N.Y. GMU Law § 109-B — New York Code / Act GMU / Article 5-A / Section 109-B
Installment contracts
Status: in_force

* § 109-b. Installment contracts. 1. As used in this section:\n  (a) "Political subdivision" shall mean a municipal corporation, school\ndistrict, district corporation or board of cooperative educational\nservices.\n  (b) "Installment purchase contract" shall mean any lease purchase\nagreement, installment sales agreement or other similar agreement\nproviding for periodic payments between a corporation, person or other\nentity and a political subdivision which has as its purpose the\nfinancing of equipment, machinery or apparatus.\n  (c) "Certificate of participation" shall mean a security or other\ninstrument representing a proportionate interest or the right to receive\na proportionate share in lease, rental, installment or other periodic\npayments made or to be made by a political subdivision or made by the\nagency on behalf of a political subdivision pursuant to an installment\npurchase contract.\n  (d) "Agency" shall mean the state of New York municipal bond bank\nagency established by section twenty-four hundred thirty-three of the\npublic authorities law.\n  (e) "Agency certificates of participation" shall mean certificates of\nparticipation executed and delivered by the agency on behalf of, for the\nbenefit of and pursuant to a written agreement with a political\nsubdivision.\n  (f) Functions performed by a governing board under this section shall,\nin the city of New York, be performed by the mayor and comptroller, and\nthe approvals of the mayor and the comptroller of any agreement,\ncontract, instrument, arrangement or transaction contemplated by this\nsection shall be the only approvals required therefor, subject to the\nprovisions of the New York state financial emergency act for the city of\nNew York.\n  2. A political subdivision may enter into an installment purchase\ncontract subject to the following restrictions:\n  (a) Neither any person, partnership, corporation or other legal entity\nnor any political subdivision, officer, employee, agency or department\nnor the agency for agency certificates of participation shall execute\nand deliver or cause the execution and delivery of certificates of\nparticipation except in accordance with the provisions of this section\nand with express written approval of the governing board of such\npolitical subdivision and with the concurrence of the agency for agency\ncertificates of participation. The provisions of this section are hereby\nmade a part of every installment purchase contract entered into by such\na political subdivision or by the agency for agency certificates of\nparticipation. Every such contract shall contain a clause expressly\nreciting the provisions of this subdivision, provided, however, that the\nabsence of such clause in such a contract shall not obviate the duty of\nall parties thereto to comply with the provisions of this subdivision.\nNeither this provision, nor any other provision of this section, shall\nbe construed to prevent such political subdivisions from entering into\ninstallment purchase or lease purchase agreements funded without the use\nof certificates of participation or similar instruments, as otherwise\nprovided in this section.\n  (b) Subject to the provisions of subdivision five of this section, the\ngoverning board of a political subdivision shall adopt a resolution\nauthorizing the installment purchase contract.\n  (c) Subject to the provisions of subdivision five of this section,\nwhere the financing of equipment, machinery or apparatus pursuant to an\ninstallment purchase contract is to be provided by agency certificates\nof participation, the governing board of a political subdivision shall\nadopt a resolution authorizing the written contract with the agency\nsetting forth the rights and liabilities of the agency and the political\nsubdivision as provided for in section twenty-four hundred thirty-five-a\nof the public authorities law.\n  (d) The term of such installment purchase contract, including all\nrenewals thereof, shall not exceed the period of probable usefulness\nprescribed by section 11.00 of the local finance law for the equipment,\nmachinery or apparatus being financed under the installment purchase\ncontract.\n  (e) The installment purchase contract shall separately state the\nprincipal and interest component of the periodic payments to be made\nthereunder. The total of all periodic payments which include both\nprincipal and interest components made by the political subdivision\nduring each year throughout the term of the installment purchase\ncontract shall be substantially level or falling.