NY Loc Fin L § 90.10 (2021)
2021 New York Laws LFN - Local Finance Article 2 - Local Indebtedness Title 7 - Refunding of Bonds and Capital Notes 90.10 - Advance Refunding of Certain Bonds.

§  90.10  Advance  refunding  of  certain  bonds.  a.  As used in this section:   1. The term "escrow contract" shall mean a contract  entered  into  by and  between a municipality, school district or district corporation and a bank or trust company pursuant to paragraph i of this section.   2. The term "escrow holder" shall  mean  the  bank  or  trust  company designated as such pursuant to an escrow contract.   3.  The  term "refunding financial plan" shall mean the financial plan for a refunding as set forth in the refunding bond  resolution  relating thereto.   4.  The  term  "refunding bonds" shall mean refunding bonds authorized pursuant to this section.   5. The term  "refunding  bond  resolution"  shall  mean  a  resolution authorizing   the  issuance  of  refunding  bonds  adopted  pursuant  to paragraph e of this section.   b. 1. A municipality, school  district  or  district  corporation  may issue  serial  bonds  to  refund  all  or  any  portion  of  an issue of outstanding serial bonds issued on  or  after  January  first,  nineteen hundred seventy, and, in addition, a municipality or school district may issue  serial  bonds  or serial bonds to refund all or any portion of an issue of outstanding sinking fund bonds or sinking fund bonds issued  on or  after  December fifteenth, nineteen hundred eighty-one and may issue sinking fund bonds  to  refund  all  or  any  portion  of  an  issue  of outstanding  serial  bonds  or  sinking  fund  bonds,  in the manner and subject to the limitations and conditions set forth in this section. The principal  amount  of  refunding  bonds  shall  not  exceed  an   amount sufficient to pay the sum of (a) the principal amount of the bonds to be refunded,  which is outstanding as of the date of issue of the refunding bonds, (b) the aggregate amount of unmatured  interest  payable  on  the bonds  to  be  refunded  to  and including either the date or dates such bonds mature or, if such bonds are to be called for redemption prior  to their  maturities,  the  date  or  dates  set  for  such  redemption  in accordance with the refunding financial plan, (c)  redemption  premiums, if  any,  payable on the bonds to be refunded as of such redemption date or dates, and (d) costs and expenses incidental to the issuance  of  the refunding  bonds,  including  the development of the refunding financial plan, and of executing and performing the terms and  conditions  of  the escrow  contract  and  all fees and charges of the escrow holder. In the event a municipality or school district issues bonds to  refund  sinking fund  bonds,  and  such  refunding  has  the  effect  of  permitting the municipality or school district to withdraw assets from a  sinking  fund established  for  such refunded bonds, then such assets shall be used to pay principal and interest on either such refunded bonds or other  bonds of such municipality or school district.   2.  * (a)  Refunding  bonds shall be issued only in the event that the present value of the total payments of both principal  and  interest  to become due on the refunding bonds, and deducting any accrued interest or premium  received  by the issuer 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 financial 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. In the case of the city of New York, notwithstanding any other provision of law to the contrary, for purposes of calculating the present value  of  debt service  and  calculating  savings  in  connection  with the issuance of refunding bonds, (i)  the  effective  interest  rate  and  debt  service payable  on  variable  rate  bonds  in connection with which, and to the extent that, the city of New York has  entered  into  an  interest  rate exchange or similar agreement pursuant to which such city makes payments based  on  a  fixed  rate and receives payments based on a variable rate that shall be found by the finance board of such city to  be  equivalent over  time to the variable rate paid on the related variable rate bonds, shall be calculated assuming that the rate of interest on such  variable rate  bonds is the fixed rate payable by such city on such interest rate exchange or similar agreement for the scheduled term of such  agreement; (ii) the effective interest rate and debt service on variable rate bonds in  connection  with which, and to the extent that, the city of New York has not entered into such an interest rate exchange or similar agreement shall be calculated assuming that interest  on  such  variable  interest rate  bonds  is  payable  at  a  rate  or rates as shall be found by the finance board of such city; (iii) the effective interest rate  and  debt service  on  any  bonds subject to optional or mandatory tender shall be calculated assuming that such bonds are remarketed  following  any  such tender  at a rate or rates as shall be found by the finance board of the city of New York; and (iv) otherwise, the effective  interest  rate  and debt  service  on  any  bonds  shall  be  calculated  at a rate or rates determined by the finance board of the city of New York. Notwithstanding any other provision of law to the contrary, in the case of the  city  of New  York,  for  calculating  the  present  value  of  debt  service and calculating savings in connection with the issuance of refunding  bonds, the  refunding  of variable rate debt instruments with new variable rate debt instruments shall be excluded from any  such  requirements,  if  so determined by the finance board of such city.   * NB Effective until July 15, 2022   * (a)  Refunding  bonds  shall  be  issued  only in the event that the present value of the total payments of both principal  and  interest  to become due on the refunding bonds, and deducting any accrued interest or premium  received  by the issuer 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 financial 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.   * NB Effective July 15, 2022  (b)  Notwithstanding  the  provisions  of  subparagraph  (a)  of  this subdivision,  the city of New York may also issue refunding bonds (i) if the bond to be refunded contains a covenant referring to  the  existence of  the New York state emergency financial control board for the city of New York or any other covenant relating to matters other than the prompt payment of principal and interest on the obligation when  due,  and  the refunding  bond  omits or modifies any such covenant or (ii) if the bond to be refunded is guaranteed by the federal government.  (c)  Notwithstanding  the  provisions  of  subparagraph  (a)  of  this subdivision,  in  the case of refunding bonds sold to the New York state environmental facilities corporation and purchased for  deposit  in  the water  pollution  control revolving fund established pursuant to section twelve hundred eighty-five-j of the public authorities law and for which an allocation has been established pursuant to section  17-1909  of  the environmental conservation law, the present value of the projected total allocation  payable to the issuer of the refunding bonds or available to make principal and interest payments on the  refunding  bonds  shall  be subtracted from the present value of the total payments of the principal and  interest  to  become  due on the refunding bonds in determining the present value savings attributable to the  issuance  of  such  refunding bonds pursuant to subparagraph (a) of this subdivision.  (d)  Notwithstanding  the  provisions  of  subparagraph  (a)  of  this subdivision, in the case of refunding bonds sold to the New  York  state environmental  facilities  corporation  and purchased for deposit in the drinking water revolving fund established  pursuant  to  section  twelve hundred  eighty-five-m  of  the  public authorities law and for which an allocation has been  established  pursuant  to  section  eleven  hundred sixty-two  of  the public health law, the present value of the projected total allocation payable  to  the  issuer  of  the  refunding  bonds  or available to make principal and interest payments on the refunding bonds shall  be subtracted from the present value of the total payments of the principal  and  interest  to  become  due  on  the  refunding  bonds  in determining  the  present  value savings attributable to the issuance of such refunding bonds pursuant to subparagraph (a) of this subdivision.  (e)  Notwithstanding  the  provisions  of  subparagraph  (a)  of  this subdivision,  a school district may also issue refunding bonds to refund bonds if the bonds were issued by a school district  prior  to  December first two thousand one, or prior to thirty days after the effective date of  this  subdivision,  whichever is later, for the purpose of financing  facilities that were eligible for building aid pursuant  to  subdivision six  of  section  thirty-six  hundred  two of the education law, and for which the  aid  apportionment  payable  in  the  two  thousand  two--two thousand  three  and  two thousand three--two thousand four school years for approved expenditures for debt service are subsequently reduced as a result of the application of assumed amortization  to  unpaid  principal outstanding as of July first, two thousand two.   3.  Refunding  bonds  may  be  issued  at  any  time subsequent to the issuance of the bonds to be refunded.   c. 1. The last installment of each separate series of refunding serial bonds, and the maturity date of any refunding sinking fund bonds,  shall occur  not  later  than the expiration of the maximum period of probable usefulness permitted by law at the time of the issuance of the refunding bonds or the bonds to be refunded for the object or  purpose  for  which such  bonds  to  be  refunded  were  issued,  or in the alternative, the weighted average remaining period of probable usefulness of the  objects or  purposes  (or  classes  of  objects  or purposes) financed with each series of bonds to be refunded or the weighted average remaining  period of probable usefulness of all objects or purposes (or classes of objects or  purposes) financed with all of the bonds to be refunded. Such period shall be computed from the date of issuance of such bonds to be refunded or from  the  date  of  the  first  bond  anticipation  note  issued  in anticipation thereof, whichever date is the earlier.   