BILL NUMBER: S5442

SPONSOR: KRUEGER
 
TITLE OF BILL:

An act to amend the state finance law, in relation to the refund of
state bonds

 
PURPOSE:

This legislation removes the three percent limit on the call premium
that may be reserved to the State for the purposes of redeeming or
refunding State bonds prior to the date on which such bonds shall be due
and payable. This legislation would allow for more effective management
of the State's voter-approved General Obligation (GO) debt portfolio by
permitting such bonds to be redeemed or refunded pursuant to current
municipal bond market conventions.

 
SUMMARY OF PROVISIONS:

Section 1 of this bill amends Section 56(1) of the state finance law by
removing the three percent limit on the call premium that may be
              

reserved to the state for the purposes of redeeming or refunding state
bonds.

Section 2 of this proposal provides for an immediate effective date.

 
JUSTIFICATION:

Currently, section 56(1) of the State Finance law sets a three percent
limit on the call premium that the Comptroller may reserve to the State
when issuing and selling bonds. A bond call premium determines the
amount paid to bondholders when an issuer redeems bonds prior to the
scheduled final maturity date.

The limitation to redeem or refund bonds at a price at or below 103% of
par value can preclude opportunities to refinance certain existing debt
at lower interest rates, even when such refunding would result in debt
service savings to the State. Additionally, the 3% call premium limit
may impact interest costs when issuing new money bonds.  This bill would
remove the 3% call limitation to enhance the State's ability to more
cost-effectively refinance existing debt and avoid higher interest costs
on new money bond issuances.

Such a call premium limit does not exist for other forms of State-sup-
ported debt, such as State Personal Income Tax (PIT) or Sales Tax Reven-
ue Bonds and also does not exist for other forms of State public author-
ity borrowings.

 
PRIOR LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS FOR STATE:

It is expected that this bill would produce debt service savings to the
State by enhancing the ability to more cost-effectively issue and refi-
nance voter-approved GO bonds.

 
EFFECTIVE DATE:
This act shall take effect immediately.