Relates to the refunding of bonds and amounts and stated maturity dates of such bonds.
TITLE OF BILL: An act to amend the local finance law, in relation to the refunding of bonds
This legislation would allow NYC to issue refund bonds for one in a series of variable rate bonds from institutions that may be economically unsound or volatile.
SUMMARY OF PROVISIONS:
This bill amends section 90.00 Paragraph b-1 and section 90.10 paragraph c subdivision 3 of the Local Finance Law to permit the amounts and stated maturity dates of refunding bonds to be the same as those of the bonds to be refunded.
Under existing law, refunding bonds must comply with the fifty percent rule or have level or declining debt service. To meet these requirements, a refunding of a single maturity in a series must also refund bonds which yield no present value savings, but are included only to conform the refunding issue to the requirement of Local Finance Law. This restriction causes these structuring bonds to be refunded prematurely, wasting potential present value savings, because tax-exempt bonds generally may be refunded only once under applicable federal tax laws.
This bill would broaden an issuer's ability to utilize advance refunding bonds by allowing, as an alternative, the amounts and stated maturities of the refunding bonds to be set by reference to the refunded bonds. This eliminates the requirement to include structuring bonds that provide no present value savings in a refunding issue. This allows for targeted refunding of a single or limited number of maturities without triggering a pre-payment of principal. The protections of the Local Finance Law that assure that bonds are outstanding no longer than necessary and that avoid balloon payments are preserved, since they remain fully applicable to the original bonds to be refunded. In addition, the structure of the City's overall indebtedness is preserved, since the refunding bonds simply replace the bonds originally issued.
The consequences of the unprecedented global financial, liquidity and credit crisis continue to play out in the market, leading many of the banks that had provided liquidity support for the City's variable rate bonds to withdraw or announce their future withdrawal from that business. Targeted refundings are an essential tool to address the issue of banks not renewing their liquidity facilities, which, absent a refunding, could result in bank-held bonds that not only revert to higher rates, increasing the City's debt service expenses, but often trigger "Will-out" provisions that require accelerated repayment of those bonds. Correcting the technical restriction on targeted refunding will better equip the City to specifically address the
issues of the financial and credit crisis without exposing taxpayers to the risks of increased debt service or principal acceleration on City bonds.
To be determined.
LOCAL FISCAL IMPLICATIONS:
To be determined.
This act shall take effect immediately.
STATE OF NEW YORK ________________________________________________________________________ 5213 2013-2014 Regular Sessions IN SENATE May 14, 2013 ___________Introduced by Sen. FELDER -- read twice and ordered printed, and when printed to be committed to the Committee on Local Government AN ACT to amend the local finance law, in relation to the refunding of bonds THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph b-1 of section 90.00 of the local finance law, as added by chapter 201 of the laws of 1994, is amended to read as follows: b-1. Refunding bonds need not comply with paragraph b of this section provided that no annual installment of each separate series of refunding bonds shall be more than fifty per centum in excess of the smallest prior installment or THE AMOUNTS AND STATED MATURITY DATES OF THE REFUNDING BONDS SHALL BE THE SAME AS THOSE OF THE BONDS TO BE REFUNDED OR the finance board of the municipality, school district or district corporation issuing the bonds shall have determined to use a substan- tially level or declining annual debt service schedule for the refunding bonds. The amount of annual installments of the refunding bonds may be determined without reference to the stated maturities of the bonds to be refunded. S 2. Subdivision 3 of paragraph c of section 90.10 of the local finance law, as amended by chapter 201 of the laws of 1994, is amended to read as follows: 3. No annual installment of each separate series of refunding bonds shall be more than fifty per centum in excess of the smallest prior installment unless THE AMOUNTS AND STATED MATURITY DATES OF THE REFUND- ING BONDS SHALL BE THE SAME AS THOSE OF THE BONDS TO BE REFUNDED OR the finance board of the municipality, school district or district corpo- ration issuing the bonds has determined to use a substantially level or declining annual debt service schedule for the refunding bonds. The amounts of annual installments of the refunding bonds may be determined without reference to the stated maturities of the bonds to be refunded.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD10616-01-3 S. 5213 2
S 3. Severability. If any clause, sentence, paragraph, section or part of this act shall be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder thereof, but shall be confined in its operation to the clause, sentence, paragraph, section or part thereof directly involved in the controversy in which such judgment shall have been rendered. S 4. This act shall take effect immediately.