This bill has been amended

Bill S6985-2013

Relates to the special powers of the environmental facilities corporation

Relates to the special powers of the environmental facilities corporation.

Details

Actions

  • Jun 9, 2014: ADVANCED TO THIRD READING
  • Jun 3, 2014: 2ND REPORT CAL.
  • Jun 2, 2014: 1ST REPORT CAL.1086
  • May 28, 2014: REPORTED AND COMMITTED TO FINANCE
  • Apr 11, 2014: REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS

Meetings

Calendars

Votes

VOTE: COMMITTEE VOTE: - Corporations, Authorities and Commissions - May 28, 2014
Ayes (6): Ranzenhofer, Flanagan, Larkin, Martins, Perkins, Squadron

Memo

BILL NUMBER:S6985

TITLE OF BILL: An act to amend the public authorities law, in relation to the special powers of the New York state environmental facilities corporation

Purpose of the Bill:

The bill would permit the Environmental Facilities Corporation ("EFC") to invest moneys held in the Clean Water State Revolving Fund ("CWSRF") and Drinking Water State Revolving Fund ("DWSRF") in a broader array of debt securities.

Summary of Provisions:

Section 1 of the bill would amend Public Authorities Law ("PAL") 1285-j(6) to: (i) reduce the ratings requirement associated with EFC's authorization to invest moneys within the CWSRF in obligations of various New York State entities delineated in GML § 10(1)(f)(iv); and (ii) permit EFC to invest CWSRF moneys in obligations of any agency, instrumentality or governmental entity of another state rated in one of the two highest rating categories by at least one nationally recognized rating agency.

Section 2 of the bill would amend PAL § 1285-m(6) in a similar manner as with the CWSRF to: (i) reduce the ratings requirement associated with EFC's authorization to invest moneys within the DWSRF in obligations of various New York State entities delineated in GML 10(1)(f)(iv),;and (ii) permit EFC to invest DWSRF moneys in obligations of any agency, instrumentality or governmental entity of another state rated in one of the two highest rating categories by at least one nationally recognized rating agency.

Section 3 of the bill provides for an immediate effective date.

Existing Law:

PAL §§ 1285-j(6) and 1285-m(6) authorize EFC to invest moneys from the CWSRF and the DWSRF-in obligations specifically identified in GML § 10 provided such obligations are rated by a nationally recognized rating agency in one of its two highest rating categories.

GML § 10(1)(f)(iv) provides that in exchange for the deposit of public funds, local governments may accept, as security, obligations issued or fully insured by New York State, those issued by municipal corporations, school districts and district corporations of New York State and those issued by any public benefit corporation which under a specific New York State statute may be accepted as security for deposit of public funds.

Prior Legislative History:

This is a new bill.

Statement in Support:

New York's State Revolving Funds ("SRFs") are the largest in the country with assets exceeding $13 billion. The SRFs are capitalized through federal grants, State matching funds, repayments from prior financings, proceeds from the issuance of bonds and investment income. The SRFs provide funding for municipalities and other eligible entities to construct clean water and drinking water infrastructure projects throughout the state. A substantial portion of that funding is generated through the issuance by EFC of bonds. In addition, EFC places investments to support its bond issuances and to generate interest income. The purpose of these investments is to enhance bondholder security which preserves EFC's AAA credit ratings, and to generate interest income which subsidizes funding costs for EFC's borrowers.

EFC's investment portfolio exceeds $3 billion. Pursuant to PAL 1285-j(6) and 1285m(6), EFC is allowed to invest in obligations that are specifically identified in GML § 10 but with the additional requirement that all such investments must be rated "AA" by at least one nationally recognized rating agency. By contrast, GML § 10, which applies to all bcal governments in the State, does not impose the universal "AA" rating requirement on investments by local government entities. Indeed, with respect to the provision at issue in the bill -- GML § 10(1)(f)(iv) - there is no ratings requirement imposed upon municipalities.

The bill would amend PAL §§ 1285-j(6) and 1285-m(6) to reduce to "A" the rating standard applicable to obligations delineated in G'ML 10(1)(f)(iv) for purposes of CWSRF and DWSRF investments: obligations issued or fully insured or guaranteed by New York State, those issued by municipal corporations, school districts and district corporations of New York State, and those issued by any public benefit corporation which under a specific New York State statute may be accepted as security for deposit of public moneys. Reducing the rating in this manner would allow EFC to invest in, and earn additional investment income from a more diverse array of New York State entities. Diversity is a positive attribute in an investment portfolio. The reduced rating requirement comes with manageable risk given EFC's experience and competence in assessing the creditworthiness of governmental entities in the State.