\n  (f) The installment purchase contract shall contain the following\nclause: "This contract shall be deemed executory only to the extent of\nmonies appropriated and available for the purpose of the contract, and\nno liability on account thereof shall be incurred by the political\nsubdivision beyond the amount of such monies. The installment purchase\ncontract is not a general obligation of (insert name of political\nsubdivision(s)). Neither the full faith and credit nor the taxing power\nof (insert name of political subdivision(s)) are pledged to the payment\nof any amount due or to become due under such installment purchase\ncontract. It is understood that neither this contract nor any\nrepresentation by any public employee or officer creates any legal or\nmoral obligation to appropriate or make monies available for the purpose\nof the contract." Where agency certificates of participation are the\nsecurity for such contract, such contract shall also contain the\nfollowing clause: "Further no liability on account thereof shall be\nincurred by the state of New York municipal bond bank agency beyond the\namount of such monies. It is understood that neither this contract nor\nany representation by any employee or officer of such agency creates any\nlegal or moral obligation to appropriate or make state monies available\nfor the purpose of the contract."\n  (g) No payment under the installment purchase contact except payment\nfor the total amount outstanding shall be financed from the proceeds of\nobligations issued pursuant to the local finance law other than the\nproceeds of revenue anticipation notes, tax anticipation notes or budget\nnotes.\n  3. (a) Installment purchase contracts for equipment, machinery or\napparatus shall constitute purchase contracts for public bidding\npurposes and shall be subject to public bidding requirements to the\nextent applicable by law. For purposes of determining whether the cost\nof the equipment, machinery or apparatus exceeds the monetary threshold\nfixed in section one hundred three of this article, the cost of the\nequipment, machinery or apparatus, exclusive of the cost of financing,\nshall be considered. If the equipment, machinery or apparatus is to be\nfinanced by a party other than the party submitting the bid, the bid\nspecifications may provide that the political subdivision may assign its\nright to purchase to a third party without the necessity of approval by\nthe other party to the contract. Nothing herein shall preclude a\npolitical subdivision from advertising for bids in the alternative with\nand without financing.\n  (b) Certificates of participation caused to be executed and delivered\nby the political subdivision pursuant to this section, in connection\nwith one or more installment purchase contracts entered or expected to\nbe entered into by such political subdivision may be sold at public or\nprivate sale, either independently or in connection with a pooled or\naggregate program, as determined by the governing board. The governing\nboard may, by resolution, delegate such power to the chief fiscal\nofficer, in which event such chief fiscal officer shall exercise such\npowers and perform such duties until the governing board shall, by\nresolution, elect to reassume the same. If certificates of participation\nare sold at public sale, they shall be sold to the bidder offering the\nlowest interest cost as computed in accordance with the net interest\ncost method, taking into consideration any premium or discount, or the\nactuarial or true interest cost method, whichever is specified in the\nnotice of sale, not less than four nor more than fifteen days, Sundays\nexcepted, after a notice of such sale has been circularized in\naccordance with any rule or order prescribed by the state comptroller,\npursuant to paragraph d of section 57.00 of the local finance law, for\nthe circularization of notices for the sale of bonds. The terms of the\nsale may not be changed unless a supplemental notice of sale is provided\nin accordance with the procedure for the sale of bonds in paragraph b of\nsection 58.00 of the local finance law.\n  (c) Whenever in the judgement of the governing board, or if authorized\nby the governing board, the chief fiscal officer, the interest of the\npolitical subdivision will be served thereby, the governing board, or\nchief fiscal officer as the case may be, may authorize the sale of such\ncertificates of participation at private sale, including such sale in\nconnection with a pooled or aggregate program.\n  (d) The state comptroller shall promulgate rules in conformance with\nthe state administrative procedure act governing the procedure which\nshall be adhered to when entering into installment purchase contracts or\nauthorizing the execution and delivery of certificates of participation\npursuant to this section, including guidelines for the private sale of\ncertificates of participation. No private sale of certificates of\nparticipation shall be conducted by a political subdivision without\nprior approval of the state comptroller except as provided in such rules\nwhich shall set forth the circumstances under which such approval shall\nnot be required. The state comptroller shall annually deliver to the\nstate division of the budget, the senate finance committee and the\nassembly ways and means committee a report listing all negotiated sales\nconducted in the previous year, including the name of the issuer and\namount of the issue for each such sale.