Establishes the electronic open auction public bond sale pilot program for counties, cities, towns, villages and school districts; such provisions shall remain in effect for 3 years.
TITLE OF BILL: An act to amend the local finance law, in relation to the establishment of an electronic open auction public bond sale pilot program for municipalities; and providing for the repeal of such provisions upon expiration thereof
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to establish a pilot program for all municipalities to sell municipal bonds via an open auction format instead of by a closed bid format. Such open auction would be conducted via an electronic means instead of being done in person. This three year pilot program would be used to assess the financial and administrative advantages of selling bonds via an open auction format by a nationally recognized electronic securities bidding platform.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1: Adds a new Local Finance Law section, 58.20 to establish a statewide electronic open auction public bond sale pilot program for those municipalities that wish to participate. This bill is very similar to Chapter 304 of the Laws of 2009, (which established the Westchester County open and closed auction pilot program) except that it repositions the terms defined within this section of law to a new definitions section. This has been done for clarity within the statute. However, the remainder of the bill's provisions are essentially the same as Chapter 304. Chapter 304 was extended in 2012 by Chapter 143 of the Laws of 2012. This bill amendment to an "A" print makes a few technical changes to the definition of "closed auction" and "open auction".
The bill enacts a new Local Finance Law section 58.20 to establish a statewide pilot program for open auctions. The provisions of this bill are similar to Local Finance Law section 58.10 which currently applies only for Westchester County. Its provisions are as follows:
-Paragraph (a) adds a definitions section.
-Paragraph (b) establishes the open auction electronic public bond sale pilot program for municipalities, in addition to already existing statutory authority for the county of Westchester to conduct such sales.
-Paragraph (c) provides that open auction electronic bidding will be conducted through certain nationally recognized electronic securities bidding services.
-Paragraph (d) states that, with certain exceptions, where the notice of sale has specified that bids will only be accepted electronically, the municipality shall not be obligated to receive paper bids.
-Paragraph (e) and (f) provides that the program shall be administered by the municipality's chief fiscal officer.
- Paragraph (g) provides that the municipality's chief fiscal officer shall continue to review the program to ensure its functionality and profitability, and provides certain procedures and requirements for the program's evaluation.
Section 2: This provision sunsets this pilot program three years after it has been enacted.
Under current law, Westchester County is authorized to operate a pilot program to sell municipal bonds via electronic means (as opposed to paper bid submissions). Such electronic bond sales, under the pilot program, could be conducted by either an open or closed auction format. Before the enactment of Chapter 304 of the Laws of 2009, Westchester County (as all other municipalities in New York) had to conduct the sale of public bonds via paper bids (only a closed bid format could be used). Since then, Chapter 494 of the Laws of 2013 has been enacted so that now all municipalities in New York State can conduct their sales of bonds with only electronic submissions (and not paper bids).
Under the currently enacted pilot program, Westchester County can conduct an open auction to sell such municipal bonds via an electronic securities bidding service. Westchester County has realized both financial cost savings and a reduction in paperwork requirements to conduct such bond bids due to the enactment of Chapter 304 of the Laws of 2009.
This bill expands this program that was used by Westchester County for open auctions electronic bidding processes. This is because it has been recognized to increase the speed and efficiency of bidding for municipal bonds as well as reduce the administrative burden and costs of conducting a the paper bond bidding process. Further, it has enhanced this process for the County by allowing them to take advantage of the latest advances in internet bidding platforms operated by nationally recognized electronic securities bidding firms. This act was extended by Chapter 143 of the Laws of 2012.
According to Westchester County, not only has this new electronic bond bidding pilot program reduced the overhead costs for sponsoring a municipal bond offering, it has increased participation rates among those interested in purchasing such bonds. This increased participation rate among bidders helps to drive down the interest rate charged for such bonds, which provides for further municipal cost savings.
Currently, ten states, including New Jersey, Ohio and Texas, have enacted legislation that allow municipalities to conduct public bond sales through these nationally recognized bidding firms (many of them by the electronic bidding open auction format).
