2023 New York Laws › LFN - Local Finance › Article 2 - Local Indebtedness › Title 2 - Local Obligations: Types Thereof › 22.10 - Sinking Fund Bonds of Municipalities and School Districts.

§ 22.10 Sinking fund bonds of municipalities and school districts.  a.
Any municipality or school district may issue sinking fund bonds for any
object or purpose for which serial bonds may be issued.
b.  Sinking  fund  bonds  shall  mature  at  a date not later than the
expiration of the period of probable usefulness of the object or purpose
for which they are authorized to be issued, as computed from the date of
such bonds or, if bond anticipation notes  shall  have  been  issued  in
anticipation  thereof,  from  the  date of the earliest note or notes so
issued; provided, however, that such bonds shall not mature  at  a  date
that  is  later than fifty years from the date of such bonds or, if bond
anticipation notes shall have been issued in anticipation thereof,  from
the date of the earliest note or notes so issued. Sinking fund bonds may
be referred to as "term bonds".
c.  Sinking  fund bonds shall be redeemed through annual contributions
to sinking funds established by  the  municipality  or  school  district
issuing  such  sinking  fund bonds. Each annual contribution shall be at
least equal to the amount required, if any, to enable the  sinking  fund
to  redeem,  on  the  date  of  the  contribution,  the  same  amount of
indebtedness as would have  been  paid  and  then  be  payable  if  such
indebtedness had been financed entirely by the issuance of serial bonds,
except,  if  an issue of sinking fund bonds is combined for sale with an
issue of serial bonds, for the same object or purpose, then  the  amount
of  each  such annual contribution shall be at least equal to the amount
required, if any, to enable the sinking fund to redeem, on the  date  of
each such annual contribution, (i) the amount which would be required to
be paid annually if such indebtedness had been issued entirely as serial
bonds,  less  (ii) the amount of indebtedness, if any, to be paid during
such year on the portion of such indebtedness actually issued as  serial
bonds.   There shall be established within a sinking fund established by
a municipality or school district an account for  the  amortization  and
redemption   of  each  issue  of  sinking  fund  bonds  issued  by  such
municipality or school district.  At the time of the issuance of sinking
fund bonds, the municipality or school district issuing such bonds shall
establish and deliver to the state comptroller a schedule setting  forth
the  amount required to be on deposit in the account established for the
redemption of such bonds for each year following the year of issuance of
such bonds until the year in which all the bonds of such issue are to be
redeemed. Each account shall  be  maintained  at  or  above  the  amount
required  to  be on deposit pursuant to such schedule less the principal
amount of sinking fund bonds acquired pursuant to  subparagraph  (e)  of
subdivision  four  of  paragraph d of this section or purchased by or on
behalf of the municipality or school district and thereupon cancelled or
paid or for payment of which funds have been  duly  transferred  to  the
fiscal  agent  of  the  municipality  or school district that issued the
bonds redeemable from such account. Not less than fifteen days nor  more
than  thirty  days  prior  to  the date on which the annual contribution
shall be made, the municipality or school district shall  calculate  the
amount  expected  to  be on deposit in the sinking fund on such date and
shall certify such amount to the state comptroller. The municipality  or
school  district  shall  annually appropriate for deposit in the sinking
fund an amount equal to the difference between the amount required to be
on deposit in the sinking fund in accordance with the provisions of this
paragraph and the amount on deposit  therein  on  the  date  the  annual
contribution is to be made.
d.  Sinking  funds  shall  be  maintained  and  managed  by  the state
comptroller pursuant to the provisions set forth below:
1. (a) Moneys deposited and retained in each account  in  the  sinking
funds  to  be maintained and managed by the state comptroller shall vest

immediately in the state comptroller in trust for  the  benefit  of  the
holders  of  the  bonds for which such account was established. Payments
and transfers from the sinking funds and the accounts therein shall  not
be  subject  to  appropriation by the legislature. The state comptroller
shall have custody of the securities and other  assets  in  the  sinking
funds;  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 sinking
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 or shall be the
wholly-owned subsidiary of a  corporation  which  maintains  a  combined
capital and surplus of not less than seventy-five million dollars.
