WASHINGTON -- The New York Senate last week approved a major expansion of authority for cities and counties to lease-purchase large building projects so they can more easily meet mandates handed down by the state to build new prisons, schools, and hospitals.
State law currently prevents municipalities from leasing anything but small government purchases, such as equipment, by limiting municipal lease contract terms to 15 years and prohibiting pooled leasing arrangements, said Joe Glazer of the New York State Association of Counties.
But a bill approved by the state's Senate on Tuesday would permit pooled arrangements as well as lease terms of 30 years, enabling localities to negotiate lease-purchase contracts to finance large capital construction projects, building and land purchases. "It's the equivalent of a 30-year mortgage," he said.
The bill -- which was largely drawn from a proposal included in Gov. Mario M. Cuomo's budget request earlier this year -- is pending before the Assembly's local government committee.
Kevin Smith, a committee aide, said no action is planned on the bill, but committee members are negotiating with the bill's Senate sponsors to come up with compromise language that will probably include the leasing expansion proposal, with some revisions.
Mr. Glazer said he and other city and county lobbyists are working with the negotiators to "refine" some "technical items" in the bill, but he expects the problems to be resolved and the bill to be passed by the full Legislature before the scheduled adjournment at the end of the month.
The bill passed by the Senate also includes a provision authorizing school districts to enter long-term lease contracts if they get voter approval. Other kinds of lease financings authorized under the bill would require voter approval only if comparable bond offerings require it.
The bill would help cities and counties save money and "get around the artificial constraints imposed by debt limitations" in state law, Mr. Glazer said. Plus, by enabling municipalities to pool lease offerings, the bill would lower borrowing costs and give them better access to the bond market, he said.
"You get better interest rates and more bang for your buck with aggregate pooling," he said.
By making lease financings of large public works projects possible, the bill also could be expected to increase the size and volume of municipal lease offerings in New York.
According to Securities Data Co./Bond Buyer, lease and certificate of participation offerings by counties, cities, towns, parishes, local districts, and local authorities in New York have ranged well under $100 million a year since 1986, when there was one such offering totaling $10.8 million.
The counties group, along with the New York State Association of Towns and the New York State Conference of Mayors, has been pushing for the leasing expansion for years. But the idea took hold in the Legislature this year largely because of the statewide budget crunch and the growing awareness about the financial hardship caused by state-imposed building requirements and other mandates, the officials said.
"The state is $6.5 billion in the hole and was proposing massive cuts in aid to localities," so members of the Legislature decided to "offer something in return to help with finances," said Tim Britt, a legislative researcher.
"The state had been telling us we have to meet certain requirements for jails and health care, whether or not our debt limit had been reached," Mr. Glazer said. "When you're stuck with providing hundreds of jail cells, you need options as to how to finance them" he said.
But despite much "talk about mandate relief" in the Legislature, some members still have a "big brother mentality" toward the state's smaller jurisdictions and have questioned whether they can handle sophisticated, large-scale lease transactions, he said.
"They talk with us about the ramifications of defaulting on a certificates of participation issue," warning that a municipality could lose its access to the bond market if it chose not to pay its lease obligations, he said.
But cities and counties are well aware of their rights and obligations, he said, pointing out that municipalities in many other states already have authority to negotiate large lease obligations and have performed well.
In today's credit environment, "it doesn't make any sense for the state to be preaching at the counties," he added. "We will put our bond ratings up against the state's bond rating any day."
