NY State Senate Bill 2013-S1607

Archive: Last Bill Status - In Senate Committee Banks Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 08, 2014	referred to banks
Jan 09, 2013	referred to banks

co-Sponsors

2013-S1607 (ACTIVE) - Details

Current Committee:: Senate Banks
Law Section:: Banks
Versions Introduced in Other Legislative Sessions:: 2011-2012: S2792
2015-2016: S1562
2017-2018: S3637
2019-2020: S4745
2021-2022: S5046
2023-2024: S5055

2013-S1607 (ACTIVE) - Summary

Relates to alternative finance investment bonds.

2013-S1607 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S1607

TITLE OF BILL:
An act
in relation to alternative finance investment bonds

PURPOSE:
To direct the chair of the Urban Development Corporation in
conjunction with the chair of the Dormitory Authority, director of
Budget, superintendent of Financial Services, and the commissioner of
Tax and Finance to create an investment vehicle known as an
Alternative Finance Investment Bond.

SUMMARY OF PROVISIONS:

Section 1 sets forth the legislative findings.

Section 2 defines the Alternative Finance Investment Bond (AFIB) and
directs the chair of the Urban Development Corporation (UDC) to
create the AFIB. This section also requires the UDC, in consultation
with the state Comptroller and Attorney General, to issue regulations
for the Alternative Finance Investment Bond. Finally, the chair of
the UDC must also submit a report within 90 days of passage, on the
potential foreign and domestic market for this investment vehicle.

Section 3 establishes the effective date.

EXISTING LEGISLATION: None.

JUSTIFICATION:
According to a 2008 report by the Partnership for New York (PNY)
titled, Foreign Direct Investment: Bringing the Benefits of
Globalization Back Home, one in twenty jobs in New York City alone is
attributed to the $58 billion in foreign direct investment (FDI)
received in New York City. By comparison, London eclipses New York
City with over $104 billion in foreign direct investment.

New York ranks third among the United States' large states with
regards to FDI, lagging considerably behind Texas and California. The
U.S. Census Bureau reports that for the year 2007 Texas attracted
$119 billion in foreign direct investment, California $110 billion,
and New York a mere $62 billion. In order to create jobs and increase
New York's competitiveness, more investment and financing options
must be brought to the state.

The way to attract more FDI and new intra-state capital flows is to
create new forms of investment opportunities throughout the state. In
the past decade, nations from the Persian Gulf, South East Asia, and
other emerging markets have experienced tremendous growth. Investors
from these countries are seeking investment opportunities abroad that
comport with their religious beliefs as Muslims, namely a prohibition

on interest, This precludes them from using conventional debt
instruments such as bonds. These investors use sukuk, also referred
to as Alternative Finance Investment Bonds. This financing vehicle
permits assets to be held for the benefit of investors in
certificates issued by an entity. These benefits may include payment
of a return that is economically equivalent to interest and
redemption of the certificates out of the process from the disposal
of the asset.

In a traditional AFTB arrangement, the issuer uses the subscription
proceeds of the bond to acquire the assets, which are then held for
the benefit of the holder of the AFIB. The income earned from the
assets is shared with the bond holder. Upon the maturity of the AFIB,
the assets are sold under a pre-existing arrangement and the proceeds
are returned to the holder of the certificates. The New York Times
reported in late 2010 that the global demand for sukuk has grown
into a $100 billion market in the past decade.

General Electric became the first U.S. company to utilize this vehicle
in 2009 by issuing a $500 million sukuk to finance the leasing of
aircraft and is in the process of issuing another. Nations such as
England, France, South Africa, and Australia are all in the process
of changing their laws to treat these investment vehicles equal to
traditional bonds. In fact, France is expected to issue its first
sukuk in 2011.

In addition to the potential for job growth and development,
permitting the state and private entities to issue Alternative
Finance Investment Bonds would permit communities that do not engage
in interest based transactions, the opportunity to benefit from
capital financing facilitated by the state for the construction of
education and health care facilities as well as increase the market
for those who wish to purchase the State's debt instruments. The use
of AFIBs will permit all communities in New York to take advantage of
state financing and potentially lower the cost of borrowing.

LEGISLATIVE HISTORY:
2011-12: S.2792/A.5836 - Referred to Banks

FISCAL IMPLICATION:
There will be no cost to the State of New York, but there will be a
potential for large amounts of new investment capital to be made
available to the State and citizens.

EFFECTIVE DATE: Immediately.

