BILL NUMBER: S9416
SPONSOR: SEPULVEDA
 
TITLE OF BILL:
An act to amend the local finance law, in relation to the sale of bonds
and notes of the city of New York, the issuance of bonds or notes with
variable rates of interest, interest rate exchange agreements of the
city of New York, the selling of bonds at private sale, the refunding of
bonds, and the down payment for projects financed by bonds; to amend the
New York state financial emergency act for the city of New York, in
relation to a pledge and agreement of the state; and to amend chapter
142 of the laws of 2004, amending the local finance law relating to
interest rate exchange agreements of the city of New York and refunding
bonds of such city, in relation to the effectiveness thereof
 
SUMMARY OF PROVISIONS::
Section one of this bill would amend paragraph (a) of section 54.10 of
the Local Finance Law ("LFL") to extend through June 30, 2025 the
provisions of such section authorizing the City to sell its obligations
through negotiated agreement, to provide for compensation for services
rendered in connection with the private sale of obligations by selling
such obligations at a discount, to provide for redemption of its obli-
gations prior to maturity at prices and pursuant to terms determined by
the City, and to include the costs of a negotiated underwriting and
other costs of issuance of its obligations in the cost of the object or
purpose being financed by such obligations.
Section two of this bill would amend paragraph a of section 54.90 of the
LFL to extend through July 15, 2025 the authorization in such paragraph
for the City to issue bonds or notes with variable rates of interest.
Section three of this bill would amend subdivision 1 of paragraph d of
section 54.90 of the LFL to extend through July 15, 2025 the City's
authority to enter into interest rate exchange agreements (commonly
referred to as "swaps") or other similar agreements.
Section four would amend paragraph a of section 57.00 of the LFL to
extend through June 30, 2025 the City's authority to sell bonds at
private sale.
Section five would amend subdivision 3 of paragraph g of section 90.00
of the LFL to extend through June 30, 2025 the City's authority to
exchange refunding bonds for outstanding bonds under certain circum-
stances.
Section six would amend subdivision 8 of paragraph d of section 107.00
of the LFL to extend through June 30, 2025 the inapplicability of the
down payment provisions of such section to certain bonds and notes
issued by the City. I4264183
Section seven would amend subdivision 1 of section 10-a of section 2 of
Chapter 868 of the Laws of 1975, also known as the New York State Finan-
cial Emergency Act for the City of New York ("Financial Emergency Act"),
to extend through June 30, 2025 the City's authority to include the
pledge and agreement of the State in agreements with holders or guaran-
tors of City obligations.
Section eight would amend section 5 of Chapter 142 of the Laws of 2004
to extend until July 15, 2025 the amendment to subparagraph (a) of
subdivision 2 of paragraph b of section 90.10 of the LFL, providing that
for purposes of calculating present value savings in a refund trans-
action, the interest payments on variable rate bonds may be the fixed
rate payable by the City in a related interest rate exchange agreement,
if any, or as found by the Finance Board of the City of New York
("Finance Board"); and in the case of refunding of variable rate bonds
with variable rate bonds, if determined by the Finance Board, present
value savings would not need to be demonstrated.
Section nine would provide that if any portion of this bill is adjudged
to be invalid, that judgment will be confined to the portion of this
bill that is the subject of that judgment and would not invalidate the
remainder of this bill.
Section ten would provide that this bill takes effect immediately.
 
REASONS FOR SUPPORT::
This bill includes several elements that are instrumental in ensuring
that the City of New York continues to have efficient and cost-effective
access to the capital markets.
First, in 1978, the Legislature enacted various provisions of the LFL
and the Financial Emergency Act to respond to the financial emergency
existing in the City and to improve marketability of City obligations by
authorizing their sale on terms consistent with current market prac-
tices. Certain of these provisions contained sunset provisions, and in
1982, the Legislature extended certain sunset provisions and introduced
other changes necessary for the continued successful marketing of City
obligations, some of which were applicable to other municipal issuers as
well. Since 1986, the Legislature has extended these sunset provisions
at least annually.
This network of legislation has enabled the City to continue to sell its
obligations in the public credit markets during both stable and diffi-
cult times. Indeed, the size of the City's capital program and the
unpredictability of market conditions make the ability to sell debt
through negotiated sales crucial to the City. If the City is to continue
to undertake necessary capital projects, it must retain its ability to
utilize modem financing techniques. The extension of these sunset
provisions therefore is essential to the City's fiscal health.
Second, by extending through July 15, 2025 the authorization of the City
to enter into interest rate exchange agreements or "swaps," whether or
not relating to variable-rate bonds, the Legislature would be confirming
the continued utility of these agreements that it first recognized when
it created this swap authorization in Chapter 93 of the Laws of 2002.
Third, with respect to interest on variable rate bonds used in a refund-
ing, by extending until July 15, 2025 the amendment made to subparagraph
(a) of subdivision 2 of paragraph b of section 90.10 of the LFL, the
City would continue to be able to demonstrate present value savings by
permitting the rate on variable rate bonds to be the fixed rate payable
in a related interest rate exchange agreement or as found by the Finance
Board. Furthermore, this would extend the City's ability to refund vari-
able rate bonds with other variable rate bonds without reference to the
present value savings test. The extension of these provisions and the
enhanced flexibility in entering into exchange agreements are essential
if the City is to efficiently access the public credit markets.
Accordingly, the Mayor urges the earliest possible favorable consider-
ation of this proposal by the Legislature.