New York Codes, Rules and Regulations › Title 9 - EXECUTIVE DEPARTMENT › Subtitle S - Division of Housing and Community Renewal › Chapter III - Low Rent Housing › Subchapter D - Accounting Manual For Public Housing Agencies › Part 1643 - Financing › Subpart 1643-2 - Accounting Entries And Procedures › Section 1643-2.4 - Temporary financing: funds borrowed from private investors; initial financing

Current through Register Vol. 46, No. 28, July 10, 2024
(a)
						Resolution authorizing the execution of requisition agreements and the issuance
						of advance loan notes in the aggregate maximum principal amount of the loan
						contract. This resolution is passed, prior to the initial financing, at the
						same time as the resolution authorizing the contracting of indebtedness and the
						issuance of certificates of indebtedness. Passage of this resolution indicates
						that the local agency anticipates borrowing funds required for the temporary
						financing of project cost from private investors, rather than from the State.
						The resolution gives the form of the requisition agreements and advance loan
						notes but, unlike the resolution authorizing the contracting of indebtedness,
						does not authorize the officers of the local agency to execute requisition
						agreements and issue advance loan notes, as required. Each requisition
						agreement and each issue of advance loan notes must be authorized by separate
						resolutions of the local agency.
Accounting entry: No accounting entry is made to
						  reflect passage of this resolution.
(b) Resolution authorizing the execution of a
						requisition agreement and the execution and deposit, in escrow, of an advance
						loan note as security for an issue of temporary loan notes. The passage of this
						resolution represents the second step in the initial financing, where funds are
						to be borrowed from private investors. As previously noted, the advance loan
						note should be authorized in an amount sufficient to pay the principal of and
						interest on the temporary loan notes for which it is the security. Inasmuch as
						the advance loan note is executed in advance of the issuance of the temporary
						loan notes, at which time the actual rate of interest may not yet have been
						fixed, an estimated rate will be used for the purposes of computing the
						interest to be included in the principal amount of the advance loan note. For
						example, assume an advance loan note is being prepared in connection with an
						issue of $500,000 principal amount of temporary loan notes, which will have a
						maturity of six months from date of issue. The interest rate on the latter has
						not yet been fixed by negotiation with the private investors or through
						competitive bidding. Assume that reference to the financial columns of the
						newspapers or inquiry addressed to the division establishes the fact that
						recent issues of short term paper by local agencies have carried interest rates
						of one per cent per annum. Application of this rate to the temporary loan notes
						to be issued would give an estimated interest cost of $2,500 which is rounded
						off to the next higher $1,000 and added to the principal amount of the
						temporary loan notes to give an advance loan note in the amount of $503,000.
Accounting entry: No accounting entry is made to
						  reflect passage of the resolution authorizing the execution of the requisition
						  agreement and the execution and deposit, in escrow, of the advance loan note.
						  The execution and deposit, in escrow, of the advance loan note should be the
						  subject of a balance sheet footnote to the effect that temporary loan notes
						  outstanding in the amount of $______ are secured by a requisition agreement and
						  an advance loan note in the amount $_____, held in escrow by the ________
						  bank.
(c) Resolution
						authorizing the execution and issue of temporary loan notes.
(1) Passage of this resolution is the third
						step in the initial financing, where funds are to be borrowed from private
						investors.
Accounting entry: No accounting entry is made to
						  reflect the passage of this resolution.
(2) Depending on the expressed wishes of the
						private investors, an issue of temporary loan notes may consist of a single
						note or be broken up into a number of notes. The issue itself is assigned a
						roman numeral for identification purposes. The individual notes comprising the
						issue are called series and are assigned arabic numerals. Thus the initial
						issue of temporary loan notes may consist of three individual notes number I-1,
						I-2, I-3 and identified as Issue I, Series 1; Issue I, Series 2; Issue I,
						Series 3, etc.