§ 56. Call provision in state bonds; refunding state bonds. 1.
Whenever in his opinion it is to the advantage of the state the
comptroller when issuing and selling any bonds of the state may reserve
to the state on such conditions as he may deem advisable and proper the
privilege of refunding or of redeeming at not more than three per centum
above par value all or any part of such bonds prior to the date on which
they shall be due and payable.

2. Whenever the comptroller shall have reserved to the state the right
to redeem or refund state bonds pursuant to subdivision one of this
section, he shall be authorized to issue refunding bonds in accordance
with the provisions of this subdivision. Such bonds may be issued prior
to the first date on which he shall have reserved the right to refund or
redeem the bonds to be refunded.

(a) Refunding bonds shall be issued only when the comptroller shall
have certified that, as a result of the refunding, there will be a debt
service savings to the state on a present value basis as a result of the
refunding transaction and that either (i) the refunding will benefit
state taxpayers over the life of the refunding bonds by achieving an
actual debt service savings each year or state fiscal year during the
term to maturity of the refunding bonds when debt service on the
refunding bonds is expected to be paid from legislative appropriations
or (ii) debt service on the refunding bonds shall be payable in annual
installments of principal and interest which result in substantially
level or declining debt service payments pursuant to paragraph (b) of
subdivision two of section fifty-seven of this article. Such
certification by the comptroller shall be conclusive as to matters
contained therein after the refunding bonds have been issued.

For purposes of determining whether there is a debt service savings on
a present value basis the present value of the total payments of both
principal and interest to become due on the refunding bonds, after
deducting any accrued interest or premium received by the state and not
used to pay the principal of or interest on the bonds to be refunded or
costs of issuance of the refunding bonds, excluding all such principal
and interest payments to be made from income received as a result of the
investment of the proceeds from the sale of the refunding bonds, shall
be less than the present value of the principal and interest payments to
become due at their stated maturities on the principal amount of bonds
to be refunded which are outstanding as of the date of the issue of the
refunding bonds after deducting therefrom all costs and expenses
incidental to the issuance of the refunding bonds, including the
development of the refunding plan, and of executing and performing the
terms and conditions of the escrow contract and all fees and charges of
the escrow holder, but only to the extent such costs and expenses are
not paid from the proceeds of the refunding bonds. The present value of
debt service payments pursuant to the foregoing provisions of this
subdivision shall be computed by discounting the principal and interest
payments on both the refunding bonds and the bonds to be refunded from
the respective maturities thereof to the date of issue of the refunding
bonds at a rate equal to the effective interest cost of the refunding
bonds. The effective interest cost of the refunding bonds shall be that
rate which is arrived at by doubling the semi-annual interest rate
(compounded semi-annually) necessary to discount the debt service
payments on the refunding bonds from the maturity dates thereof to the
date of issue of the refunding bonds and to the bona fide initial public
offering price including estimated accrued interest, or, if there is no
public offering, to the price bid including estimated accrued interest.

(b) The proceeds of refunding bonds, including any premium received on
the sale thereof, and any amounts that may be appropriated by the
legislature for the purposes thereof, shall be deposited directly in an
escrow fund created pursuant to this section, and amounts in such escrow
fund, and income earned thereon, shall be used only (i) to redeem the
bonds to be refunded, (ii) to pay debt service on the refunding bonds or
on the bonds to be refunded, (iii) to pay the costs of administering
such fund, (iv) to pay any direct or indirect costs of issuing the
refunding bonds and (v) to make any other payments required to be made
with respect to the refunding transaction.

(c) Amounts deposited in each escrow fund, with the income earned
thereon, when invested as directed by this subdivision, shall be
sufficient to pay (i) all costs of issuance of the refunding bonds, (ii)
all debt service on the refunding bonds or on the bonds to be refunded
until and including the date that the bonds to be refunded are to be
redeemed, except, at the option of the state comptroller, debt service
scheduled to be paid from appropriations in effect on the date of
issuance of the refunding bonds, (iii) all costs of administering the
escrow fund, if any, (iv) the principal of and any premium due on the
bonds to be refunded on the date they are to be redeemed, and (v) any
other payments required to be made in connection with the refunding
transaction.