2.  The  first  installment of each separate series of refunding bonds shall mature not later than the date of the first stated maturity of the bonds to be refunded next following the date of issue of  the  refunding bonds.   When  the  finance  board  has  determined  to  provide  for  a substantially level or declining annual debt service  schedule  for  the refunding bonds, as provided in subdivision three of this paragraph, the determination  of  whether annual debt service is substantially level or declining shall not take into account the year which includes the  first principal  installment  of  the refunding bonds, provided that the first principal installment, when added to  the  amount  of  interest  payable within one year of its accrual that would accrue on the entire refunding debt or series of refunding bonds in one calendar year, shall be no more than  five  percent  less  than  the  greatest  aggregate amount of debt service due in any other year.   3. No annual installment of each separate series  of  refunding  bonds shall  be  more  than  fifty  per centum in excess of the smallest prior installment  unless  the  finance  board  of  the  municipality,  school district or district corporation issuing the bonds has determined to use a  substantially level or declining annual debt service schedule for the refunding bonds. The amounts of annual  installments  of  the  refunding bonds  may  be  determined without reference to the stated maturities of the bonds to be refunded.   4. In the event the bonds to be refunded  were  separately  authorized for  different  objects  or  purposes, which separately authorized bonds were consolidated for purposes of  sale  and  sold  as  a  single  issue pursuant to paragraph c of section 57.00 of this chapter, each component issue  included  in  such  consolidated  issue  shall be considered as a separate issue for the purposes of the provisions of  subdivisions  one, two and four of this paragraph, notwithstanding that the refunding bonds are sold as a single issue.   5. Refunding bonds may be issued as two or more separate series.   d.  Bond anticipation notes shall not be issued in anticipation of the sale of refunding bonds.    e. The issuance of refunding bonds shall be authorized by a "refunding bond resolution". Such a resolution  shall  contain,  in  substance,  at least the following:   1.  The  maximum  amount  of  refunding  bonds authorized to be issued pursuant thereto.   2. A  determination  that  such  maximum  amount  of  refunding  bonds authorized  to  be  issued  does  not  exceed  the limitation imposed by subdivision one of paragraph b of this section.   3. The amount and  a  description  of  the  outstanding  bonds  to  be refunded.   4. A statement of the maximum period or periods of probable usefulness permitted by law at the time of the issuance of the bonds to be refunded for the object or purpose or objects or purposes for which such bonds to be refunded were issued.   5.  The financial plan for the refunding proposed, showing the sources and amounts of all moneys required to  accomplish  such  refunding,  and except  where  such  refunding  bonds are issued by the city of New York pursuant to subparagraph (b) of subdivision two of paragraph b  of  this section  an  estimate  of  the  present  value of the total debt service savings anticipated, computed in accordance  with  subparagraph  (a)  of subdivision two of paragraph b of this section.   f.   1.   Any  refunding  bonds  issued  to  refund  bonds  which  are additionally secured by a pledge of any specific moneys pursuant to  any general  or  special  law,  at  the  option of the finance board, may be additionally secured to the same extent and in the same  manner  as  the bonds  to be refunded effective upon the date of issue of such refunding bonds, subject only to any rights of the holders of  such  bonds  to  be refunded.   2.  Refunding  bonds may be sold at either public or private sale, but they shall not be  sold  on  option  or  on  a  deferred  payment  plan, provided,  however,  that  if  such  bonds are sold at private sale, the terms and conditions of  such  sale  shall  be  approved  by  the  state comptroller. Refunding bonds sold at private sale shall bear interest at such  rate  or  rates,  not exceeding the maximum rate, if any, fixed by paragraph b of section 57.00 of this chapter, as may  be  determined  by the  finance  board.  Refunding  bonds  may be sold at private sale at a discount in the same manner as authorized  by  paragraph  e  of  section 57.00  of  this  chapter. The cost of such discount, together with other costs of the issuance of obligations, shall be deemed a part of the cost of the objects or purposes for which such obligations are issued.   