NYC-WTC_000195490

NYC 9/11 Public Portal Document

accounted for as long-term liabilities, as an add-on to bonds in calculating debt ratios. For New York City, there is no significant unfunded liability in the aggregate for the major pension systems, a circumstance dramatically different from that of many large cities. 'n order (oes not TFA bonds* which also have a statutory cap of $11.5 billion of debt issuance, have a covenant with itutorily bondholders preventing additional debt issuance if it would result in TFA debt service in excess of $330 million per gutter. This has the practical effect of limiting the issuance of TFA debt to approximately $ 12 billion, depending on interest rates at the time of issuance. 0MB”) capital 2. UMlIAIIONSliNJLiSHJl/l&jElNANClNGSi^ iddition Provisions of the Financial Emergency Act requiring that City note financings for cash flow purposes be aensive secured by clearly identified revenues or taxes and prohibiting cash flow borrowing over fiscal year end in-Year should be incorporated permanently into the State Local Finance Law to ensure that these guidelines will are the continue to^ exist after M sunset of the Financial Emergency Act in 20081 Bond Anticipation Notes can be a capital useful way to access the short-term capital market as an alternative to variable rate bonds or as a construction renting period financing device and should not be limited to niaturity to the fiscal year in which issued. ' i ft- ' 1 3, LIMITATIONS ON DEBT ISSUANCE IN LOCAL FINANCE LAW: )r fine- ft The Local Finance Lavi’ as it applies to debt issued to finance the capital program of New York City must be ie debt reviewed annually to advise the State Legislature of recommended amendments and modernizdtion to permit ^te the the City to incorporate in its borrowings the latest prudent cost saving financial techniques. /funds one or The Local Finance Law contains a long list of restrictions and compliance rules for the issuance of New 4atipn York City GO and TFA debt. These Include: ;s such B • limitations on the amount of variable rate indebtedness. a look • requirements that amortization of debt be in relation to statutorily specified periods of probable ilityds usefulness (“PPUs”) of assets findneed. live to • formulations which have the effect of requiring roughly level or declining annual debt service. jurden • limitations on capital purposes for which the proceeds of indebtedness may be used. j • the requirement that advance refunding must either result in present value savings or produce the , I defeasance of certain state covenants contairied in bonds to be refunded. (taxes • I the requirement that bonds issued for advance refunding purposes be; amortized separately from ir city. : bonds amortized to fund the City’s ongoing capital program. ;ent of •' limitations on the use of negotiated or private sale of bonds as alternatives to advertised bids and lie 15 , making such sales subject to approvals by the State Comptroller. (ice is The legislative proposals of the City for calendar year 2001 contain several technical but important amendments to the Local Finance Law which would afford the opportunity for significant cost savings for taxpayers without relaxing or foregoing the City’s conservative and prudent approach to debt issuance. These (and include the proposal that refundings and new money be permitted to be structured together to meet amortization ’rting requirements iwhen new money issues are combined with bonds issued to refinance previously issued debt. Snds This change would apply to both general obligation and TFA financings. In addition, the City is proposing tithe that it be expressly authorized to utilize interest rate swaps (as is currently the case for at least one State item financing authority), to issue bonds with detachable call provisions, and to issue debt payable in foreign hof currencies for sale in international markets for debt not qualifying for tax-exempt status. Foreign borrowings ft of would be required to be entirely hedged so that the liability of the City for debt repayment would be paid in iThis dollars at a known cost. k- led ire

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NYC-WTC_000195608