NY Gen Mun L § 109-B (2021)
2021 New York Laws GMU - General Municipal Article 5-A - Public Contracts 109-B - Installment Contracts.

* § 109-b. Installment contracts. 1. As used in this section:  (a) "Political subdivision" shall mean a municipal corporation, school district,  district  corporation  or  board  of  cooperative educational services.  (b) "Installment purchase contract"  shall  mean  any  lease  purchase agreement,  installment  sales  agreement  or  other  similar  agreement providing for periodic payments between a corporation, person  or  other entity  and  a  political  subdivision  which  has  as  its  purpose the financing of equipment, machinery or apparatus.  (c) "Certificate of participation" shall  mean  a  security  or  other instrument representing a proportionate interest or the right to receive a  proportionate  share  in lease, rental, installment or other periodic payments made or to be made by a political subdivision or  made  by  the agency  on  behalf of a political subdivision pursuant to an installment purchase contract.  (d) "Agency" shall mean the state of  New  York  municipal  bond  bank agency  established  by  section twenty-four hundred thirty-three of the public authorities law.  (e) "Agency certificates of participation" shall mean certificates  of participation executed and delivered by the agency on behalf of, for the benefit  of  and  pursuant  to  a  written  agreement  with  a political subdivision.  (f) Functions performed by a governing board under this section shall, in the city of New York, be performed by the mayor and comptroller,  and the  approvals  of  the  mayor  and  the  comptroller  of any agreement, contract, instrument, arrangement or transaction  contemplated  by  this section  shall  be  the only approvals required therefor, subject to the provisions of the New York state financial emergency act for the city of New York.   2. A political subdivision may  enter  into  an  installment  purchase contract subject to the following restrictions:  (a) Neither any person, partnership, corporation or other legal entity nor  any  political subdivision, officer, employee, agency or department nor the agency for agency certificates of  participation  shall  execute and  deliver  or  cause  the  execution  and delivery of certificates of participation except in accordance with the provisions of  this  section and  with  express  written  approval  of  the  governing  board of such political subdivision and with the concurrence of the agency for  agency certificates of participation. The provisions of this section are hereby made  a part of every installment purchase contract entered into by such a political subdivision or by the  agency  for  agency  certificates  of participation.  Every  such  contract  shall  contain a clause expressly reciting the provisions of this subdivision, provided, however, that the absence of such clause in such a contract shall not obviate the duty  of all  parties  thereto to comply with the provisions of this subdivision. Neither this provision, nor any other provision of this  section,  shall be  construed  to prevent such political subdivisions from entering into installment purchase or lease purchase agreements funded without the use of certificates of participation or similar  instruments,  as  otherwise provided in this section.  (b) Subject to the provisions of subdivision five of this section, the governing  board  of  a  political  subdivision shall adopt a resolution authorizing the installment purchase contract.  (c) Subject to the provisions of subdivision  five  of  this  section, where  the financing of equipment, machinery or apparatus pursuant to an installment purchase contract is to be provided by  agency  certificates of  participation,  the governing board of a political subdivision shall adopt a resolution authorizing the  written  contract  with  the  agency  setting forth the rights and liabilities of the agency and the political subdivision as provided for in section twenty-four hundred thirty-five-a of the public authorities law.  (d)  The  term  of  such  installment purchase contract, including all renewals thereof, shall not exceed the  period  of  probable  usefulness prescribed  by section 11.00 of the local finance law for the equipment, machinery or apparatus being financed  under  the  installment  purchase contract.  (e)  The  installment  purchase  contract  shall  separately state the principal and interest component of the periodic  payments  to  be  made thereunder.  The  total  of  all  periodic  payments  which include both principal and interest components  made  by  the  political  subdivision during  each  year  throughout  the  term  of  the  installment purchase contract shall be substantially level or falling.  (f) The installment purchase  contract  shall  contain  the  following clause:  "This  contract shall be deemed executory only to the extent of monies appropriated and available for the purpose of the  contract,  and no  liability  on  account  thereof  shall  be incurred by the political subdivision beyond the amount of such monies. The  installment  purchase contract  is  not  a  general  obligation  of  (insert name of political subdivision(s)). Neither the full faith and credit nor the taxing  power of  (insert name of political subdivision(s)) are pledged to the payment of any amount due or to  become  due  under  such  installment  purchase contract.   