g. Except where such refunding bonds are issued by  the  city  of  New York  pursuant  to subparagraph (b) of subdivision two of paragraph b of this section, no refunding  bonds  shall  be  issued  pursuant  to  this section  unless  the chief fiscal officer of the issuer shall have first filed with the finance  board  a  certificate,  approved  by  the  state comptroller,  which  shall  be  final  and  conclusive upon all parties, setting forth the present value of the total debt service savings to the issuer resulting from the issuance of the refunding  bonds  computed  in accordance with the provisions of subparagraph (a) of subdivision two of paragraph  b of this section, except that the actual amount, rather than an estimate, of the amount of accrued interest to be paid on such  bonds shall  be  used  in determining the effective interest cost thereof. The certificate shall be in the form and shall contain such  information  as shall  be prescribed by the state comptroller. The certificate shall not be approved until ten days after the filing of such certificate  in  the office of the state comptroller.   h.  1.  Prior  to  the  issuance of refunding bonds, the finance board shall adopt a resolution electing to call in and redeem such portion  of  the  bonds  to  be  refunded as is to be called for payment prior to the date of their maturity in accordance with the refunding financial  plan. The  resolution  adopted  pursuant to this paragraph shall authorize and direct  the escrow holder to cause notice of such call for redemption to be given in the name of the issuer of such refunding bonds in the manner and within the times provided by paragraph a of section  53.00  of  this chapter.  If the issuer has no official newspaper, such resolution shall designate  a   newspaper   having   general   circulation   within   the municipality, school district or district corporation for the purpose of giving such notice.   2.  Upon  the issuance of the refunding bonds, the election to call in and redeem the bonds to be refunded and  the  direction  to  the  escrow holder  to  cause notice thereof to be given contained in the resolution adopted pursuant to subdivision one  of  this  paragraph,  shall  become irrevocable,  and  the  provisions of such resolution shall constitute a covenant with the holders of such refunding bonds,  provided  that  such resolution may be amended from time to time as may be necessary in order to  comply  with  the publication requirements of paragraph a of section 53.00 of this chapter.   i. 1. The finance board, or the chief fiscal officer  if  the  finance board  shall  delegate  such  duty  to  him,  prior  to  the issuance of refunding bonds, shall contract on behalf of the issuer with a  bank  or trust  company  located  and authorized to do business in this state for the purpose of having such bank or  trust  company  act  as  the  escrow holder  of the proceeds, inclusive of any premium, from the sale of such refunding bonds, together with all income derived from the investment of such proceeds, and any other moneys to be provided  by  such  issuer  to effectuate  the  refunding  financial  plan.  Each escrow contract shall contain such terms and conditions as shall  be  necessary  in  order  to accomplish the refunding financial plan, including, without limiting the generality  of  the  foregoing, provisions for the escrow holder without further authorization or direction from  the  issuer  of  the  refunding bonds,  except  as  otherwise provided therein, (a) to make all required payments  of  principal,  interest  and  redemption  premiums   to   the appropriate paying agent with respect to either the bonds to be refunded or  the refunding bonds, (b) to pay costs and expenses incidental to the issuance of the  refunding  bonds,  including  the  development  of  the refunding  financial plan, and of executing and performing the terms and conditions of the escrow contract and all of its fees and charges as the escrow holder, (c) at the appropriate time or times to cause to be given on behalf of such issuer the notice of redemption authorized to be given pursuant to paragraph h of this section, and (d) to  invest  the  moneys held  by  it  consistent  with the provisions of the refunding financial plan. Each escrow contract shall be irrevocable and shall  constitute  a covenant with the holders of the refunding bonds to which it relates.   2.  The proceeds, inclusive of any premium, from the sale of refunding bonds, immediately upon receipt, shall be placed in escrow by the issuer with the escrow holder in  accordance  with  the  escrow  contract.  