(b)  In  performing  his duties hereunder, the state comptroller shall
have no obligation to follow the directions of any bondholder  or  group
of  bondholders  nor  to  take  any action on behalf of the bondholders,
including, without limitation, the obligation to take any action against
the municipality or the school district  for  nonpayment  of  an  annual
contribution.  The  state  comptroller shall be required to perform only
such duties as are set forth in this section and no implied covenants or
obligations shall be read into this section. The state comptroller shall
not be liable for any error of judgment made in good faith nor  for  any
action  taken  or  omitted  to  be taken by him in good faith. The state
comptroller makes no representations as to the validity  or  sufficiency
of  the  bonds  redeemable with amounts on deposit in the sinking funds,
and shall not be accountable for the use or application of the  proceeds
of  such bonds or of any excess in the sinking funds. The municipalities
and school  districts  shall  deliver  to  the  state  comptroller  such
certificates  and  documents  as  he  shall  by  regulation or otherwise
request. A determination made or action taken by the  state  comptroller
under  this  section  shall  be  final  unless  it  is  shown  that such
determination or action was arbitrary and  capricious  or  an  abuse  of
discretion.
(c)  In  connection  with any claim, demand, suit, or judgment against
the state comptroller in connection with the exercise or performance  of
any  of  his  powers or duties under this section, the state comptroller
shall be entitled to representation by private counsel of his choice  in
any  civil  judicial proceeding whenever the attorney general determines
based upon his investigation and review of the facts  and  circumstances
of  the  case  that  representation  by  the  attorney  general would be
inappropriate.  The attorney general shall notify the state  comptroller
in  writing  of  such determination. The provisions of this subparagraph
shall be in addition to and shall not supplant  the  indemnification  or
other benefits conferred upon the state comptroller by section seventeen
of  the public officers law or otherwise, or any further indemnification
or other benefits that may be hereafter conferred by any such  law.  The
provisions   of   this  subparagraph  shall  inure  only  to  the  state
comptroller, shall not enlarge or  diminish  the  rights  of  any  other
party,  and shall not impair, limit or modify the rights and obligations
of any insurer under any policy of insurance.
2. As soon as practicable after a municipality or school  district  on
whose behalf the state comptroller is maintaining and managing a sinking
fund  notifies  the state comptroller of its intention to redeem sinking
fund bonds redeemable from an account in such sinking fund prior  to  or
at maturity, the state comptroller shall transfer the requested funds in
accordance   with  the  instructions  of  such  municipality  or  school
district.
3. Subject to the provisions of subdivision six of this paragraph, the
state comptroller shall, as soon as practicable following the request of
the municipality or school district, (i) transfer to  such  municipality
or  school  district any amounts in any account in the sinking fund held
on  its  behalf  determined  by  the municipality or school district and
certified by it to the state comptroller to be over and above the amount
required to be maintained in such account pursuant  to  paragraph  c  of
this  section  or  (ii)  transfer or credit the excess in one account to
another account within a sinking fund established by  such  municipality
or  school  district.   Such request shall not be made more than once in
any twelve month period.
4. (a) Moneys in any sinking fund shall be  invested  in  any  of  the
following:
(i)  Direct obligations of the United States of America or obligations
the principal of and interest on which are unconditionally guaranteed by
the United States of America.
(ii) Certificates of deposit  issued  by  commercial  banks  or  trust
companies  maintaining  their  principal place of business in this state
which maintain, or the  corporations  of  which  they  are  wholly-owned
subsidiaries  maintain,  a combined capital and surplus of not less than
seventy-five million dollars;  provided  that  any  such  investment  in
certificates  of  deposit  shall be secured by direct obligations of the
United States of America or the state or by obligations the principal of
and interest on which  are  unconditionally  guaranteed  by  the  United
States  of America or the state in a principal amount with a fair market
value at least equal at all times to the principal amount at maturity of
such certificates of deposit, and provided further that such  collateral
securities  shall  be  physically delivered by the bank or trust company
issuing the certificate of deposit to the state comptroller or to a bank
or trust company designated pursuant to section sixty-five of the  state
finance  law  as his agent (which designated bank or trust company shall
not be an issuer of certificates of deposit for  the  purposes  of  this
section)  unless  such  collateral  securities  are issued in book-entry
form, in which case the state comptroller shall take such  other  action
as  may be necessary to obtain title to or a perfected security interest
in such collateral securities.
