§ 89-f. Approval of issues of stock, bonds and other forms of
indebtedness. A water-works corporation organized or existing, or
hereafter incorporated, under or by virtue of the laws of the state of
New York, may issue stocks, bonds, notes or other evidences of
indebtedness payable at periods of more than twelve months after the
date thereof, or a receiver of such a corporation, if duly authorized by
law, may issue receiver's certificates, when necessary for the
acquisition of property, the construction, completion, extension or
improvement of its water system, or for the improvement or maintenance
of its service or for the discharge or lawful refunding of its
obligations or for the reimbursement of moneys actually expended from
income or from any other moneys in the treasury of the corporation not
secured or obtained from the issue of stocks, bonds, notes or other
evidences of indebtedness of such corporation, within five years next
prior to the filing of an application with the commission for the
required authorization, for any of the aforesaid purposes except
maintenance of service and except replacements in cases where the
applicant shall have kept its accounts and vouchers of such expenditure
in such manner as to enable the commission to ascertain the amount of
moneys so expended and the purposes for which such expenditure was made;
provided and not otherwise that there shall have been secured from the
commission an order authorizing such issue, and the amount thereof, and
stating the purposes to which the issue or proceeds thereof are to be
applied, and that, in the opinion of the commission, the money, property
or labor to be procured or paid for by the issue of such stock, bonds,
notes or other evidences of indebtedness is or has been reasonably
required for the purposes specified in the order, and that except as
otherwise permitted in the order in the case of bonds, notes and other
evidences of indebtedness, such purposes are not in whole or in part
reasonably chargeable to operating expenses or to income. Stock may be
issued to stockholders as a stock dividend provided that there shall
have been secured from the commission an order authorizing such issue
and a transfer of surplus to capital in an amount equal to the par or
stated value of the stock so authorized and stating that a sum equal to
the amount to be so transferred was expended for the purposes enumerated
in this section. Stock may be issued to an employee or director of a
waterworks corporation under a stock option plan pursuant to which such
corporation grants options to its employees or directors to purchase
shares of stock, such options to be exercisable for a stated period of
time to purchase shares of stock at the market value of the stock at the
time of issuance of the option, provided that there shall have been
secured from the commission an order authorizing such issue and that the
proceeds from the exercise of the stock options are needed for one of
the purposes enumerated in this section. The issue of stocks, bonds or
other evidences of indebtedness, within the meaning of this section,
shall include the sale hereafter by any such corporation of its stocks,
bonds or other evidences of indebtedness previously issued and
reacquired, whether originally issued at, before or after the time this
section takes effect, provided, however, for good cause shown the
commission may exempt from the restriction hereof stocks, bonds or other
evidences of indebtedness. For the purpose of enabling it to determine
whether it should issue such an order, the commission shall make such
inquiry or investigation, hold such hearings and examine such witnesses,
books, papers, documents or contracts as it may deem of importance in
enabling it to reach a determination. Such corporation shall not without
the consent of the commission apply said issue or any proceeds thereof
to any purpose not specified in such order. Such corporation may issue
notes, for proper corporate purposes and not in violation of any
provision of this or of any other act, payable at periods of not more
than twelve months without such consent; but no such notes shall, in
whole or in part, directly or indirectly be refunded by any issue of
stock or bonds or by any evidences of indebtedness running for more than
twelve months without the consent of the commission. The commission
shall have power to require every such corporation to file with the
commission after the issuance of stocks, bonds, notes or other evidences
of indebtedness, issued with or without the approval of the commission
as herein provided, a notice of such transaction in such form as the
commission may prescribe. Provided, however, that the commission shall
have no power to authorize the capitalization of any franchise to be a
corporation nor to authorize the capitalization of any franchise or the
right to own, operate or enjoy any franchise whatsoever in excess of the
amount (exclusive of any tax or annual charge) actually paid to the
state or to any political subdivision thereof as the consideration for
the grant of such franchise or right, nor to authorize the issuance of
any stocks or other securities for any purposes other than those
enumerated in this section. Nor shall the capital stock of a corporation
formed by the merger or consolidation of two or more other corporations,
exceed the sum of the capital stock of the corporations, so
consolidated, at the par value thereof, or such sum and any additional
sum actually paid in cash; nor shall any contract for consolidation or
lease be capitalized in the stock of any corporation whatever; nor shall
any corporation hereafter issue any bonds against or as a lien upon any
contract for consolidation or merger.