NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A9692
SPONSOR: Magnarelli
 
TITLE OF BILL: An act to amend the local finance law, in relation to
making technical amendments to the time frame within which a governing
board of the municipality or school district authorized to incur debt to
finance a deficit may make adjustments to its proposed budget; updating
the list of types of obligations which may be issued by municipalities,
school districts or district corporations; and to amend chapter 386 of
the laws of 2010, amending the local finance law relating to the private
sale of bonds, in relation to eliminating the expiration and repeal of
such provisions
 
PURPOSE: To correct two technical errors in the Local Finance Law and
to repeal the expiration of the increase in the amount of bonds a muni-
cipality, school district or district corporation annually may sell at
private sale in any fiscal year.
 
SUMMARY OF PROVISIONS: Section 1 of this bill would amend Paragraph d
of Section 10.10 of the Local Finance Law to delete the phrase "within
fifteen days after receipt of any such recommendations."
Section 2 of this bill would add a new Subdivision 12 to Paragraph a of
Section 20.00 of the Local Finance Law to update the list of types of
obligations which may be issued by municipalities, school districts or
district corporations to add deficiency notes.
Section 3 of this bill would amend Section 14 of Chapter 386 of the Laws
of 2010 to repeal the sunset provision that would have the increase in
the amount of bonds a municipality, school district or district corpo-
ration annually may sell at private (negotiated) sale in any fiscal year
from 51 million to 55 million expire on June 1, 2012.
 
PRIOR LEGISLATIVE HISTORY: New bill.
 
JUSTIFICATION: Section 1 of this bill is a technical amendment to
language added by Chapter 341 of the Laws of 2007, which enacted Section
10.10 of the Local Finance Law. Section 10.10 provides uniform require-
ments applicable to municipalities and school districts that are author-
ized by general or special law to contract indebtedness to finance the
liquidation of operating deficits. Paragraph d of Section 10.10 sets
forth a procedure for the submission of the proposed budget of the muni-
cipality or school district to the State Comptroller (and, in the case
of a school district, the Commissioner of Education) for review and
recommendation. Among other things, Paragraph d provides that "no later
than five days prior to the adoption of the budget" the municipality or
school district must review those recommendations and either make
adjustments to the proposed budget consistent with the recommendations
or explain in writing the reasons for the rejection of any recommenda-
tion. Later in the same sentence as the quoted provision, the phrase
"within fifteen days after receipt of any such recommendations" appears,
creating an ambiguity as to the proper timeframe for the municipality or
school district to act. It is apparent that the inclusion of this phrase
in Paragraph d was inadvertent and likely a carryover from an earlier
version of the bill that was enacted. The phrase "within fifteen days
after the receipt of any such recommendations" is inconsistent with the
budget review timeframe otherwise set forth in Paragraph d of Section
10.10 of the Local Finance Law and should be deleted so that the statute
is consistent and clear.
Section 2 of this bill makes a. technical amendment relating to Chapter
386 of the Laws of. 2010, which, among other things, added Local Finance
Law § 29.20 to authorize municipalities, school districts and district
corporations to issue deficiency notes to finance a deficiency in any
fund or funds arising from revenues being less than the amount estimated
in the budget for the current fiscal year. Paragraph a of Section 20.00
of the Local Finance Law, which lists by name the types of bonds and
notes that a municipality, school district or district corporation may
issue, also should have been amended at that time, but was not. This
bill will correct that oversight.
Section 3 of this bill relates to the increase from $1 million to $5
million in the maximum amount of bonds that municipalities, school
districts and district corporations may sell at private sale annually,
which was enacted into law by Chapter 386 of the Laws of 2010. Pursuant
to Section 14 of Chapter 386 of the Laws of 2010, the increased maximum
amount is scheduled to expire on June 1, 2012. Section 6 of Chapter 386
of the Laws of 2010 required the State Comptroller to prepare a report
on the private sales of bonds conducted pursuant to Paragraph b of
Section 63.00 of the Local Finance Law, including recommendations with
respect to such private sales. Section 6 also required municipalities,
school districts and district corporations to file reports of each
private sale with the Comptroller.
In December 2011, the Comptroller prepared a report on private sales of
bonds by municipalities, school districts and district corporations as
required by Chapter 386 of the Laws of 2010
(http://www.osc.state.ny.us/localgov/pubs/research/ privatesales-
bond.pdf). As noted in this report, the increase in the private sale cap
did not significantly increase the number of localities that issued
bonds at private sale. Also, given that a number of the sales over the
$1 million threshold were conducted through some form of competitive
process that included the receipt of bids, it is unclear that a formal
public sale, as would have been required under the law prior to the
amendment in Chapter 386 of the Laws of 2010, would have yielded appre-
ciably different results. The increase in the cap did give local issuers
with relatively small bond issues additional options on how best to gain
market access. The enhanced flexibility afforded by this private sale
option also allowed issuers the opportunity to premarket their bonds to
both retail and institutional investors, potentially expanding the pool
of investors-. Finally, the report noted that private bond sales are
particularly useful to smaller local governments that generally conduct
bond sales involving smaller principal amounts and may find the cost of
obtaining a bond rating and/or the cost of publishing a formal notice of
sale to be economically prohibitive. In consideration of these points,
the Comptroller's report recommended keeping the statutory private sale
cap of $5 million in place and repealing the sunset provision. This bill
would implement the recommendation made in such report.
The Comptroller urges the passage of this proposed legislation.
 
FISCAL IMPLICATIONS FOR STATE: This bill has no significant State
fiscal impact.
 
EFFECTIVE DATE: This act shall take effect immediately; provided,
however, if section three of this act shall become a law on or after
June 1, 2012 such section shall take effect immediately and shall be
deemed to have been in fall force and effect on and after June 1, 2012.