(iii) With the consent of the municipality or school district on whose
behalf a sinking fund is held, securities of or guaranteed by the  state
of  New York or obligations of political subdivisions and public benefit
corporations thereof, other than obligations  of  such  municipality  or
school district.
(iv)  Deposit  accounts  (other  than  certificates of deposit) at the
banks or trust companies described in subdivision one of this paragraph;
provided that the amounts on deposit in such accounts are secured at all
times by direct obligations of the United States of America or the state
or  by  obligations  the  principal  of  and  interest  on   which   are
unconditionally  guaranteed by the United States of America or the state
in an amount with a fair market value at least equal at all times to the
amount of such deposits;  and  provided  further  that  such  collateral
securities  shall  be  physically  delivered  for retention to the state
comptroller or a bank or trust company designated  pursuant  to  section
sixty-five  of the state finance law as his agent (which designated bank
or trust company shall not be the bank or trust company  at  which  such
account  is  located)  unless  such  collateral securities are issued in
book-entry form, in which case the state  comptroller  shall  take  such
other  action  as  may  be  necessary  to obtain title to or a perfected
security interest in such collateral securities.
(b) For purposes of making any investment of amounts pursuant to  this
section,  the  state  comptroller  may consolidate moneys in any sinking
fund or account in a sinking fund with moneys in any other sinking  fund
or  account  in  the  same or any other sinking fund and may transfer an
interest  in  an  investment from one sinking fund or account to another
without liquidating the investment, but only if all such investments are
authorized or  consented  to  for  such  sinking  funds,  and  all  such
investments  shall  be  credited  on a pro-rata basis to the appropriate
sinking funds and accounts. The allocable amount of income  or  interest
earned  and  gains  realized  in  excess  of  losses suffered due to the
investment of amounts on deposit in any account in a sinking fund  shall
be deposited upon receipt in such account. All investments made pursuant
to  this  section  shall  mature  or  be redeemable at the option of the
holder thereof on such dates and in such amounts as may be necessary  to
pay principal of any sinking fund bonds when due, whether at maturity or
by redemption prior to maturity.
(c)  Each  municipality  and  school  district shall provide the state
comptroller with information and opinions of counsel necessary to insure
that the municipality or school district complies with any  restrictions
imposed by applicable federal law on the yield payable on investments in
a  sinking  fund.  In  order to comply with such yield restrictions, the
state comptroller shall, at the direction of the municipality or  school
district, invest the amounts on deposit in any account of a sinking fund
of  such  municipality  or  school  district in obligations described in
clause (iii) of subparagraph (a) of subdivision four of this  paragraph,
the  interest  on  which  is exempt from federal income taxes. The state
comptroller is authorized to promulgate  rules  and  regulations  as  he
deems appropriate to implement the provisions of this paragraph.
(d)  The state comptroller may engage the services of such consultants
and counsel as he  may  deem  necessary  to  assist  in  performing  the
functions required to be performed by him under this section.
(e)   The   state   comptroller  shall,  at  the  instruction  of  any
municipality or school district on whose behalf the state comptroller is
maintaining and managing a sinking fund, use his best efforts  to  apply
funds  in  any  account  within  such  sinking  fund  to  purchase bonds
redeemable from such account.
5. The principal amount of sinking fund bonds required to be  redeemed
on  any  date  by  payment  from  a sinking fund shall be reduced by the
principal amount of any such sinking fund bond which has been  purchased
or  redeemed  and  cancelled  and  not  theretofore  applied as a credit
against such requirement.