(d) The comptroller is authorized to establish an escrow fund in
connection with each issue of refunding bonds that he may sell from time
to time, and he shall hold such funds outside the state treasury for the
purposes enumerated in this section.

(e) All money in each escrow fund shall be held as cash or shall be
invested in direct obligations of the federal government, direct
obligations the principal and interest of which are guaranteed by the
federal government, or obligations the interest on which is exempt from
federal income taxation and which are fully secured by direct
obligations of the federal government, having such maturities and
interest payment dates as required to make all payments to be made from
the escrow fund as they come due. The earnings on such obligations shall
remain in the escrow fund until required to be used to pay debt service
on the refunding bonds, to pay debt service on the bonds to be refunded
or to make other payments authorized to be made from the escrow fund.
Any money or investments remaining in any escrow fund after all refunded
bonds are redeemed and after all expenses related to the refunding
transaction have been paid shall be deposited in the general fund.

(f) No appropriation shall be required for disbursement of moneys from
any escrow fund created pursuant to this section, or the earnings
thereon, for the purposes enumerated above, and the comptroller may
covenant, on behalf of the state, with holders of the refunding bonds
and the bonds to be refunded that such disbursements will be made. The
comptroller is also authorized to enter into such other agreements with
other persons as he deems necessary or appropriate in connection with
any refunding transaction.

(g) Any refunding bonds issued pursuant to this section shall be paid
in annual installments which shall, so long as any refunding bonds are
outstanding, be made in each year or state fiscal year in which
installments were due on the bonds to be refunded and shall be in an
amount which shall result in annual debt service payments which shall be
less in each year or state fiscal year than the annual debt service
payments on the bonds to be refunded unless debt service on the
refunding bonds is payable in annual installments of principal and
interest which will result in substantially level or declining debt
service payments pursuant to paragraph (b) of subdivision two of section
fifty-seven of this article.

3. The state comptroller shall have custody of the securities and
other assets in the escrow funds created pursuant to this section;
provided, however, that, subject to the rights of the owners of the
bonds, the state comptroller may contract with a bank or trust company
for the maintenance, management and custody of the escrow funds. Such
bank or trust company shall have an office and be authorized to do
business in the state and shall maintain a combined capital and surplus
of not less than seventy-five million dollars.

4. Except where inconsistent with the provisions of this section, the
provisions of section fifty-seven of this chapter governing the original
issuance of debt shall apply to the sale of refunding debt pursuant to
this section.

5. Notwithstanding any other law, rule or regulation to the contrary,
within thirty days of the delivery of any fixed rate, fixed term state
obligations issued pursuant to sections fifty-five and fifty-seven of
this article, the state comptroller shall determine and certify to the
director of the budget, the chairs of the senate finance committee and
the assembly ways and means committee, the allowable bond yield on such
obligations as such allowable bond yield is determined pursuant to the
provisions of the internal revenue code of 1986, as amended. With
respect to any short-term series notes, flexible notes, or other notes
on which interest rates may vary from time to time, the state
comptroller shall determine and certify to the director of the budget
and the chairs of the senate finance committee and the assembly ways and
means committee as soon as is practicable after the maturity of such
notes on any state obligations issued pursuant to section fifty-five of
this article the allowable bond yield on such obligations as such
allowable bond yield is determined pursuant to the provisions of the
internal revenue code of 1986, as amended. Prior to making of a payment
of any rebate to the federal government, the state comptroller shall
certify to the director of the budget and the chairs of the senate
finance committee and the assembly ways and means committee the amount
of the rebate required to be paid and the date prior to which such
rebate must be paid in order to maintain the exemption from federal
income taxation of the interest paid on the obligations for which the
rebates are being made.

6. Notwithstanding any other law, rule or regulation to the contrary,
no monies shall be expended for the purpose of redeeming serial bonds to
maintain the exemption from federal taxation of the interest paid to
holders of state obligations issued pursuant to sections fifty-five and
fifty-seven of this article, issued by the state of New York until the
state comptroller has certified to the director of the budget and the
chairs of the senate finance committee and the assembly ways and means
committee their determination, the amount of such bonds to be redeemed
and the date upon which such bonds are to be redeemed.