BILL NUMBER: S8931

SPONSOR: GAUGHRAN
 
TITLE OF BILL:

CONCURRENT RESOLUTION OF THE SENATE AND ASSEMBLY proposing an amendment
to section 5 of article 8 of the constitution, in relation to the exclu-
sion of indebtedness contracted for sewage facilities

 
PURPOSE:

To enable counties, cities, towns and villages to finance construction
and reconstruction of sewage treatment facilities without limiting their
capacity to finance other essential capital requirements.

 
SUMMARY OF PROVISIONS:

Section 1 of this bill amends Paragraph E of Section 5 of Article 8 of
the Constitution to extend, until January 1, 2034, the authority of
counties, cities, towns and villages to exclude from their constitu-
tional debt limits indebtedness contracted for the construction and
reconstruction of facilities for the conveyance, treatment and disposal
              

of sewage.

 
PRIOR LEGISLATIVE HISTORY:

The legislature has adopted similar resolutions to amend this provision
of the Constitution every ten years since 1963.

 
JUSTIFICATION:

The exclusion of sewer debt from the constitutional debt limits of coun-
ties, cities, towns and villages was originally authorized in 1963 for a
10-year period.

The purpose of the exclusion when it was originally added to the Consti-
tution was to encourage and enable municipalities to participate in the
State's then-new sewer construction assistance plan and issue debt for
sewer facilities without reducing their capacity to incur debt within
the constitutional debt limit for other capital improvements. The intent
in limiting the exclusion to debt incurred during a 10-year period was
to encourage municipalities to take action within that timeframe; the
exclusion would thereby assist in accomplishing the purposes of the
State's water anti-pollution program.

The exclusion has been subsequently extended for five successive ten-
year periods, reflecting the ongoing and fundamental need for municipal
governments to incur debt to finance critical sewer and water pollution
control facilities. Without this extension, the current debt exclusion
will apply only to debt issued through the end of 2023. This amendment
would permit the exclusion of indebtedness until January 1, 2034.

The need and rationale for the debt exclusion cited in 1963 and in each
subsequent extension remains relevant and valid today.

Local government finances continue to be strained by the need to repair
or replace aging sewer infrastructure. Indeed, the urgent need for
improvements and upgrades to municipal sewer facilities is well-docu-
mented as an ongoing concern for local governments.
Currently, the State's primary programs to support improvements to sewer
facilities are the Clean Water State Revolving Fund ("CWSRF") (which is
capitalized with an annual grant from the U.S.  Environmental Protection
Agency) and the Water Infrastructure Improvement Act ("WIIA") grant
program administered by the State Department of Environmental Conserva-
tion ("DEC") and the Environmental Facilities Corporation ("EFC").

The CWSRF program provides loans at below-market interest rates to muni-
cipalities for a variety of projects relating to water pollution,
including waste-water treatment facilities and sewer systems. Since its
inception in 1990, the CWSRF program has loaned more than $18.2 billion
for 2,473 projects across the State. According to the 2022 intended use
plan prepared with respect to the CWSRF, DEC and EFC anticipate financ-
ing approximately $1 billion in various clean water/sewer projects,
including many for the conveyance, treatment and disposal of sewage in
New York State. While the State also provides grant funds to munici-
palities from the CWSRF and the WIIA grant program (created by the State
in 2015 to provide an additional source of State funds to help munici-
palities pay for water quality infrastructure projects), there is clear-
ly still a substantial need for municipalities to borrow (by issuing
debt) to finance sewer facilities. Moreover, this dynamic is also pres-
ent in relation to federal financing options for sewer facilities. For
example, the U.S.  Department of Agriculture Rural Development, makes
loans at below-market rates, along with grants, available to qualifying
municipalities. As is the case under the CWSRF program, t he USDARD
financing involves municipalities issuing their own bonds as the method
of borrowing.

In short, the debt contracting capacity under the constitutional debt
limit continues to be a critical issue for municipalities seeking to
improve and upgrade their sewer infrastructure.

The constitutional exclusion has been implemented by Local Finance Law §
124.10, which requires that applications for the exclusion of sewer
indebtedness be filed with the State Comptroller. The Office of the
State Comptroller's records indicate that from January of 2011 through
the close of 2021, municipalities have applied for and were granted 199
exclusions of sewer debt. Each applicant derived benefit from its exclu-
sion by virtue of protecting its debt contracting margin, thereby
preserving the ability to issue 'Wastewater Infrastructure Needs of New
York State, New York State Department of Environmental Conservation,
March 2008; Growing Cracks in the Foundation: Local Governments are
Losing Ground on Addressing Vital Infrastructure Needs, Office of the
New York State Comptroller, December 2012; Growing Cracks in the Founda-
tion: Local Governments Still Challenged to Keep Up with Vital Infras-
tructure Needs, Office of the New York State Comptroller, September
2014.  debt for other capital projects and needs. This bill would
continue the exclusion of sewer debt from debt limitations and so main-
tain the resulting significant benefits to municipalities throughout the
State.

The current authorization for excluding indebtedness for sewage
construction from municipal debt limitations will expire on December 31,
2023. Since a constitutional amendment requires passage by two consec-
utively elected legislatures and approval by the voters, the current
authorization will expire unless the Legislature extends the sunset date
by passing an amendment during the current 2022 legislative session and
again in 2023.
The Comptroller urges the passage of this proposed legislation.

 
FISCAL IMPLICATIONS FOR STATE:

This bill has no significant State fiscal impact.

 
EFFECTIVE DATE:
This amendment would become effective on the first day of January next
succeeding approval of both houses of two consecutively elected legisla-
tures and approval of the people in the subsequent general election.