§ 1285-m. Drinking water revolving fund. 1. (a) The corporation shall
undertake and provide assistance in support of the program to make
financial assistance available to recipients to encourage and support
the planning, development and construction of water supply facilities in
accordance with the provisions of this section and title four of article
eleven of the public health law.

(b) There is hereby established in the custody of the corporation a
special fund to be known as the drinking water revolving fund. Except as
otherwise provided by this paragraph, moneys in the drinking water
revolving fund shall be segregated from all other funds of or in the
custody of the corporation subject to any rights of holders of
corporation bonds or notes issued for the purposes of this section.
Moneys in the drinking water revolving fund shall only be used in
accordance with the provisions of this section and title four of article
eleven of the public health law; provided that, in addition, to the
extent permitted by federal or state law, moneys in the drinking water
revolving fund may be transferred to and used for the purposes
authorized for the water pollution control revolving fund, and moneys in
the water pollution control revolving fund may be transferred to and
used for the purposes authorized for the drinking water revolving fund.
The moneys in the drinking water revolving fund shall be applied to or
paid out for authorized purposes of such fund in accordance with
subdivision four of this section and title four of article eleven of the
public health law. To the extent approved by the commissioner of health
and the commissioner of environmental conservation and notwithstanding
the provisions of paragraph (a) of this subdivision, moneys in the
drinking water revolving fund and in the water pollution control
revolving fund may be held together; provided that all such moneys are
segregated from all other funds of or in the custody of the corporation
subject to any rights of holders of corporation bonds or notes issued
for the purposes of this section; provided further, that the corporation
shall establish and maintain or cause there to be established and
maintained a system of tracking the application of such moneys to the
purposes of this section. The corporation may establish within the
drinking water revolving fund additional accounts or subaccounts and
specify any conditions applicable to the transfer of moneys between such
accounts or subaccounts. With respect to each eligible project, the
corporation shall establish and maintain a record of the allocation
provided for the benefit of such project in accordance with the terms of
the applicable financing agreement.

2. As used in this section, the terms "allocation", "construction",
"eligible project", "fund" and "financing agreement" shall have the
meanings set forth in section eleven hundred sixty of the public health
law.

3. Such fund shall consist of all of the following:

(a) the proceeds of bonds or notes issued by the state pursuant to the
Clean Water/Clean Air Bond Act of 1996; provided that up to two hundred
sixty-five million dollars ($265,000,000) of such proceeds shall be
available to finance state assistance payments in the manner set forth
in paragraphs (a), (d), (e), (f) and (g) of subdivision four of this
section, and up to ninety million dollars ($90,000,000) shall be
available to finance state assistance payments in the manner set forth
in paragraphs (d), (f) and (h) of subdivision four of this section;

(b) federal capitalization grants and awards or other federal
assistance provided pursuant to the federal safe drinking water act for
purposes of deposit in the fund and appropriated by the state for
deposit therein;

(c) moneys appropriated by the state legislature for the purpose of
such fund or otherwise transferred by the state for deposit therein by
the comptroller as required by law;

(d) payments of principal and interest made by recipients pursuant to
loan or other financing agreements entered into pursuant to subdivisions
eight and nine of this section; provided, however, if financial
assistance made pursuant to financing agreements were financed by the
issuance of bonds or notes of the corporation, deposit of such payments
into the fund shall be subject to the rights of the holders of such
bonds or notes to receive such moneys;

(e) investment earnings on amounts in such fund; and

(f) the proceeds of bonds or notes issued by the corporation for
purposes of providing financial assistance to recipients.

4. Moneys in the drinking water revolving fund shall be applied by the
corporation in accordance with this section and title four of article
eleven of the public health law to provide financial assistance to
recipients for construction of eligible projects and, upon consultation
with the director of the division of the budget, for such other purposes
permitted by the federal safe drinking water act, as amended, and to
provide for the administrative and management costs of the program,
provided however, that proceeds of bonds issued pursuant to the Clean
Water/Clean Air Bond Act of 1996, other than proceeds of bonds used to
finance the state match for federal capitalization grants for the
drinking water revolving fund, shall not be used for administrative and
management costs; and provided further, that proceeds of bonds issued
pursuant to the Clean Water/Clean Air Bond Act of 1996, other than
proceeds of bonds issued to finance the state match for federal
capitalization grants for the drinking water revolving fund, shall not
be used to finance costs with respect to the Croton filtration project.
As used in this section "financial assistance to recipients" means any
one or more of the following:

(a) making loans to recipients for construction of eligible projects
on such terms as the corporation may determine, subject to any
applicable provisions of federal or state law;

(b) buying or refinancing debt obligations of recipients at market or
below market rates, subject to any applicable provisions of federal or
state law;