\n  4. (a) The proceeds of certificates of participation executed and\ndelivered in connection with the installment purchase contract made\npursuant to this section, in addition to being applied towards the cost\nof the equipment, machinery or apparatus, may also be used for the\nestablishment of reserve funds to secure such certificates, the cost or\npremium of letters of credit, insurance or other credit enhancements,\nthe costs of bond counsel, a financial advisor, underwriter, trustees\nand paying agent, and other actual and necessary expenses directly\nrelated to the issuance of such certificates. The foregoing shall not be\nconstrued to authorize the use of such proceeds for the payment of\npersonal service expenses of the political subdivision. Where agency\ncertificates are executed and delivered, proceeds may be used for\npayment by the political subdivision of the expenses incurred by the\nagency in connection with the execution and delivery and sale of such\ncertificates.\n  (b) Each political subdivision shall have the power to enter into\nagreements providing credit enhancement with respect to the installment\npurchase contract and/or certificates of participation, but any\nreimbursement obligation of the political subdivision shall be subject\nto appropriation.\n  (c) The proceeds from certificates of participation may be invested\nonly in obligations of the United States of America, obligations\nguaranteed by agencies of the United States of America where the payment\nof principal and interest are guaranteed by the United States of\nAmerica, obligations of the state of New York, or special time deposit\naccounts in or certificates of deposit issued by a bank or trust company\nlocated and authorized to do business in the state and secured by a\npledge of obligations of the United States of America, obligations of\nthe state of New York, or obligation of any political subdivision,\nschool district or district corporation of the state of New York.\n  (d) All certificates of participation shall contain the following\nclause: "This certificate shall be deemed executory only to the extent\nof monies appropriated and available for the purpose of the installment\npurchase contract to which it relates, and no liability on account\nthereof shall be incurred by the political subdivision beyond the amount\nof such monies. The installment purchase contract is not a general\nobligation of (insert name of political subdivision(s)). Neither the\nfull faith and credit nor the taxing power of (insert name of political\nsubdivision(s)) are pledged to the payment of any amount due or to\nbecome due under such installment purchase contract. It is understood\nthat neither this certificate nor any representation by any public\nemployee or officer creates any legal or moral obligation to appropriate\nor make monies available for the purpose of the contract."\n  Agency certificates of participation shall also bear the following\nlegend: "Further, the installment purchase contract is not a general\nobligation of the state of New York municipal bond bank agency. Neither\nthe full faith and credit nor the taxing power of the state of New York\nare pledged to the payment of any amounts due or to become due under\nsuch installment purchase contract."\n  5. (a) If an authorization for the issuance of obligations to finance\nthe equipment, machinery or apparatus would have been required by law to\nbe subject to a permissive or mandatory referendum, then the\nauthorization to enter into an installment purchase contract shall be\nsubject to a permissive or mandatory referendum, as the case may be, in\nthe same manner as provided for such referendum on the issuance of\nobligations.\n  (b) If the authorization for the issuance of obligations to finance\nthe equipment, machinery or apparatus would have been required by law to\nbe subject to: (i) a certain supermajority vote of the governing board,\n(ii) a mandatory or permissive referendum, or (iii) both, then the\nauthorization to enter into an installment purchase contract for\nequipment, machinery or apparatus shall be subject to such vote,\nreferendum or such referendum and vote, as the case may be, in the same\nmanner as provided for such vote and/or referendum on the issuance of\nobligations.\n  (c) If the authorization for the issuance of obligations would have\nbeen subject to a referendum only if the obligations had a maturity of\nmore than five years or not less than some other minimum period, then\nthe authorization to enter into the installment purchase contract shall\nbe subject to referendum only if the term of the contract is equal to or\nmore than such minimum period of maturity.\n  6. (a) Installment purchase contracts made pursuant to this section,\ntogether with any certificates of participation executed and delivered\nor caused to be executed and delivered in connection therewith, shall\nnot constitute or create indebtedness of the state or a political\nsubdivision for purposes of article seven or eight of the state\nconstitution or section 20.00 of the local finance law, nor shall they\nconstitute a contractual obligation in excess of the amounts\nappropriated therefor. Neither the state nor a political subdivision has\nany continuing legal or moral obligation to appropriate money for said\npayments or other obligations due under the installment purchase\ncontract. No installment purchase contract shall contain any provision\nwhich, in the event of non-appropriation, precludes a political\nsubdivision from acquiring equipment, machinery or apparatus for the\nsame or similar purpose as the equipment, machinery or apparatus\nincluded in the installment purchase contract for a period of more than\nsixty days from the date of expiration, termination or cancellation of\nsuch contract, provided, however, that in no case shall an installment\npurchase contract contain any provision which would preclude a political\nsubdivision from performing any statutorily or constitutionally required\nduties or functions, or require the political subdivision to pay\nliquidated damages.