NY State Fin L § 56 (2021)
2021 New York Laws STF - State Finance Article 5 - Borrowing by the State 56 - Call Provision in State Bonds; Refunding State Bonds.

§  56.  Call  provision  in  state  bonds;  refunding  state bonds. 1. Whenever in his opinion  it  is  to  the  advantage  of  the  state  the comptroller  when issuing and selling any bonds of the state may reserve to the state on such conditions as he may deem advisable and proper  the privilege of refunding or of redeeming at not more than three per centum above par value all or any part of such bonds prior to the date on which they shall be due and payable.   2. Whenever the comptroller shall have reserved to the state the right to  redeem  or  refund  state  bonds pursuant to subdivision one of this section, he shall be authorized to issue refunding bonds  in  accordance with  the provisions of this subdivision. Such bonds may be issued prior to the first date on which he shall have reserved the right to refund or redeem the bonds to be refunded.  (a) Refunding bonds shall be issued only when  the  comptroller  shall have  certified that, as a result of the refunding, there will be a debt service savings to the state on a present value basis as a result of the refunding transaction and that either (i)  the  refunding  will  benefit state  taxpayers  over  the  life of the refunding bonds by achieving an actual debt service savings each year or state fiscal  year  during  the term  to  maturity  of  the  refunding  bonds  when  debt service on the refunding bonds is expected to be paid from  legislative  appropriations or  (ii)  debt service on the refunding bonds shall be payable in annual installments of principal and interest  which  result  in  substantially level  or  declining  debt service payments pursuant to paragraph (b) of subdivision  two  of  section  fifty-seven   of   this   article.   Such certification  by  the  comptroller  shall  be  conclusive as to matters contained therein after the refunding bonds have been issued.   For purposes of determining whether there is a debt service savings on a present value basis the present value of the total  payments  of  both principal  and  interest  to  become  due  on the refunding bonds, after deducting any accrued interest or premium received by the state and  not used  to pay the principal of or interest on the bonds to be refunded or costs of issuance of the refunding bonds, excluding all  such  principal and interest payments to be made from income received as a result of the investment  of  the proceeds from the sale of the refunding bonds, shall be less than the present value of the principal and interest payments to become due at their stated maturities on the principal amount  of  bonds to  be refunded which are outstanding as of the date of the issue of the refunding  bonds  after  deducting  therefrom  all  costs  and  expenses incidental  to  the  issuance  of  the  refunding  bonds,  including the development of the refunding plan, and of executing and  performing  the terms  and conditions of the escrow contract and all fees and charges of the escrow holder, but only to the extent such costs  and  expenses  are not  paid from the proceeds of the refunding bonds. The present value of debt service payments pursuant  to  the  foregoing  provisions  of  this subdivision  shall be computed by discounting the principal and interest payments on both the refunding bonds and the bonds to be  refunded  from the  respective maturities thereof to the date of issue of the refunding bonds at a rate equal to the effective interest cost  of  the  refunding bonds.  The effective interest cost of the refunding bonds shall be that rate which is arrived at  by  doubling  the  semi-annual  interest  rate (compounded  semi-annually)  necessary  to  discount  the  debt  service payments on the refunding bonds from the maturity dates thereof  to  the date of issue of the refunding bonds and to the bona fide initial public offering  price including estimated accrued interest, or, if there is no public offering, to the price bid including estimated accrued interest.  (b) The proceeds of refunding bonds, including any premium received on the sale thereof, and any  amounts  that  may  be  appropriated  by  the  legislature  for the purposes thereof, shall be deposited directly in an escrow fund created pursuant to this section, and amounts in such escrow fund, and income earned thereon, shall be used only (i)  to  redeem  the bonds to be refunded, (ii) to pay debt service on the refunding bonds or on  the  bonds  to  be refunded, (iii) to pay the costs of administering such fund, (iv) to pay any direct  or  indirect  costs  of  issuing  the refunding  bonds  and (v) to make any other payments required to be made with respect to the refunding transaction.  (c) Amounts deposited in each escrow  fund,  with  the  income  earned thereon,  when  invested  as  directed  by  this  subdivision,  shall be sufficient to pay (i) all costs of issuance of the refunding bonds, (ii) all debt service on the refunding bonds or on the bonds to  be  refunded until  and  including  the  date that the bonds to be refunded are to be redeemed, except, at the option of the state comptroller,  debt  service scheduled  to  be  paid  from  appropriations  in  effect on the date of issuance of the refunding bonds, (iii) all costs  of  administering  the escrow  fund,  if  any, (iv) the principal of and any premium due on the bonds to be refunded on the date they are to be redeemed,  and  (v)  any other  payments  required  to  be  made in connection with the refunding transaction.  (d) The comptroller is authorized  to  establish  an  escrow  fund  in connection with each issue of refunding bonds that he may sell from time to time, and he shall hold such funds outside the state treasury for the purposes enumerated in this section.  (e)  All  money  in each escrow fund shall be held as cash or shall be invested  in  direct  obligations  of  the  federal  government,  direct obligations  the  principal  and interest of which are guaranteed by the federal government, or obligations the interest on which is exempt  from federal   income   taxation  and  which  are  fully  secured  by  direct obligations of  the  federal  government,  having  such  maturities  and interest  payment dates as required to make all payments to be made from the escrow fund as they come due. The earnings on such obligations shall remain in the escrow fund until required to be used to pay debt  service on  the refunding bonds, to pay debt service on the bonds to be refunded or to make other payments authorized to be made from  the  escrow  fund. Any money or investments remaining in any escrow fund after all refunded bonds  are  redeemed  and  after  all  expenses related to the refunding transaction have been paid shall be deposited in the general fund.  (f) No appropriation shall be required for disbursement of moneys from any escrow fund created  pursuant  to  this  section,  or  the  earnings thereon,  for  the  purposes  enumerated  above, and the comptroller may covenant, on behalf of the state, with holders of  the  refunding  bonds and  the  bonds to be refunded that such disbursements will be made. The comptroller is also authorized to enter into such other agreements  with other  persons  as  he deems necessary or appropriate in connection with any refunding transaction.  (g) Any refunding bonds issued pursuant to this section shall be  paid in  annual  installments which shall, so long as any refunding bonds are outstanding, be made  in  each  year  or  state  fiscal  year  in  which installments  were  due  on  the bonds to be refunded and shall be in an amount which shall result in annual debt service payments which shall be less in each year or state fiscal year  than  the  annual  debt  service payments  on  the  bonds  to  be  refunded  unless  debt  service on the refunding bonds is payable  in  annual  installments  of  principal  and interest  which  will  result  in  substantially level or declining debt service payments pursuant to paragraph (b) of subdivision two of section fifty-seven of this article.    3. The state comptroller shall have  custody  of  the  securities  and other  assets  in  the  escrow  funds  created pursuant to this section; provided, however, that, subject to the rights  of  the  owners  of  the bonds,  the  state comptroller may contract with a bank or trust company for  the  maintenance,  management and custody of the escrow funds. Such bank or trust company shall have an  office  and  be  authorized  to  do business  in the state and shall maintain a combined capital and surplus of not less than seventy-five million dollars.   4. Except where inconsistent with the provisions of this section,  the provisions of section fifty-seven of this chapter governing the original issuance  of  debt shall apply to the sale of refunding debt pursuant to this section.   5. Notwithstanding any other law, rule or regulation to the  contrary, within  thirty  days of the delivery of any fixed rate, fixed term state obligations issued pursuant to sections fifty-five  and  fifty-seven  of this  article,  the state comptroller shall determine and certify to the director of the budget, the chairs of the senate finance  committee  and the  assembly ways and means committee, the allowable bond yield on such obligations as such allowable bond yield is determined pursuant  to  the provisions  of  the  internal  revenue  code  of  1986, as amended. With respect to any short-term series notes, flexible notes, or  other  notes on  which  interest  rates  may  vary  from  time  to  time,  the  state comptroller shall determine and certify to the director  of  the  budget and the chairs of the senate finance committee and the assembly ways and means  committee  as  soon  as is practicable after the maturity of such notes on any state obligations issued pursuant to section fifty-five  of this  article  the  allowable  bond  yield  on  such obligations as such allowable bond yield is determined pursuant to  the  provisions  of  the internal  revenue code of 1986, as amended. Prior to making of a payment of any rebate to the federal government,  the  state  comptroller  shall certify  to  the  director  of  the  budget and the chairs of the senate finance committee and the assembly ways and means committee  the  amount of  the  rebate  required  to  be  paid and the date prior to which such rebate must be paid in order to  maintain  the  exemption  from  federal income  taxation  of  the interest paid on the obligations for which the rebates are being made.   6. Notwithstanding any other law, rule or regulation to the  contrary, no monies shall be expended for the purpose of redeeming serial bonds to maintain  the  exemption  from  federal taxation of the interest paid to holders of state obligations issued pursuant to sections fifty-five  and fifty-seven  of  this article, issued by the state of New York until the state comptroller has certified to the director of the  budget  and  the chairs  of  the senate finance committee and the assembly ways and means committee their determination, the amount of such bonds to  be  redeemed and the date upon which such bonds are to be redeemed.