(c) guarantying, or purchasing insurance or other credit enhancement
for municipal obligations where such action would improve credit market
access for or reduce interest rates on such municipal obligations;

(d) providing a source of revenue or security for payment of principal
and interest on bonds or notes issued by the corporation if the proceeds
of the sale of such bonds or notes will be deposited in the fund;

(e) providing interest rate subsidy allocations to subsidize loans to
recipients made from the proceeds of the corporation's bonds or notes;

(f) paying, pursuant to subdivision seven of this section, the costs
of the corporation and the department of health of administering and
managing the program described in this section and title four of article
eleven of the public health law and paying the costs of the corporation
and the department of health of providing technical assistance with
respect to such program; provided, however, that proceeds of bonds
issued pursuant to the Clean Water/Clean Air Bond Act of 1996, other
than proceeds of bonds used to finance the state match for federal
capitalization grants for the drinking water revolving fund, shall not
be used for such costs;

(g) paying up to seventy-five percent of the principal on loans made
to recipients under financing agreements if the corporation determines
that the recipient would be unable to carry out the eligible project
financed with such loan without creating a financial hardship on system
users and without the subsidy afforded by such payment of principal,
provided that (i) the amounts applied to such purpose shall be paid from
interest earned on funds deposited in the fund and from interest
received on other loans made from the fund, (ii) the amounts so applied
shall not exceed, in the aggregate, the interest earnings received by
the fund on fifty percent of the amounts deposited to the fund, and
(iii) in accordance with regulations to be promulgated by the
corporation, preference shall be given to small and rural communities in
providing such principal subsidies; or

(h) making state assistance payments for the state share of the cost
of an eligible project from up to ninety million dollars ($90,000,000)
of the proceeds of state bonds and notes issued pursuant to the Clean
Water/Clean Air Bond Act of 1996; provided that, in accordance with
regulations to be promulgated by the corporation, preference shall be
given to recipients which would be unable to carry out such eligible
projects in the absence of such state assistance payments without
creating a financial hardship on system users.

Subject to any applicable provisions of federal or state law, any
financial assistance at an interest rate of zero percent provided to
recipients that meet the financial hardship criteria regulations
established pursuant to title four of article eleven of the public
health law, may have a final maturity up to forty years following
scheduled completion of the eligible project.

5. The corporation may make payments to the state in accordance with
subdivision seven of this section to reimburse the state for
expenditures made pursuant to appropriation to pay the cost of the
corporation and the department of health for administering and managing
the drinking water revolving fund program, including provision of
technical assistance. Such reimbursement may be made from:

(a) available investment earnings on all amounts in the drinking water
revolving fund excluding all amounts in the fund which are the subject
of allocations or other financial assistance to a recipient;

(b) payments received from a recipient for such purpose; and

(c) the proceeds of federal capitalization grants, awards or
assistance available for administration and management of such program.

Notwithstanding the foregoing, if the sources of revenues described in
paragraphs (a), (b) and (c) of this subdivision are at any time
insufficient to make a reimbursement to the state pursuant to this
subdivision when due, the corporation may make such reimbursement from
any other available amounts in the drinking water revolving fund,
excluding all amounts that are the subject of allocations, provided,
that the amounts paid from fund sources other than those described in
paragraphs (a), (b) and (c) of this subdivision shall be reimbursed upon
a determination by the director of the budget that future revenues
obtained from sources described in paragraphs (a), (b) and (c) of this
subdivision are in excess of the amounts reasonably needed to make
future reimbursements pursuant to this subdivision.

* 6. Moneys in the drinking water revolving fund may be invested as
provided in subdivision four of section twelve hundred eighty-four of
this title and may be further invested:

(a) in investment agreements continuously secured by obligations with
any insurance company or reinsurance company or corporate affiliate
thereof rated by a nationally recognized rating agency in one of its two
highest categories, any bank, trust company or broker or dealer, as
defined by the securities exchange act of 1934, which is a dealer in
government bonds, which reports to, trades with and is recognized as a
primary dealer by a federal reserve bank and is a member of the
securities investors protection corporation, if such investment
agreement provides that:

(i) such obligations securing such investment agreements are
obligations as set forth in section ten of the general municipal law;

(ii) such obligations are to be delivered to a trustee for the benefit
of the corporation or, with respect to moneys pledged under an indenture
of trust or trust agreement relating to bonds or notes of the
corporation, to the trustee under such indenture or trust agreement, or
are supported by a safe keeping receipt issued by a depository
satisfactory to the corporation as applicable, provided that such
investment agreements must provide that the value of the underlying
obligations shall be maintained at a current market value, calculated no
less frequently than monthly, of not less than the amount deposited
thereunder;

(iii) a prior perfected security interest in the obligations which are
securing such agreement has been granted to the corporation, such
trustee or such depository as applicable; and

(iv) such obligations are free and clear of adverse third party
claims; or

(b) in obligations as set forth in section ten of the general
municipal law that are rated by a nationally recognized rating agency in
one of its two highest rating categories.