6. The  state  comptroller  shall  be  reimbursed  annually  by  March
fifteenth  of  each  year  for  the  fees  and expenses of custodians of
securities in a  sinking  fund,  fees  and  expenses  of  custodians  of
collateral  securities  for investments in a sinking fund, fees of banks
and trust companies designated  pursuant  to  subdivision  one  of  this
paragraph, fees and expenses of counsel other than the attorney general,
fees  and  expenses  of  consultants,  direct  personnel  costs  of  the
department of audit and control and  other  similar  costs  and  related
expenses  of  maintaining and managing the sinking funds during the year
ending the preceding December  thirty-first  by  the  municipalities  or
school districts issuing the bonds redeemable therefrom. Notwithstanding
the  foregoing,  the  fees  and  expenses of consultants retained by the
comptroller shall be reimbursed  by  any  such  municipality  or  school
district  only  with  its  express  consent. In the event that the state
comptroller shall not have been reimbursed as provided above,  then  the
state  comptroller shall deduct the amount of the required reimbursement
from any excess on deposit in a sinking fund; provided, however, that in

no event shall the state comptroller use assets  of  the  sinking  funds
other  than  the  excess  therein  for  such  reimbursement.  The  state
comptroller may establish such accounts in  the  state  special  revenue
fund as are necessary to provide for the receipt and disposition of such
payments  as  may  be  received from municipalities and school districts
pursuant to this subdivision; provided that payments and transfers  from
such  accounts  shall  be  made pursuant to an appropriation provided by
law.
7. (a) The state comptroller shall adopt such regulations as he  deems
appropriate  to  implement  the  provisions  of  this section, which may
include, but shall not be limited to, regulations establishing:
(A) The rights  and  responsibilities  of  the  state  comptroller  in
maintaining  and  managing the sinking funds hereunder, which rights and
responsibilities may include, among others, that:
(i) the state comptroller undertakes to perform such duties  and  only
such   duties  as  are  specifically  set  forth  in  the  statute,  the
regulations or any agreement with the municipality  or  school  district
and  no implied covenants or obligations shall be read into the statute,
the regulations or into any agreement with the  municipality  or  school
district against the state comptroller;
(ii)  the  state comptroller may conclusively rely, as to the truth of
the statements and the correctness of the  opinions  expressed  therein,
upon  certificates  or  opinions  furnished to the state comptroller and
conforming to the requirements of the statute, the regulations  and  any
agreement  with  the municipality or school district; but in the case of
any such certificates or opinions which are specifically required to  be
furnished  to  the  state  comptroller  pursuant  to paragraph c of this
section, the state comptroller shall be under  a  duty  to  examine  the
contents  of  the  same  to determine whether or not they conform to the
requirements of the statute, the regulations and any agreement with  the
municipality or school district;
(iii)  the  state  comptroller  shall  not  be liable for any error of
judgment made in good faith by him;
(iv) the state comptroller shall not be liable  with  respect  to  any
action  taken  or omitted to be taken by him in good faith in accordance
with the direction of the municipality or school district;
(v) the state comptroller may rely, and shall be protected  in  acting
or refraining from acting in reliance, upon any resolution, certificate,
statement,  instrument,  opinion,  report,  notice,  request, direction,
consent, order, bond, debenture or other paper or document  believed  by
him  to  be  genuine  and to have been signed or presented by the proper
party or parties;
(vi) any request or direction of the municipality or  school  district
shall be sufficiently evidenced by a certificate signed by an authorized
official  of  the  municipality or school district and any resolution of
the governing body  of  the  municipality  or  school  district  may  be
sufficiently  evidenced  by  a  copy of such resolution certified by the
appropriate official of the municipality or school district;
(vii) whenever the state comptroller shall deem it  desirable  that  a
matter  be  proved or established prior to taking, suffering or omitting
any action, the state comptroller (unless other evidence be specifically
prescribed) may, in the absence of bad faith on his part,  rely  upon  a
certificate  signed  by  an  authorized  official of the municipality or