\n  (b) In the case of the failure to appropriate, the sole security,\napart from any security provided by a credit enhancement, for any\nremaining periodic payments shall be the equipment, machinery or\napparatus subject to the installment purchase contract, and if\ncertificates of participation are executed and delivered or caused to be\nexecuted and delivered, reserve funds, if any, or any remaining proceeds\nfrom certificates executed and delivered by or on behalf of the\npolitical subdivision. Any installment purchase contract or any\nagreement for the execution and delivery of certificates of\nparticipation to fund an installment purchase contract may provide that\nthe installment purchase contract or certificates of participation are\nsecured by the underlying equipment, machinery or apparatus and that, in\nthe event the political subdivision fails to appropriate funds\nsufficient for payments required under the contract, the financed\nequipment, machinery or apparatus may be sold on behalf of the holders\nof the certificates or other person entitled to receive payments under\nthe installment purchase contract, provided that any excess proceeds\nfrom such a sale, after deduction for and payment of fees, expenses and\nany taxes levied on the sale, and distribution to the holders of the\ncertificates in the amount of the face value of the certificates plus\naccrued interest shall be paid to the political subdivision.\n  (c) The aggregate amount of unpaid periodic payments, excluding\ninterest, to be made under any outstanding installment purchase contract\nshall be deemed to be existing indebtedness for the purpose of\ndetermining the power of any political subdivision to contract\nindebtedness under section 104.00 of the local finance law. No political\nsubdivision shall enter into any installment purchase contract if the\namount of unpaid periodic payments, excluding interest, proposed to be\nmade under such installment purchase contract and those outstanding,\ntogether with the amount of outstanding indebtedness, would exceed one\nhundred fifteen percent of the limit prescribed by such section 104.00\nor if the total amount of such payments, excluding interest, under such\nproposed contract and those outstanding would exceed forty percent of\nsuch limit.\n  7. A political subdivision shall not have the power to enter into an\ninstallment purchase contract except as authorized in this section or\nthe education law and nothing in this section shall authorize the\nconveyance or lease of property owned by a political subdivision except\nas authorized by law.\n  8. Whether or not certificates of participation are of such form and\ncharacter as to be negotiable instruments under the terms of the uniform\ncommercial code, the certificates of participation are hereby made\nnegotiable instruments within the meaning of and for all purposes of the\nuniform commercial code, subject only to the provisions of the\ncertificates of participation for registration.\n  9. All installment purchase contracts and certificates of\nparticipation of a political subdivision and the interest thereon, shall\nbe exempt from taxation for municipal and state purposes.\n  10. Certificates of participation are hereby made securities in which\nall public officers and bodies of this state and all municipalities and\nmunicipal subdivisions, all insurance companies and associations and\nother persons carrying on an insurance business, all banks, bankers,\ntrust companies, savings banks and savings associations, including\nsavings and loan associations, building and loan associations,\ninvestment companies and other persons carrying on a banking business,\nall administrators, guardians, executors, trustees and other\nfiduciaries, and all other persons whatsoever who are now or may\nhereafter be authorized to invest in bonds or in other obligations of\nthe state, may properly and legally invest funds, including capital, in\ntheir control or belonging to them; and are also hereby made securities\nwhich may be deposited with and may be received by all public officers\nand bodies of the state and all municipalities and public corporations\nfor any purpose for which the deposit of bonds or other obligations of\nthe state is now or may hereafter be authorized.\n  11. Enactment of this section shall not be constructed as invalidating\nany installment purchase contract for an improvement to real property\nentered into by a political subdivision prior to the effective date of\nsuch enactment.\n  12. References in this section to the agency and agency certificates\nof participation shall cease to have force and effect on and after July\nfirst, nineteen hundred ninety-two.\n  * NB Repealed July 15, 2027\n