2023 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.