2013-S1607 (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  1607

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

Introduced  by  Sen.  PARKER -- read twice and ordered printed, and when
  printed to be committed to the Committee on Banks

AN ACT in relation to alternative finance investment bonds

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1. Legislative findings and intent. 1.  New York's historical
prosperity has derived from the freedom and  innovative  nature  of  the
state's  capital  markets  and  New  York's roles as a center of foreign
trade and investment, which has helped build the industries  and  create
the jobs that earned the state the nickname of the Empire State.
  2.  The legislature finds that in order to bring more jobs to New York
in  a  global  economy, and to increase the state's competitiveness, the
state must find new sources of capital  investment  to  create  opportu-
nities  throughout  the state. An innovative way to accomplish this goal
would be to create alternate investment instruments that  would  attract
capital  from investors who for personal, moral or religious reasons are
unable to use conventional debt instruments such as bonds due  to  their
inability to purchase securities that generate interest.
  3.  New  York  has the proud heritage of being a model for the rest of
the nation in the areas  of  ethnic,  national,  racial,  and  religious
tolerance and diversity. However, over time large numbers of New Yorkers
have  been  unable to participate in investment opportunities offered by
the state, or in public-private partnerships due to the lack of  diverse
means of long term capital investments. Broadening the state's portfolio
of investment instruments would not only enfranchise large groups of New
Yorkers and lower the costs of state and local borrowing, but would also
aid  in  community  renewal  and revitalization. Creating more inclusive
forms of state financial opportunities would also broaden the streams of
capital available to the state, lowering the cost of financing and  once
again  involving the world's investors in the development of our state's
economy.
  4. The legislature therefore declares that expanding New York's  tools
for  economic  development  by creating new forms of alternative invest-

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD02776-01-3

S. 1607                             2

ments would enable it to participate in the multi-billion dollar  market
for  alternative  investment  vehicles  akin to conventional bonds, thus
freeing up new capital for business and job creation.  The  creation  of
these  innovative financial instruments will furthermore permit individ-
uals and institutions of all faiths to invest in and issue such  instru-
ments,  redressing  historic  wrongs  and low participation rates in our
economy.
  S 2. (1) Definitions. (a) "Alternative finance investment bond"  shall
mean  a  certificate  of  equal  value  representing undivided shares of
ownership of tangible assets, usufructs and services or (in  the  owner-
ship  of) the assets of particular projects or special investment activ-
ity.
  (b) "Alternative finance investment  bond  agreement"  shall  mean  an
agreement where:
  (i)  the  agreement provides for a person ("the bond holder") to pay a
sum of money ("the capital") to another ("the bond issuer"),
  (ii) the agreement identifies assets, or a class of assets, which  the
bond  issuer  will acquire for the purpose of generating income or gains
directly or indirectly ("bond assets"),
  (iii) the agreement specifies a period at the end of which they  cease
to have effect ("the bond term"),
  (iv) the bond issuer undertakes under the agreement:
  (A)  to  make a repayment of the capital ("the redemption payment") to
the bond holder during or at the end of the bond term (whether or not in
installments), and
  (B) to pay to the bond holder other payments on one or more  occasions
during or at the end of the bond term ("additional payments"), and
  (v)  the  amount  of the additional payments does not exceed an amount
which would be a reasonable commercial return on a loan of the capital.
  (2) The chair of the dormitory authority, the director of the  budget,
the  superintendent  of financial services and the commissioner of taxa-
tion and finance are hereby authorized and directed to assist the  chair
of  the New York state urban development corporation in creating, within
one calendar year of the effective  date  of  this  act,  an  investment
instrument  for  the  state  of New York that will be compliant with the
definition of alternative finance investment bonds, and regulated  in  a
manner consistent with traditional bonds and other debt instruments.
  (3)  The  chair of the New York state urban development corporation is
hereby directed to consult with the state comptroller and  the  attorney
general  concerning  the  regulation  of  alternative finance investment
bonds, and whether such bonds may be issued by New York municipal  enti-
ties  in  addition  to any issuances by the state of New York, and shall
provide the legislature with language necessary for  the  regulation  of
such security.
  (4) Within ninety days of the effective date of this act, the chair of
the  New  York  state  urban development corporation shall report to the
governor, the temporary president of the senate, and the speaker of  the
assembly,  the  minority leader of the senate and minority leader of the
assembly concerning the potential domestic and foreign market for alter-
native finance investment bonds, and how such investment vehicles  might
be   used   in  economic  development  generally,  and  specifically  in
distressed census tracts.
  S 3. This act shall take effect immediately.

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Senate Bill S1607

Sponsored By

Archive: Last Bill Status - In Senate Committee Banks Committee

co-Sponsors

2013-S1607 (ACTIVE) - Details

2013-S1607 (ACTIVE) - Summary

2013-S1607 (ACTIVE) - Sponsor Memo

2013-S1607 (ACTIVE) - Bill Text download pdf

Comments

Senate Bill S1607

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Sponsored By

Kevin S. Parker

Archive: Last Bill Status - In Senate Committee Banks Committee

co-Sponsors

Adriano Espaillat

2013-S1607 (ACTIVE) - Details

2013-S1607 (ACTIVE) - Summary

2013-S1607 (ACTIVE) - Sponsor Memo

2013-S1607 (ACTIVE) - Bill Text download pdf

Comments