Both chambers of the New York State Legislature were expected to pass a major mandate relief package on Wednesday evening that would give localities $830 million in savings over the next three years and allow them to sell variable-rate debt and zero coupon bonds.

For localities across the state, the reform bill would unfetter them from arcane and archaic spending mandates and financing regulations codified in the old public finance law. It also brings to a close four years of intense, but often fruitless, lobbying efforts by local governments seeking the reforms. The passage of the reform bill was expected some time around midnight on Wednesday.

New York City would be one of the biggest beneficiaries of the bill because it includes about $90 million in budget relief for fiscal 1991, which ended Sunday, and fiscal 1992. The city, along with other municipalities, would be permitted to use the proceeds from the sale of bond-financed assets for capital costs or debt service on other projects.

Assemblyman Francis J. Pordum, D-Erie County and chairman of the Assembly committee on local governments, said, "I am pleased we were able to reach a two house agreement on a mandate relief package. As a result, local governments, large and small, throughout New York State will share in over $830 million in savings in the next three years."

"The bill contains everything local governments fought for during this four-year campaign," said C. Todd Miles, a partner with the bond counsel firm of Hawkins, Delafied & Wood and a member of the New York State Government Finance Officers Association.

The legislative process required a good deal of discussion and compromise between both chambers, Mr. Miles observed. For example, the bill contains an agreement on the use of the state's bond bank agency to issue certificates of participation for pools of municipalities for a one year trial period. This represented a major compromise between the Assembly, which wanted permanent authorization, and the state Senate, wish did not want to grant it, he pointed out.

Among the many amendments in the bill are provisions that would:

* Allow local governments to delay the first installment payment on serial bonds by six months, providing $98 million in savings.

* Repeal the requirement for a 5% down payment before bond issuance, allowing for $91 million in savings.

* Allow variable-rate financing for local governments, providing $8.8 million in savings.

* Allow local governments to issue certificates of participation. This would yield about $4.4 million in savings.

* Activate the State Municipal Bond Bank to help local governments access the capital markets. This would yield about $2.5 million.

* Ease advance refunding bond maturity requirements. It repeals the requirement that advance refunding bonds mature not later than the expiration of one-half of the maximum probable use for the object or purpose for which the refunded bonds were issued.

* Expand the ability of local governments to issue refunding bonds.

* Allow the sale of zero coupon bonds.

Meanwhile, just hours before the Legislature was expected to adjourn for the year on Wednesday evening, an end to the state's long drawn budget battle was finally in sight.

Legislative leaders and Gov. Mario M. Cuomo said they agreed to restore about $700 million in spending to the budget passed in early July. The bulk of the money, about $400 million, would finance school aid payments in fiscal 1992. Another $45 million in funds would be restored to state agency budgets -- a restoration Mr. Cuomo had fought hard for.

In addition, the leaders and the governor modified some parts of the petroleum business tax increase, including removing the tax on natural gas and exempting industrial use of petroleum from the increased tax.

To make up for the modifications in the petroleum business tax and to pay for the spending restorations, the leaders and the governor said they agreed to other revenue raising measures, including a 1/2% increase in the utilities gross receipts tax.

When the state Legislature passed the budget June 4, 65 days after its was due, they included a plan to increase the rate of the state's petroleum business tax, charged to companies importing petroleum products into the state, to 12 cents a gallon from 7.6 cents. The legislature's original petroleum business tax would generate about $369 million.

The fate of New York City's proposed personal income tax increase, needed to generate $335 million in its fiscal 1992 budget, remained uncertain early Wednesday evening. The city's fiscal year began Monday morning with a budget agreement in place, but with the fate of some of its components still not determined.

The state Senate added to the city personal income tax increase a two-year sunset provision.

The state Senate's version of the bill would require the city to reduce the size of its government to a certain level where they would achieve a structurally balanced budget over the next four fiscal years. The measure would also give the New York State Financial Control Board some oversight of this process.

"The Assembly is not going for this," said a spokesman for the state Senate.

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