school district;
(viii) the state comptroller may consult with counsel,  including  the
attorney  general,  and the written advice of such counsel shall be full
and complete authorization and  protection  in  respect  of  any  action
taken, suffered or omitted by it in good faith and in reliance thereon;
(ix)   the   state   comptroller  shall  not  be  bound  to  make  any
investigation into the  facts  or  matters  stated  in  any  resolution,
certificate,  statement,  instrument,  opinion, report, notice, request,
direction, consent, order, bond or other  paper  or  document,  but  the
state  comptroller,  in his discretion, may make such further inquiry or
investigation into such facts or matters as he may see fit, and, if  the
state  comptroller  shall  determine  to  make  such  further inquiry or
investigation, he shall be entitled to examine the  books,  records  and
premises  of the municipality or school district, personally or by agent
or attorney;
(B) Procedures for determining the value of investments in the sinking
funds and of the collateral securities securing such investments;
(C) Procedures for determining and allocating administrative  expenses
related  to  maintaining  and managing the sinking funds and the payment
thereof;
(D) Procedures for determining the amount of  excesses  in  a  sinking
fund  and  when withdrawals of excesses in a sinking fund may occur, for
transferring moneys from a sinking fund to redeem sinking fund bonds and
for  directing  the  purchase  of  sinking  fund  bonds,  including  the
frequency with which such actions may be taken;
(E) The form and substance of reports, certificates and other material
to  be delivered by the municipality or the school district to the state
comptroller;
(F) Standards for  the  qualification  of  consultants  to  the  state
comptroller;
(G) Procedures for securing amounts on deposit in the sinking funds;
(H)  Procedures  for  distributing  the amount on deposit in a sinking
fund if such amount is insufficient to pay any bonds when due; and
(I) Procedures for the disposition of a sinking fund  upon  defeasance
of  the  sinking  fund  bonds,  if  defeasance  other than by payment or
purchase by sinking fund moneys is legally permissible.
(b) Each municipality and school district is authorized to enter  into
agreements  with  the  state  comptroller  and  the state comptroller is
authorized to enter into agreements with one  or  more  municipality  or
school  district  setting  forth,  with respect to the sinking funds and
each account therein, the dates on which annual  contributions  to  such
accounts  shall  be  made,  the  dates  on  which  withdrawals from such
accounts may be made, the dates on which excesses in such accounts shall
be calculated, any limitations on the price to be paid for the  purchase
of  bonds  pursuant  to  subparagraph  (e)  of  subdivision four of this
paragraph and such other  matters  as  the  state  comptroller  and  the
municipality  or school district shall deem appropriate. Such agreements
shall be subject to approval only by the chief fiscal  officer  and  the
finance board of the municipality or school district.
8.  Nothing  in this section shall be construed to prevent or apply to
the issuance of sinking fund bonds by the city of New York  pursuant  to
the  authorization contained in section 22.00 of this chapter; provided,
however, that in the event the city of  New  York  issues  sinking  fund
bonds  pursuant  to  the authorization contained in this section, all of
the provisions of this section shall apply.
9. Failure to comply with any provision  of  this  section  shall  not
affect the validity of any sinking fund bonds.
10.  The  comptroller  shall annually prepare a report with respect to
the maintenance and management  of  sinking  funds  authorized  by  this
section.  Such  report,  with  respect  to  each municipality and school
district issuing sinking fund bonds  pursuant  to  this  section,  shall
include,  but  not  be  limited  to, a summary statement of the cash and
bonds invested in sinking  funds,  earnings  thereon  and  disbursements

therefrom,  and  fees  charged  including  information pertaining to the
allocation of the costs of  the  department  of  audit  and  control  of
managing  and  maintaining  such funds. Such report may also include any
other matter which the comptroller deems advisable. Such report shall be
delivered  not  later  than May thirtieth to the governor, the temporary
president of the senate, the speaker of the assembly,  the  chairman  of
the  senate  finance  committee,  the  chairman of the assembly ways and
means committee and the chief fiscal officer of each  such  municipality
and school district.