It   is  understood  that  neither  this  contract  nor  any representation by any public employee or officer creates  any  legal  or moral obligation to appropriate or make monies available for the purpose of  the  contract."  Where  agency certificates of participation are the security for  such  contract,  such  contract  shall  also  contain  the following  clause:  "Further  no  liability  on account thereof shall be incurred by the state of New York municipal bond bank agency beyond  the amount  of  such monies. It is understood that neither this contract nor any representation by any employee or officer of such agency creates any legal or moral obligation to appropriate or make state monies  available for the purpose of the contract."  (g)  No  payment under the installment purchase contact except payment for the total amount outstanding shall be financed from the proceeds  of obligations  issued  pursuant  to  the  local finance law other than the proceeds of revenue anticipation notes, tax anticipation notes or budget notes.   3. (a) Installment purchase  contracts  for  equipment,  machinery  or apparatus   shall  constitute  purchase  contracts  for  public  bidding purposes and shall be subject to  public  bidding  requirements  to  the extent  applicable  by law. For purposes of determining whether the cost of the equipment, machinery or apparatus exceeds the monetary  threshold fixed  in  section  one  hundred  three of this article, the cost of the equipment, machinery or apparatus, exclusive of the cost  of  financing, shall  be  considered. If the equipment, machinery or apparatus is to be financed by a party other than the party submitting  the  bid,  the  bid specifications may provide that the political subdivision may assign its right  to purchase to a third party without the necessity of approval by the other party  to  the  contract.  Nothing  herein  shall  preclude  a political  subdivision from advertising for bids in the alternative with and without financing.  (b) Certificates of participation caused to be executed and  delivered by  the  political  subdivision  pursuant to this section, in connection with one or more installment purchase contracts entered or  expected  to be  entered  into by such political subdivision may be sold at public or private sale, either independently or in connection  with  a  pooled  or  aggregate  program,  as determined by the governing board. The governing board may, by resolution,  delegate  such  power  to  the  chief  fiscal officer,  in  which  event such chief fiscal officer shall exercise such powers  and  perform  such  duties  until  the governing board shall, by resolution, elect to reassume the same. If certificates of participation are sold at public sale, they shall be sold to the bidder  offering  the lowest  interest  cost  as  computed in accordance with the net interest cost method, taking into consideration any premium or discount,  or  the actuarial  or  true  interest cost method, whichever is specified in the notice of sale, not less than four nor more than fifteen  days,  Sundays excepted,  after  a  notice  of  such  sale  has  been  circularized  in accordance with any rule or order prescribed by the  state  comptroller, pursuant  to  paragraph d of section 57.00 of the local finance law, for the circularization of notices for the sale of bonds. The terms  of  the sale may not be changed unless a supplemental notice of sale is provided in accordance with the procedure for the sale of bonds in paragraph b of section 58.00 of the local finance law.  (c) Whenever in the judgement of the governing board, or if authorized by  the  governing  board, the chief fiscal officer, the interest of the political subdivision will be served thereby, the  governing  board,  or chief  fiscal officer as the case may be, may authorize the sale of such certificates of participation at private sale, including  such  sale  in connection with a pooled or aggregate program.  (d)  The  state comptroller shall promulgate rules in conformance with the state administrative procedure act  governing  the  procedure  which shall be adhered to when entering into installment purchase contracts or authorizing  the execution and delivery of certificates of participation pursuant to this section, including guidelines for the private  sale  of certificates  of  participation.  No  private  sale  of  certificates of participation shall be conducted  by  a  political  subdivision  without prior approval of the state comptroller except as provided in such rules which  shall set forth the circumstances under which such approval shall not be required. The state comptroller shall  annually  deliver  to  the state  division  of  the  budget,  the  senate finance committee and the assembly ways and means committee a report listing all negotiated  sales conducted  in  the  previous  year, including the name of the issuer and amount of the issue for each such sale.   4. (a) The proceeds of  certificates  of  participation  executed  and delivered  in  connection  with  the  installment purchase contract made pursuant to this section, in addition to being applied towards the  cost of  the  equipment,  machinery  or  apparatus,  may also be used for the establishment of reserve funds to secure such certificates, the cost  or premium  of  letters  of credit, insurance or other credit enhancements, the costs of bond counsel, a financial  advisor,  underwriter,  trustees and  paying  agent,  and  other  actual  and necessary expenses directly related to the issuance of such certificates. The foregoing shall not be construed to authorize the use of  such  proceeds  for  the  payment  of personal  service  expenses  of  the political subdivision. Where agency certificates are executed  and  delivered,  proceeds  may  be  used  for payment  by  the  political  subdivision of the expenses incurred by the agency in connection with the execution and delivery and  sale  of  such certificates.  (b)  Each  political  subdivision  shall  have the power to enter into agreements providing credit enhancement with respect to the  installment purchase   contract   and/or  certificates  of  participation,  but  any reimbursement obligation of the political subdivision shall  be  subject to appropriation.  (c)  The  proceeds  from certificates of participation may be invested only in  obligations  of  the  United  States  of  America,  obligations guaranteed by agencies of the United States of America where the payment of  principal  and  interest  are  guaranteed  by  the  United States of America,  obligations  of the state of New York, or special time deposit accounts in or certificates of deposit issued by a bank or trust company located and authorized to do business in the  state  and  secured  by  a pledge  of  obligations  of the United States of America, obligations of the state of New York,  or  obligation  of  any  political  subdivision, school district or district corporation of the state of New York.  (d)  All  certificates  of  participation  shall contain the following clause: "This certificate shall be deemed executory only to  the  extent of  monies appropriated and available for the purpose of the installment purchase contract to which it  relates,  and  no  liability  on  account thereof shall be incurred by the political subdivision beyond the amount of  such  monies.  The  installment  purchase  contract is not a general obligation of (insert name of  political  subdivision(s)).  Neither  the full  faith and credit nor the taxing power of (insert name of political subdivision(s)) are pledged to the payment  of  any  amount  due  or  to become  due  under  such installment purchase contract. It is understood that neither this certificate  nor  any  representation  by  any  public employee or officer creates any legal or moral obligation to appropriate or make monies available for the purpose of the contract."   Agency  certificates  of  participation  shall also bear the following legend: "Further, the installment purchase contract  is  not  a  general obligation  of the state of New York municipal bond bank agency. Neither the full faith and credit nor the taxing power of the state of New  York are  pledged  to  the  payment of any amounts due or to become due under such installment purchase contract."   5. (a) If an authorization for the issuance of obligations to  finance the equipment, machinery or apparatus would have been required by law to be   subject   to   a  permissive  or  mandatory  referendum,  then  the authorization to enter into an installment purchase  contract  shall  be subject  to a permissive or mandatory referendum, as the case may be, in the same manner as provided for  such  referendum  on  the  issuance  of obligations.  (b)  If  the  authorization for the issuance of obligations to finance the equipment, machinery or apparatus would have been required by law to be subject to: (i) a certain supermajority vote of the governing  board, (ii)  a  mandatory  or  permissive  referendum,  or (iii) both, then the authorization  to  enter  into  an  installment  purchase  contract  for equipment,  machinery  or  apparatus  shall  be  subject  to  such vote, referendum or such referendum and vote, as the case may be, in the  same manner  as  provided  for such vote and/or referendum on the issuance of obligations.  (c) If the authorization for the issuance of  obligations  would  have been  subject  to a referendum only if the obligations had a maturity of more than five years or not less than some other  minimum  period,  then the  authorization to enter into the installment purchase contract shall be subject to referendum only if the term of the contract is equal to or more than such minimum period of maturity.   6. (a) Installment purchase contracts made pursuant to  this  section, together  with  any certificates of participation executed and delivered or caused to be executed and delivered in  connection  therewith,  shall not  constitute  or  create  indebtedness  of  the  state or a political subdivision for  purposes  of  article  seven  or  eight  of  the  state constitution  or  section 20.00 of the local finance law, nor shall they constitute  a  contractual  obligation  in   excess   of   the   amounts  appropriated therefor. Neither the state nor a political subdivision has any  continuing  legal or moral obligation to appropriate money for said payments  or  other  obligations  due  under  the  installment  purchase contract.  