BILL NUMBER: S5655

SPONSOR: MARTINEZ
 
TITLE OF BILL:

An act to amend the general municipal law, in relation to removing the
requirement that  where a municipal corporation, school district or
district corporation issues indebtedness to finance the cost of prepara-
tion of plans and specifications for a proposed capital improvement,
there must be a waiting period of at least one year before authorizing
the undertaking of the capital improvement

 
PURPOSE:

The purpose of this legislation would grant more flexibility to local
governments as it would allow them to undertake the financing of a capi-
tal project more quickly by eliminating the requirement that when the
capital planning costs are financed the project must wait at least one
year before obtaining formal authorization to start.

 
SUMMARY OF PROVISIONS:

              

Section 1. Amends the general municipal law by eliminating subdivision 2
of section 99-d, which requires a local authority to wait for a period
of at least one year from the issuance of bonds or capital notes that
would be used to finance the preparation of preliminary plans and spec-
ifications for a capital improvement.

Section 2. is the enacting clause

 
JUSTIFICATION:

In the course of developing a capital project which is expected to be
financed by the issuance of bonds or notes, it is often necessary for a
municipal corporation, school district or district corporation to engage
engineers, architects or other professionals to prepare preliminary
plans and specifications relating to the proposed project. Preliminary
plans and specifications enable local officials to better understand the
project in terms of size, scope, appearance and other relevant aspects.
Such plans and specifications also provide an estimate of cost, which
permits the municipality or school district to estimate the projected
tax impact of the debt service associated with the project. In addition,
the environmental review required pursuant to the New York State Envi-
ronmental Quality Review Act (SEQRA) may be performed by the engineer or
architect engaged to assist in the early stages of planning the project.

In many cases the municipal corporation, school district or district
corporation does not have sufficient funds available to pay for the
preliminary plans and specification and the Local Finance Law therefore
provides that, where appropriate, bonds or notes may be issued to
finance the preliminary costs. The authority to issue bonds or notes for
this purpose comes from Section 10.00 of the Local Finance Law, which
provides that a local government may contract indebtedness to finance
any purpose for which a period of probable usefulness is provided under
Section 11.00. Subdivision 62 of Section 11.00 of the Local Finance Law
establishes a period of probable usefulness of five years for the cost
of preparation, pursuant to Section 99-d of the General Municipal Law,
of surveys, preliminary plans, detailed plans, specifications and esti-
mates for capital projects which may be undertaken in the future. A
significant practical difficulty is presented by the special provision
appearing in Section 99-d of the General Municipal Law, which provides
that if indebtedness is issued to finance the preparation of preliminary
plans and specifications for a capital improvement, the municipal corpo-
ration, school district or district corporation must wait for a period
of at least one year from the date of issuance of such indebtedness
before authorizing the undertaking of the capital improvement. As a
result, neither a resolution authorizing the undertaking of the project,
nor a bond resolution authorizing issuance of the construction bonds can
be legally adopted until one year after the initial planning bonds or
notes were issued. Where the construction bond resolution is subject to
a permissive referendum and an estoppel publication, the actual issuance
of the construction bonds may have to be delayed by a period of 14
months or more. This can impede the ability of the local government to
construct the project in a timely manner. Depending upon the actual time
of year, the required waiting period may cause the local government to
miss an entire construction season, meaning that construction of the
project may be delayed by a period well in excess of 14 months.

Pursuant to Local Finance Law Section 11.00, preliminary costs associ-
ated with a particular capital improvement are deemed a part of the cost
of the project and, therefore, may be included in the amount of bonds
authorized for the project. However, in many cases the municipal corpo-
ration, school district or district corporation has compelling reasons
to authorize and issue indebtedness for preliminary costs separately
from the construction costs. For example, the environmental review
required under SEQRA may not yet be completed at the time when financing
is needed to pay for preliminary costs.  Pursuant to SEQRA, the bond
resolution authorizing the construction bonds cannot be adopted until
the SEQRA review has been completed and, for that reason, it may be
necessary or desirable to issue a certain amount of bonds or notes to
finance preliminary costs separately from the construction bonds or
notes.

 
FISCAL IMPLICATIONS:

None

 
EFFECTIVE DATE:
This act shall take effect immediately.