BILL NUMBER: S8413
SPONSOR: GOUNARDES
 
TITLE OF BILL:
An act in relation to authorizing a loan from the state to the city of
Dunkirk (Part A); and making an appropriation therefor (Part B)
 
PURPOSE:
This bill would authorize an additional debt and financing option for
the city of Dunkirk (or the "City") as a matter of last resort, to amel-
iorate a condition of severe fiscal difficulty and potential lack of
market access by the city. Dunkirk presently has a $12.7 million princi-
pal revenue anticipation note with a maturity date of July 24, 2025 and
lacks sufficient cash and potentially lacks market access for financing
options to repay such note's principal and interest (totaling approxi-
mately $13.7 million). The inability to pay such revenue anticipation
note could have significant negative financial implications, including a
loss of credit access or increased costs of borrowing for not only the
City, but other municipal debt issuers throughout the State of New York.
 
SUMMARY OF PROVISIONS:
Bill Section 1 enacts into law components of legislation necessary to
authorization a loan for the city of Dunkirk and sets forth that each
component is contained within parts identified as Part A and Part B.
With respect to Part A:
Section 1 contains Legislative findings.
Section 2 contains the title of this act, the "City of Dunkirk Revenue
Anticipation Note Refinancing Act.
Section 3 contains definitions.
Section 4 would establish a State loan to the city of Dunkirk and would
clarify that any payment made to the City for an appropriation made by
part B of this bill shall be used by the City for the repayment and
settlement of its anticipation note due July 24, 2025.
Section 5 of the bill would establish the amortization period of the
loan period of probable usefulness, which shall be 15 years. The rate of
interest shall be 7.5% per year. The Budget Director may modify the
terms of the loan, including the term and interest if the reduction of
any payment or payments made for the City pursuant to section 6 is
insufficient to satisfy the annual repayment amount set forth in the
loan repayment schedule.
Section 6 of the bill would obligate the City to repay the loan in
accordance with a loan repayment schedule provided by the Budget Direc-
tor, which reflects the amount and date of all loan payments made by the
State to the City for an appropriation pursuant to part B. Such a loan
repayment schedule may be revised from time to time. By no later than
September 30 of any year while the loan is outstanding, the Budget
Director shall notify the Mayor, the City Council, the State Comp-
troller, the Chair of the Assembly Ways and Means Committee, and the
Chair of the Senate Finance Committee of any offset payments for the
City, and the principal and interest repayment schedule, reflecting the
remaining amount owed by the City to the State for each State fiscal
year
Section 7 of the bill would establish that the Budget Director may
direct any department, agency, or instrumentality to reduce the amount
of any payment or payment owed in a fiscal year to the city of Dunkirk,
or any department, agency or instrumentality thereof, provided that such
reduction is in an amount no greater than the amount due for such year
as set in the loan repayment schedule.
Section 8 of the bill would establish that the State shall not require
the early termination of the loan or pre-payment of any amount set forth
in the loan repayment schedule, except that the mayor may do so subject
to the notice provisions and subject to the written confirmation of the
Budget Director of the calculated amount of principle and interest owed
by the City as of the proposed date of loan repayment.
Section 9 of the bill would treat the loan as indebtedness of the City
with respect to article 8 of the State Constitution. For purposes of
compensating and replenishing the City's all funds budget for the annual
withholding of State payments to the City pursuant to section 7 of the
bill, the amount of annual principal and interest shall be excluded from
the tax limit imposed by section 10 of article 8 of the state Constitu-
tion. For as long as the State loan shall remain outstanding, the City
shall comply with the provisions of the Dunkirk Fiscal Recovery Act. The
period of probable usefulness of the first issuance of deficit bonds or
notes pursuant to such act shall be computed from the date of the
payment referenced in section 10 of this bill. On or before July 9 of
each State fiscal year that the loan remains outstanding, the mayor
shall provide an attestation to the Budget Director, the State Comp-
troller, the Assembly ways and means committee and the Senate finance
committee that either the City has been unable to issue deficit financ-
ing notes or bonds despite its good faith efforts or that the City has
issued deficit notes or bonds and is able to use the proceeds to prepay
in whole the loan made pursuant to this act.
Section 10 of the bill provides that the foregoing, part A, shall take
effect on the same date and in the same manner as part B, takes effect.
With respect to part B of this bill:
Section 1 would appropriate up to thirteen million, seven hundred thou-
sand dollars ($13,700,000) or so much thereof as may be necessary, from
the general fund for payment to the city of Dunkirk solely to refinance
its revenue anticipation note, with a final maturity and due date of
July 24, 2025. No payment shall be made without a written signed attes-
tation by the mayor of Dunkirk, sent to the Budget Director, the State
Comptroller, the Chair of the Assembly Ways and Means Committee and the
Chair of the Senate Finance Committee by no later than July 9, 2025,
stating that the City has, despite making good faith efforts to secure
the full amount of principal plus interest through a combination of cash
on hand, new City revenue or tax anticipation notes or issuances of new
deficit bonds or anticipation notes, and is unable to secure enough
funding to pay the total amount due, and is in need of, and is request-
ing, a specific dollar amount due to be loaned from the State, to the
City, by means of this appropriation.
Section 2 of part B establishes that this act shall take effect upon the
receipt of the written, signed attestation submitted by the mayor of the
City of Dunkirk.
Bill Section 2 contains a sevetability provision.
Bill Section 3 sets forth an effective date of immediate, provided
however, that the applicable effective date of Parts A and B shall be
set forth in the last section of such Parts.
 
