Relates to the delivery of the good faith deposit following award of the bonds to the successful bidder

◆ The sponsor's argument

Why Monica Martinez says this is needed

There are substantial administrative burdens and costs associated with returning multiple good faith deposits received in connection with the public sale of bonds by municipalities, school districts and district corporations. Pursuant to Section 58.00(c)(3) of the New York State Local Finance Law the good faith deposit must be not less than one-half of one per centum of the amount of bonds to be bid for. For example, for a bond issue with a par amount of $10,000,000, the required good faith deposit must be at least $50,000. The good faith deposit is applied as part payment for the bonds or retained by the municipality, school district or district corporation selling said bonds as liquidated damages in case the successful bidder does not take up and pay for the bonds in accordance with the terms of the notice of sale. Typically, depending on the size, there can be as many as five to ten or more bids received for a single bond issue. Each bid must be accompanied by a good faith deposit. If a municipality, school district or district corporation is selling more than one series of bonds on the same date, the number of deposits received increases substantially. For conven- ience, most bidders send their good faith deposit to the municipality, school district or district corporation selling the bonds in the form of cash by wire transfer to an account designated by said municipality, school district or district corporation. A few bidders may send a certi- fied or cashier's check in lieu of a wire. The law also provides that the deposit may be made in the form of a surety bond; however, there are presently no insurance companies in New York State that meet the rating criteria set forth in Section 58.00(c) (3) of the New York State Local Finance Law for providing a surety bond. In addition, deposits are also received from banks and underwriting firms that do not ultimately submit a bid for the bonds. Following the award of the bonds, the municipality, school district or district corporation must return all of the deposits submitted by the unsuccessful bidders. This task can take several hours or more to complete and typically requires the time and attention of several staff members of the municipality, school district or district corporation. For each deposit to be returned, the municipality, school district or district corporation must obtain and/or confirm wire instructions from the unsuccessful bidder, undertake the multi-layer approval process for sending outgoing wires, pay any costs associated with sending a wire imposed by their banking institution and also account for or document the receipt and return of the wires as part of the internal bookkeeping and/or reconciliation process of said municipality, school district or district corporation. Due to the large number of wires that must be sent, there is an increased likelihood of errors or mistakes, which would require addi- tional time spent by the staff of the municipality, school district or district corporation to address. Deposits are sometimes not returned until the day following the sale. A reduction in the number of wires being sent by a municipality, school district or district corporation will lessen opportunities for wire fraud or related threats. Amending this practice will reduce these administrative burdens and costs following a bond sale by allowing the delivery of a good faith deposit by the successful bidder following award of the bonds to said successful bidder by the sale officer.

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.