Relates to installments of bonds; repealer

◆ The sponsor's argument

Why Monica Martinez says this is needed

1. Amending Section 21.00 b of the NYS Local Finance Law Municipalities and school districts ("issuers") are required under the New York State Constitution (Article 8, sec. 2) to pay their indebtedness in annual installments, the first of which (except for refunding) shall be paid not more than two years after initial issuance. Section 21.00 b. of the Local Finance Law ("LFL") formerly was more restrictive, requiring the first installment of serial bonds to mature not later than eighteen months after the date of such bonds, however for the last twenty years the State Legislature has repeatedly amended Section 21.00 b. to substi- tute two years for the eighteen months and keep the statute consistent with the constitutional requirement. Such amendments only provided this flexibility for finite periods of time, usually from one to three years, presumably to track market condi- tions for so long as investors did not impose any additional cost on issuers which incorporated such flexibility in the structuring of prin- cipal repayment of their bonds. Sunset provisions terminating this flex- ibility have been routinely included in each successive amendment to Section 21.00 b., and such flexibility has been routinely and repeatedly extended for the last twenty years. Meanwhile, the capital markets have accepted this two-year limit as routine with no market penalties and issuers routinely structure their bond issues accordingly. 2. Amending Section 53.00 of the NYS Local Finance Law it is common practice when issuers structure their borrowing through the issuance of bonds to incorporate an option to redeem such bonds prior to their sche- duled maturity dates, thus facilitating cost-efficient refinancing or "refunding" of bonds when lower interest rates prevail in the capital markets after original issuance of such bonds. The early redemption date is known as the "call" date of the bonds, and the refunding is accomplished by giving required notice to the holders of the bonds that the issuer intends to refund them on the call date by structuring and issuing refunding bonds at lower interest rates to fund the payment of outstanding principal and accrued interest due and paya- ble on the original bonds. Section 53.00 of the LFL authorizes issuers to incorporate such call features in their bonds and specifies the process for giving the required notice and certain parameters for redemption of bonds prior to their scheduled maturities. For bonds issued prior to July 1, 1988 the provisions of section 53.00 reflected then prevailing market require- ments that outstanding principal installments on bonds could only be called (i) in the inverse order of their maturity or, (ii) in equal proportionate amounts. As capital markets evolved, investors became comfortable purchasing bonds which allowed more flexibility in the call features. Starting in 1988, the State Legislature has repeatedly amended Section 53.00 to provide that "installments remaining unpaid on such bonds may be called for redemption prior to their date of maturity in such amounts, at such times in such manner and pursuant to such terms as may be determined by the finance board of a municipality, school district or district corpo- ration at the time of the issuance thereof." Such amendments only provided this flexibility for finite periods of time, usually from one to three years, presumably to track market conditions for so long as investors did not impose any additional cost on issuers which incorpo- rated such flexibility in the call features of their bonds. Sunset provisions terminating this flexibility have been routinely included in each successive amendment to Section 53.00 since 1988, and such flexibility has been routinely and repeatedly extended for the last thirty years. Since bond issues come to market throughout the year including during the periods after state legislation has passed both houses of the State Legislature and awaits approval by the Governor, there are period

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.