To further the concept of allowing municipalities to conduct their bond auctions via a means of: a) doing so by electronic bids instead of paper bids, and b) by closed auctions via electronic means and c) open auctions at all, Chapter 304 of the Laws of 2009 and Chapter 143
of the Laws of 2012 were enacted to authorize Westchester County to do so via the pilot project.
To further this progression in municipal finance to help lower municipal bond costs, Chapter 494 of the Laws of 2013 was enacted to ensure that all municipalities can have the option to exclusively accept bids electronically if they wish to do so. Hence under current law, since all bond auctions are done in a closed manner (each bidder submits one bid and the lowest bidder gets the contract to purchase those bonds) but can be done electronically, the final step in this process is to allow municipalities to accept electronic bids in a manner that allows for an open auction.
This is a non-controversial bill that merely extends this very successful program that is being operated by Westchester. County to every municipality in the State. This bill sunsets in 3 years so that the State Comptroller and Legislature can evaluate the operation of this program.
Similar to the demonstration program established by Chapter 304 of the Laws of 2009, extended by Chapter 143 of the Laws of 2012. A portion of this pilot project that allows for the electronic transmission of bids was extended to all municipalities by Chapter 494 of the Laws of 2013.
None to the State, but a demonstrated positive fiscal impact to Westchester County.
Immediate, and shall sunset three years after it goes into effect.
STATE OF NEW YORK ________________________________________________________________________ 6579--A IN SENATE February 7, 2014 ___________Introduced by Sen. KLEIN -- read twice and ordered printed, and when printed to be committed to the Committee on Local Government -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the local finance law, in relation to the establishment of an electronic open auction public bond sale pilot program for muni- cipalities; and providing for the repeal of such provisions upon expi- ration thereof THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The local finance law is amended by adding a new section 58.20 to read as follows: S 58.20 ELECTRONIC OPEN AUCTION PUBLIC BOND SALE PILOT PROGRAM; MUNI- CIPALITIES. A. AS USED IN THIS SECTION: 1. "CLOSED AUCTION" MEANS A BOND SALE PROCEDURE THAT DOES NOT ALLOW A BIDDER TO RECEIVE INFORMATION WITH RESPECT TO THE STATUS OR RANK OF ITS BIDS PRIOR TO THE CONCLUSION OF THE BID SUBMISSION PERIOD. 2. "MUNICIPALITY" MEANS A COUNTY, CITY, TOWN, VILLAGE OR SCHOOL DISTRICT. 3. "NATIONALLY RECOGNIZED ELECTRONIC SECURITIES BIDDING SERVICE" MEANS A BIDDING SERVICE THAT IS RECOGNIZED NATIONALLY BY THE PREDOMINANT USERS OF ELECTRONIC SECURITIES BIDDING SERVICES AS PROVIDING AN ACCURATE, SECURE AND RELIABLE ON-LINE BIDDING SYSTEM. 4. "OPEN AUCTION" MEANS A BOND SALE PROCEDURE THAT ALLOWS A BIDDER TO RECEIVE INFORMATION WITH RESPECT TO THE STATUS OR RANK OF ITS BIDS PRIOR TO THE CONCLUSION OF THE BID SUBMISSION PERIOD AND IMPROVE ITS BID AS A RESULT OF THE RECEIVED INFORMATION IN ACCORDANCE WITH THE MUNICIPALITY'S NOTICE OF SUCH BOND SALE CIRCULATED IN ACCORDANCE WITH APPLICABLE REQUIREMENTS OF THIS CHAPTER. 5. "PROGRAM" MEANS THE ELECTRONIC OPEN AUCTION PUBLIC BOND SALE PILOT PROGRAM ESTABLISHED PURSUANT TO THIS SECTION. B. THERE IS HEREBY ESTABLISHED AN ELECTRONIC OPEN AUCTION PUBLIC BOND SALE PILOT PROGRAM AUTHORIZING MUNICIPALITIES TO CONDUCT OPEN AUCTIONEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD13127-03-4 S. 6579--A 2
