the CWSRF, created by Chapter 565 of the Laws of 1989.
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, administers the DWSRF,
created by Chapter 413 of the Laws of 1996. 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 in several forms to recipients for the purpose of financing
or refinancing such projects. The Federal monies used by EFC for the
making of financings/loans are first made available to the CWSRF and
DWSRF under a letter of credit, upon which the State draws in
accordance with certain rules prescribed by the United States
Environmental Protection Agency. Under these rules, Federal funds can
be drawn only as eligible costs are incurred by the recipient.

Normally, when financing is provided to a municipality under either
the CWSRF or the DWSRF, EFC receives a general obligation bond or note
from the municipality as evidence of its obligation to repay such
financing. Installment loans, through the use of a grid note, allow
municipalities to draw financing proceeds on a cost-incurred basis
without having to issue a separate bond or note to EFC for each amount
advanced. Without grid notes, a municipality would be required to
"close" a new loan each time it requested funds. The resultant
transactional costs could be prohibitive. (Financing closing costs
typically range between $5,000 and $10,000.) The use of grid notes was
authorized for the CWSRF by Chapter 492 of the Laws of 1993, and for
the DWSRF by Chapter 304 of the Laws of 1997.

Since its inception in 1995, the use-of grid notes in EFC's short-term
CWSRF financing program has been an unqualified success in saving
municipalities money. Hundreds of counties, cities, towns and villages
throughout New York have successfully utilized grid notes to secure
short-term CWSRF financing. The use of grid notes has provided
recipients with flexibility and savings, and helped make low-cost
CWSRF financing readily available for financing planning and design
costs, as well as actual construction, and, in many cases,
interest-free "bridge" financing for municipalities which anticipate
receiving grants for a project. The success of the CWSRF short-term
financing program led to the initiation on October 1, 2001 of the
short-term financing program for the DWSRF.

Because of the substantial benefits grid notes provide to municipal
financing recipients, the installment loan, or grid note,
authorization contained in LFL § 169.00 should be continued.

Budget Implications:

None.

Local Impact:

None.


Effective Date:

The bill would take effect immediately.