No  installment purchase contract shall contain any provision which,  in  the  event  of  non-appropriation,  precludes  a   political subdivision  from  acquiring  equipment,  machinery or apparatus for the same or  similar  purpose  as  the  equipment,  machinery  or  apparatus included  in the installment purchase contract for a period of more than sixty days from the date of expiration, termination or  cancellation  of such  contract,  provided, however, that in no case shall an installment purchase contract contain any provision which would preclude a political subdivision from performing any statutorily or constitutionally required duties or  functions,  or  require  the  political  subdivision  to  pay liquidated damages.  (b)  In  the  case  of  the failure to appropriate, the sole security, apart from any security  provided  by  a  credit  enhancement,  for  any remaining  periodic  payments  shall  be  the  equipment,  machinery  or apparatus  subject  to  the  installment  purchase  contract,   and   if certificates of participation are executed and delivered or caused to be executed and delivered, reserve funds, if any, or any remaining proceeds from  certificates  executed  and  delivered  by  or  on  behalf  of the political  subdivision.  Any  installment  purchase  contract   or   any agreement   for   the   execution   and   delivery  of  certificates  of participation to fund an installment purchase contract may provide  that the  installment  purchase contract or certificates of participation are secured by the underlying equipment, machinery or apparatus and that, in the  event  the  political  subdivision  fails  to   appropriate   funds sufficient  for  payments  required  under  the  contract,  the financed equipment, machinery or apparatus may be sold on behalf of  the  holders of  the  certificates or other person entitled to receive payments under the installment purchase contract, provided  that  any  excess  proceeds from  such a sale, after deduction for and payment of fees, expenses and any taxes levied on the sale, and distribution to  the  holders  of  the certificates  in  the  amount of the face value of the certificates plus accrued interest shall be paid to the political subdivision.  (c) The  aggregate  amount  of  unpaid  periodic  payments,  excluding interest, to be made under any outstanding installment purchase contract shall  be  deemed  to  be  existing  indebtedness  for  the  purpose  of determining  the  power  of  any  political  subdivision   to   contract indebtedness under section 104.00 of the local finance law. No political subdivision  shall  enter  into any installment purchase contract if the amount of unpaid periodic payments, excluding interest, proposed  to  be made  under  such  installment  purchase contract and those outstanding, together with the amount of outstanding indebtedness, would  exceed  one hundred  fifteen  percent of the limit prescribed by such section 104.00 or if the total amount of such payments, excluding interest, under  such proposed  contract  and  those outstanding would exceed forty percent of such limit.   7. A political subdivision shall not have the power to enter  into  an installment  purchase  contract  except as authorized in this section or the education law and  nothing  in  this  section  shall  authorize  the conveyance  or lease of property owned by a political subdivision except as authorized by law.   8. Whether or not certificates of participation are of such  form  and character as to be negotiable instruments under the terms of the uniform commercial  code,  the  certificates  of  participation  are hereby made negotiable instruments within the meaning of and for all purposes of the  uniform  commercial  code,  subject  only  to  the  provisions  of   the certificates of participation for registration.   9.   All   installment   purchase   contracts   and   certificates  of participation of a political subdivision and the interest thereon, shall be exempt from taxation for municipal and state purposes.   10. Certificates of participation are hereby made securities in  which all  public officers and bodies of this state and all municipalities and municipal subdivisions, all insurance  companies  and  associations  and other  persons  carrying  on  an insurance business, all banks, bankers, trust companies,  savings  banks  and  savings  associations,  including savings   and   loan   associations,  building  and  loan  associations, investment companies and other persons carrying on a  banking  business, all   administrators,   guardians,   executors,   trustees   and   other fiduciaries, and all  other  persons  whatsoever  who  are  now  or  may hereafter  be  authorized  to invest in bonds or in other obligations of the state, may properly and legally invest funds, including capital,  in their  control or belonging to them; and are also hereby made securities which may be deposited with and may be received by all  public  officers and  bodies  of the state and all municipalities and public corporations for any purpose for which the deposit of bonds or other  obligations  of the state is now or may hereafter be authorized.   11. Enactment of this section shall not be constructed as invalidating any  installment  purchase  contract for an improvement to real property entered into by a political subdivision prior to the effective  date  of such enactment.   12.  References  in this section to the agency and agency certificates of participation shall cease to have force and effect on and after  July first, nineteen hundred ninety-two.   * NB Repealed July 15, 2024