PUBLIC BOND SALES THROUGH ANY NATIONALLY RECOGNIZED ELECTRONIC SECURI- TIES BIDDING SERVICE. C. THE FINANCE COMMISSIONER OF A MUNICIPALITY MAY ACCEPT ELECTRONIC BIDS SUBMITTED IN THE FORM OF OPEN AUCTIONS CONDUCTED THROUGH A NATIONALLY RECOGNIZED ELECTRONIC SECURITIES BIDDING SERVICE WHICH SHALL BE DEEMED TO BE THE DESIGNATED RECEIVING DEVICE. NOTICE OF ANY BOND SALE SHALL PROVIDE FOR THE MANNER IN WHICH THE BID SUBMISSION PERIOD MAY BE EXTENDED AND THE BASIS FOR DETERMINATION OF THE WINNING BIDDER. D. NOTWITHSTANDING THE PROVISIONS OF SECTION THREE HUNDRED FIVE OF THE STATE TECHNOLOGY LAW OR ANY OTHER LAW, THE NOTICE OF SALE MAY CONTAIN A PROVISION THAT BIDS WILL ONLY BE ACCEPTED ELECTRONICALLY IN THE MANNER PROVIDED IN SUCH NOTICE OF SALE. E. THE MUNICIPALITY'S CHIEF FISCAL OFFICER SHALL ADMINISTER THE PROGRAM AND SHALL PUBLISH ITS POLICIES AND PROCEDURES FOR THE PROCURE- MENT OF ELECTRONIC SECURITIES BIDDING SERVICES ON THE MUNICIPALITY'S INTERNET WEBSITE AND IN A NATIONALLY RECOGNIZED PUBLICATION USED BY PROFESSIONALS IN THE BOND MARKET. EXCEPT AS MODIFIED BY THIS SECTION, EACH MUNICIPAL PROGRAM SHALL COMPLY WITH THIS CHAPTER AND ALL OTHER APPLICABLE LAWS RELATED TO THE SALE OF BONDS. F. THE MUNICIPALITY'S CHIEF FISCAL OFFICER SHALL REVIEW THE ELECTRONIC OPEN AUCTION BIDDING PROCESS TO ENSURE THAT THE BOND SALE WAS COMPLETED IN A TIMELY FASHION; AND THE SALE WAS COMPLETED WITHOUT ERRORS. G. EACH MUNICIPALITY, OR TWO OR MORE MUNICIPALITIES ACTING JOINTLY OR IN COOPERATION WITH ANY ENTITY REPRESENTING MUNICIPALITIES, SHALL, ON OR BEFORE FEBRUARY FIRST, CONDUCT ANNUAL EVALUATIONS OF THEIR PILOT PROGRAM OR PROGRAMS WITH A SUMMARY EVALUATION AT THE END OF THE THREE YEAR OPEN AUCTION PILOT PROGRAM. THE MUNICIPALITY OR MUNICIPALITIES WILL SUBMIT THE EVALUATIONS TO THE STATE COMPTROLLER. SUCH REPORT SHALL INCLUDE, BUT NOT BE LIMITED TO, ANY DEMONSTRATED EVIDENCE THAT SALE OF PUBLIC BONDS USING ELECTRONIC OPEN AUCTIONS IS COMPARABLE TO THE COST OF ISSU- ING PUBLIC BONDS THROUGH THE CURRENT CLOSED AUCTION PROCESS, THAT THE USE OF ELECTRONIC OPEN AUCTIONS RESULTED IN AN INCREASED NUMBER OF BIDS AND WHETHER THE RESULTS ACHIEVED FOR PUBLIC BOND SALES CONDUCTED THROUGH ELECTRONIC OPEN AUCTIONS ACHIEVED SAVINGS COMPARED TO THE PREVIOUS BID PROCESS USED BY THE MUNICIPALITY. ANNUALLY, THE STATE COMPTROLLER SHALL COMPILE ALL THE INFORMATION RECEIVED FROM MUNICIPALITIES PURSUANT TO THIS PARAGRAPH, AND, ON OR BEFORE APRIL FIRST, SUBMIT SUCH COMPILED INFORMATION TO THE LEGISLATURE, THE TEMPORARY PRESIDENT OF THE SENATE, THE SPEAKER OF THE ASSEMBLY, THE MINORITY LEADER OF THE SENATE AND THE MINORITY LEADER OF THE ASSEMBLY. S 2. This act shall take effect immediately, and shall expire and be deemed repealed 3 years after such effective date.