EXISTING LAW:
None. Part DD of Chapter 56 of the Laws of 2024 enacted the "Dunkirk
fiscal recovery act".
 
JUSTIFICATION:
Without financial assistance from the State, the city of Dunkirk is
likely unable to meet its obligation to repay a $12.7 million principal
revenue anticipation note, which has a due date of July 24, 2025. A
potential default may have significant negative financial implications
for the City as well as the taxpayers of New York State.
This bill would impose a seven and half (7.5) percent rate of annual
interest on the amount of the loan utilized. This matches the rate most
recently received by the City in the credit markets when it issued last
year the revenue anticipation in question - effectively continuing the
existing debt until the deficit financing authorization can be accessed.
For local governments previously experiencing severe financial difficul-
ty, the State Legislature has implemented various oversight and relief
mechanisms, including authorizing deficit financing and control boards.
Part DD of Chapter 56 of the Laws of 2024 authorized the city of Dunkirk
to issue deficit financing bonds with a term of 15 years for accumulated
deficits through 2025 totaling up to $18.5 million. However, the City is
presently unable to issue such bonds to repay the Revenue Anticipation
Note in question. This loan would serve a similar purpose until the City
is able to so issue.
Section nine of part A of this bill provides that the City shall comply
with the oversight requirements set forth in the Dunkirk Fiscal Recovery
Act as long as the State loan is outstanding. These requirements include
many which may be similar to those required by a control board:
*Preparation and reporting to State parties by the City treasurer, with-
in thirty days of each quarter end, of quarterly summaries of budget
variances and trial balances prepared in accordance with the uniform
system of accounts prescribed by the State Comptroller, accompanied by
recommendations from the City fiscal affairs officer setting forth any
remedial action necessary (section seven);
*Budget review and recommendations by the State Comptroller, including
the requirement that the City Council shall review and make adjustments
to the proposed budget consistent with any recommendations made by the.
State Comptroller (section eight);
*Preparation and submission to State parties by the City fiscal affairs
officer of a three-year multiyear financial plan containing, at a mini-
mum, projected employment levels, projected annual expenditures for
personal service, fringe benefits, non-personal services and debt
service, appropriate reserve fund amounts, estimated annual revenues
including projection of property tax rates, the value of the taxable
real property and resulting tax levy, annual growth in sales tax and
non-property tax revenues, and the proposed use of one-time revenue
sources. The financial plan also must identify actions necessary to
achieve and maintain long-term fiscal stability, including, but not
limited to, improved management practices, initiatives to minimize or
reduce operating expenses, and potential shared services agreements with
other municipalities (section nine);
*Notification to and comment by the State Comptroller prior to the issu-
ance of any further debt issuance or installment purchase contract, with
such comments to include recommendations regarding the affordability to
the City (section ten).
Control boards have been authorized for the counties of Nassau and Erie,
and the cities of Buffalo and New York. First and foremost, implementing
a control board would not avert a likely default in July 2025, which is
the impetus of this legislation. A control board would not be estab-
lished in time and would not have a mechanism for repaying the revenue
anticipation note in question.
Also, each municipality with a control board is significantly larger in
population and budget size than the city of Dunkirk, important elements
for the feasibility of maintaining a board quorum (a board typically has
seven members to ensure compliance with public authorities law and best
practice) as well as affordability. Each municipality pays for the staff
and operations of its control board. Even a modest $500,000 annual
operation, the cost of the cheapest control board, would comprise three
percent of the City's $18.7 million general fund budget. The most expen-
sive control board, over $2 million for the county of Nassau, would
comprise twelve percent of the City's budget. In addition, in the first
years of operation, most control boards have significantly higher
expenses due to start-up costs and potential litigation, which feasibly
total millions of dollars. Because the City is near its Constitutional
property tax limit, the City would likely be forced to make significant
operational cuts simply to fund its control board.
Dunkirk Buffalo Erie Nassau
Population (est12,743 278,34 9954,236 1,395,754
General Fund Budget*
$ 18,716,335 $510,755,205 $1,968,183,452 $2,227,406,146
Control Board CN/As $1,028,537 $512,096 $2,225,000
*2025 Adopted Budgets
 
LEGISLATIVE HISTORY:
This is a new bill,
 
BUDGET IMPLICATIONS:
This bill would allow the City to defease the principal and interest it
owes on its $12.7 million Revenue Anticipation Note due July 24, 2025.
Given the City's lack of cash and potential lack of investors willing to
purchase City debt, a City default is probable, leaving the City with a
long term inability to secure future financing for its budgetary and
infrastructure needs. In addition to the direct impact to the City, a
default could have significant negative financial implications, includ-
ing a loss of credit access or higher cost of borrowing, for other
municipal debt issuers throughout the State of New York.
 
EFFECTIVE DATE:
This act shall take effect immediately, provided however that the appli-
cable effective date of Parts A through B are set forth as specified in
the last section of such Parts.