All moneys  held  by  the  escrow  holder  shall  be invested only in direct obligations of the United  States  of  America  or  in  obligations  the principal of and interest on which are unconditionally guaranteed by the United  States  of America, which obligations shall mature or be subject to redemption at the option of the holder thereof  not  later  than  the respective  dates  when such moneys will be required to make payments in accordance with the refunding financial plan. Any such moneys  remaining in  the  custody  of  the  escrow holder after the full execution of the escrow contract shall be returned to the issuer of the  refunding  bonds and  shall  be applied by such issuer to the payment of the principal of  or interest on the refunding bonds then outstanding, to the  payment  of any  amounts  required  to  be  paid  to the United States of America in connection with the refunding or to the payment of or reimbursement  for the  costs  of  issuance  or  other  administrative  costs  incurred  in connection with the issuance of the refunding bonds.   3. That portion of such proceeds from the  sale  of  refunding  bonds, together  with  interest  earned  thereon and any moneys on deposit in a sinking fund established for the refunded bonds which is applied to  the payment  of the principal and interest on the refunded bonds pursuant to subdivision one of paragraph b of this section, which shall be  required for  the  payment  of  the  principal of and interest on the bonds to be refunded, including any redemption  premiums,  in  accordance  with  the refunding  financial plan, shall be irrevocably committed and pledged to such purpose and the holders of such bonds to be refunded shall  have  a lien  upon  such  moneys  and the investments thereof held by the escrow holder. All interest earned from  the  investment  of  such  moneys  not required  for  such  payments  on  the  bonds  to  be refunded, shall be irrevocably committed and pledged to the payment of the principal of and interest on the refunding bonds, or such portion or  series  thereof  as shall  be  required  by the refunding financial plan, and the holders of such refunding bonds shall have a lien upon  such  moneys  held  by  the escrow  holder.  The  pledges and liens provided for in this subdivision shall become valid and binding upon the issuance of the refunding  bonds and  the  moneys  and  investments  held  by  the  escrow  holder  shall immediately be subject thereto without any further act. Such pledges and liens shall be valid and binding as against all parties having claims of any kind in tort, contract  or  otherwise  against  the  issuer  of  the refunding  bonds  irrespective  of  whether  such  parties  have  notice thereof. Neither the refunding bond resolution, the escrow contract, nor any other instrument relating to such pledges and liens, need  be  filed or recorded.   j.  The  powers granted by this section to issue refunding bonds shall be deemed to be in addition to the provisions of section 90.00  of  this chapter,  but none of the provisions of section 90.00 shall apply to any refunding bonds issued pursuant to this section. All other provisions of this chapter, not  inconsistent  with  this  section,  relating  to  the authorization,  estoppel  from  contesting  validity, form and contents, execution and issuance of bonds, other than refunding bonds, shall apply to refunding bonds, except that:   1. The provisions of section 107.00 of this chapter shall not apply to the issuance of refunding bonds.   2. The authorization of the issuance of refunding bonds shall  not  be subject to a mandatory or permissive referendum.   3.  Outstanding bonds may, with the consent of the holders thereof, be exchanged for refunding bonds (i) if the refunding  bonds  are  to  bear interest  at a rate equal to or lower than that borne by the bonds to be refunded, or (ii) if, in the case of the city of New  York,  the  annual payment  required  for  principal  and interest on the refunding bond is less than the annual payment required for principal and interest on  the bond  to be refunded, in each case such annual payments to be determined by dividing the total principal  and  interest  payments  due  over  the remaining  life  of  the  bond by the number of years to maturity of the bond, or (iii) if, in the case of the city of New York, the bond  to  be refunded  contains a covenant referring to the existence of the New York state emergency financial control board for the city of New York or  any other  covenant  relating  to  matters  other than the prompt payment of principal and interest on the obligation when  due,  and  the  refunding bond omits or modifies any such covenant, or (iv) if, in the case of the  city  of  New York, the bond to be refunded is guaranteed by the federal government.   4.  All  refunding  bonds shall contain a recital that they are issued pursuant to this chapter, which recital shall be conclusive evidence  of their validity and of the regularity of their issuance.   k. The authority herein granted to authorize the issuance of refunding bonds  shall  in  no  way  be  affected  by  the  invalidity  of  or any irregularity in any proceedings authorizing the issuance of the bonds to be refunded, except that refunding bonds shall not be issued  to  refund bonds  adjudged  invalid  by  the final judgment of a court of competent jurisdiction.