* NB Effective until September 30, 2026

* 6. Moneys in the drinking water revolving fund may be invested as
provided in subdivision four of section twelve hundred eighty-four of
this title and may be further invested:

(a) in investment agreements continuously secured by obligations with
any insurance company or reinsurance company or corporate affiliate
thereof rated by a nationally recognized rating agency in one of its two
highest categories, any bank, trust company or broker or dealer, as
defined by the securities exchange act of 1934, which is a dealer in
government bonds, which reports to, trades with and is recognized as a
primary dealer by a federal reserve bank and is a member of the
securities investors protection corporation, if such investment
agreement provides that:

(i) such obligations securing such investment agreements are
obligations as set forth in section ten of the general municipal law;

(ii) such obligations are to be delivered to a trustee for the benefit
of the corporation or, with respect to moneys pledged under an indenture
of trust or trust agreement relating to bonds or notes of the
corporation, to the trustee under such indenture or trust agreement, or
are supported by a safe keeping receipt issued by a depository
satisfactory to the corporation as applicable, provided that such
investment agreements must provide that the value of the underlying
obligations shall be maintained at a current market value, calculated no
less frequently than monthly, of not less than the amount deposited
thereunder;

(iii) a prior perfected security interest in the obligations which are
securing such agreement has been granted to the corporation, such
trustee or such depository as applicable; and

(iv) such obligations are free and clear of adverse third party
claims; or

(b) in obligations the interest on which is excludable from gross
income under section one hundred three of the internal revenue code,
provided that such obligations are rated by a nationally recognized
rating agency in one of its two highest rating categories.

* NB Effective September 30, 2026

7. The corporation may transfer to the state on such schedule as the
corporation and the department of health shall agree amounts from the
fund to reimburse the state in accordance with the provisions of
subdivision five of this section.

8. In addition to the powers of the corporation granted elsewhere in
this chapter, the corporation shall have the power to enter into loan
and other financing agreements authorized by title four of article
eleven of the public health law. Notwithstanding the powers granted to
the corporation elsewhere in this title, the corporation's power to
finance eligible projects from the fund is limited to eligible projects
for which financing agreements have been executed pursuant to title four
of article eleven of the public health law.

9. In addition to the powers granted to the corporation elsewhere in
this chapter, the corporation may make loans or other financial
assistance to recipients for purposes of financing eligible projects for
which the fund may be used, subject to the limitations of subdivision
eight of this section, may accept the obligations of any recipient as
security for the repayment of a loan to such recipient, and may assign
and pledge such recipient obligations and financing agreements for the
benefit of the holders of obligations of the corporation. Loan proceeds
or other financial assistance may be disbursed to a recipient only in
connection with facilities that have been certified by the commissioner
of health as constituting an eligible project and in accordance with
other restrictions as may be imposed in connection with such loan or
obligations of the corporation from the proceeds of which such loan is
made.

10. The corporation is authorized to arrange, in consultation with the
department of health, for any audits required by law for the purpose of
issuing its bonds or notes to provide financial assistance to
recipients, and provide for the implementation of any independently
conducted reviews or audits arranged pursuant to subdivision two of
section eleven hundred sixty-six of the public health law.

11. In the event a municipality participating in the drinking water
revolving fund program shall fail to make any payment due the
corporation pursuant to any financing agreement or other obligation of
the municipality sold to the corporation or issued as security for the
undertaking of the municipality thereunder, the corporation shall
certify to the comptroller, and notify the chairman of the senate
finance committee, the chairman of the assembly ways and means
committee, the director of the division of the budget and the governing
body of the municipality that such municipality has failed to make such
payment. Such certificate shall be in such form as may be determined by
the corporation provided such certificate shall specify the exact amount
of debt service and surcharge, if applicable, required to satisfy such
municipality's unpaid obligation. The comptroller, upon receipt of such
certificate from the corporation, is authorized to and shall, to the
extent not otherwise prohibited by law and subject to any other
provision of law providing for withholding of payments to the
municipality which takes precedence over this subdivision, withhold from
such municipality the next succeeding payments of state aid or local
assistance otherwise payable to it to the extent necessary to meet the
certified amount of debt service and surcharge, if applicable, due the
corporation and shall immediately pay over to the corporation as a debt
service payment on behalf of such municipality the amount so withheld.