In addition, this legislation adds a new paragraph (d) to PAL 1285-j(6) and 1285-m(6) permitting EFC to invest CWSRF and DWSRF moneys in obligations of any agency, instrumentality or governmental entity of another state rated in one of the two highest rating categories by at least one nationally recognized rating agency. This provision would broaden the scope of eligible investment securities particularly by allowing EFC to invest in revenue bonds of out-of-state issuers meeting the stated ratings criteria. These issuers are increasingly issuing revenue bonds and notes to finance projects that historically have been undertaken by the issuance of general obligation bonds by state or local governments. Revenue bonds are more plentiful than general obligation bonds, and in the case of "essential service" bonds (such as water and sewer bonds) and other dedicated-tax bonds, offer more yield without taking on significant additional risk. As with the revenue bonds issued by EFC, many other issuers of revenue bonds provide enhanced opportunities for investors, often at higher rates of return or with other favorable terms.

Retaining the higher rating standard for this class of securities further protects the investment portfolio from additional risk of out-of-state investment.

By allowing CWSRF and DWSRF assets to be invested in these obligations as discussed above, the SRF programs (including the participating municipalities), will benefit from higher investment returns.

Budget Implications:

None.

Local Impact:

Increased earnings on CWSRF and DWSRF investments will benefit municipalities throughout the state by making more capital available to finance critical environmental infrastructure projects.

Effective Date:

The bill would take effect immediately.


Text

STATE OF NEW YORK ________________________________________________________________________ 6985 IN SENATE April 11, 2014 ___________
Introduced by Sen. GRISANTI -- (at request of the Environmental Facili- ties Corporation) -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions AN ACT to amend the public authorities law, in relation to the special powers of the New York state environmental facilities corporation THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivision 6 of section 1285-j of the public authorities law, as amended by chapter 307 of the laws of 2005, is amended to read as follows: 6. Moneys in the water pollution control 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 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, (i) such obligations securing such investment agreements are obli- gations as set forth in section ten of the general municipal law, (ii) such obligations are delivered to a trustee for the benefit of the corporation or, with respect to moneys pledged under an indenture of trust relating to bonds or notes of the corporation, to the trustee under such indenture, 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, 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, OTHER THAN THOSE OBLIGATIONS SET FORTH IN SUBPARAGRAPH (IV) OF PARAGRAPH F OF SUBDIVISION ONE OF SECTION TEN OF THE GENERAL MUNICIPAL LAW, that are rated by a nationally recognized rating agency in one of its two highest rating categories, OR (C) IN OBLIGATIONS AS SET FORTH IN SUBPARAGRAPH (IV) OF PARAGRAPH F OF SUBDIVISION ONE OF SECTION TEN OF THE GENERAL MUNICIPAL LAW THAT ARE RATED BY A NATIONALLY RECOGNIZED RATING AGENCY IN ONE OF ITS THREE HIGH- EST RATING CATEGORIES, OR (D) IN OBLIGATIONS OF ANY AGENCY, INSTRUMEN- TALITY OR GOVERNMENTAL ENTITY OF ANOTHER STATE THAT ARE RATED BY AT LEAST ONE NATIONALLY RECOGNIZED RATING AGENCY IN ONE OF ITS TWO HIGHEST RATING CATEGORIES. S 2. Subdivision 6 of section 1285-m of the public authorities law, as amended by chapter 307 of the laws of 2005, is amended to read as follows: 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 securi- ties investors protection corporation, if such investment agreement provides that: (i) such obligations securing such investment agreements are obli- gations 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 corpo- ration, 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 agree- ments 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 trus- tee 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 munici- pal law, OTHER THAN THOSE OBLIGATIONS SET FORTH IN SUBPARAGRAPH (IV) OF PARAGRAPH F OF SUBDIVISION ONE OF SECTION TEN OF THE GENERAL MUNICIPAL LAW, that are rated by a nationally recognized rating agency in one of its two highest rating categories; OR (C) IN OBLIGATIONS AS SET FORTH IN SUBPARAGRAPH (IV) OF PARAGRAPH F OF SUBDIVISION ONE OF SECTION TEN OF THE GENERAL MUNICIPAL LAW THAT ARE RATED BY A NATIONALLY RECOGNIZED RATING AGENCY IN ONE OF ITS THREE HIGH- EST RATING CATEGORIES; OR (D) IN OBLIGATIONS OF ANY AGENCY, INSTRUMENTALITY OR GOVERNMENTAL ENTITY OF ANOTHER STATE THAT ARE RATED BY AT LEAST ONE NATIONALLY RECOG- NIZED RATING AGENCY IN ONE OF ITS TWO HIGHEST RATING CATEGORIES.
S 3. This act shall take effect immediately; provided, however that the amendments to subdivision 6 of section 1285-j and subdivision 6 of section 1285-m of the public authorities law made by sections one and two of this act shall not affect the expiration and reversion of such subdivisions and shall expire and be deemed repealed therewith.

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