Section 90.10. Advance refunding of certain bonds

a.  As used in this
  section:
    1. The term "escrow contract" shall mean a contract  entered  into  by
  and  between a municipality, school district or district corporation and
  a bank or trust company pursuant to paragraph i of this section.
    2. The term "escrow holder" shall  mean  the  bank  or  trust  company
  designated as such pursuant to an escrow contract.
    3.  The  term "refunding financial plan" shall mean the financial plan
  for a refunding as set forth in the refunding bond  resolution  relating
  thereto.
    4.  The  term  "refunding bonds" shall mean refunding bonds authorized
  pursuant to this section.
    5. The term  "refunding  bond  resolution"  shall  mean  a  resolution
  authorizing   the  issuance  of  refunding  bonds  adopted  pursuant  to
  paragraph e of this section.
    b. 1. A municipality, school  district  or  district  corporation  may
  issue  serial  bonds  to  refund  all  or  any  portion  of  an issue of
  outstanding serial bonds issued on  or  after  January  first,  nineteen
  hundred seventy, and, in addition, a municipality or school district may
  issue  serial  bonds  or serial bonds to refund all or any portion of an
  issue of outstanding sinking fund bonds or sinking fund bonds issued  on
  or  after  December fifteenth, nineteen hundred eighty-one and may issue
  sinking fund bonds  to  refund  all  or  any  portion  of  an  issue  of
  outstanding  serial  bonds  or  sinking  fund  bonds,  in the manner and
  subject to the limitations and conditions set forth in this section. The
  principal  amount  of  refunding  bonds  shall  not  exceed  an   amount
  sufficient to pay the sum of (a) the principal amount of the bonds to be
  refunded,  which is outstanding as of the date of issue of the refunding
  bonds, (b) the aggregate amount of unmatured  interest  payable  on  the
  bonds  to  be  refunded  to  and including either the date or dates such
  bonds mature or, if such bonds are to be called for redemption prior  to
  their  maturities,  the  date  or  dates  set  for  such  redemption  in
  accordance with the refunding financial plan, (c)  redemption  premiums,
  if  any,  payable on the bonds to be refunded as of such redemption date
  or dates, and (d) costs and expenses incidental to the issuance  of  the
  refunding  bonds,  including  the development of the refunding financial
  plan, and of executing and performing the terms and  conditions  of  the
  escrow  contract  and  all fees and charges of the escrow holder. In the
  event a municipality or school district issues bonds to  refund  sinking
  fund  bonds,  and  such  refunding  has  the  effect  of  permitting the
  municipality or school district to withdraw assets from a  sinking  fund
  established  for  such refunded bonds, then such assets shall be used to
  pay principal and interest on either such refunded bonds or other  bonds
  of such municipality or school district.
    2.  * (a)  Refunding  bonds shall be issued only in the event that the
  present value of the total payments of both principal  and  interest  to
  become due on the refunding bonds, and deducting any accrued interest or
  premium  received  by the issuer 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 financial 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. In the
  case of the city of New York, notwithstanding any other provision of law
  to the contrary, for purposes of calculating the present value  of  debt
  service  and  calculating  savings  in  connection  with the issuance of
  refunding bonds, (i)  the  effective  interest  rate  and  debt  service
  payable  on  variable  rate  bonds  in connection with which, and to the
  extent that, the city of New York has  entered  into  an  interest  rate
  exchange or similar agreement pursuant to which such city makes payments
  based  on  a  fixed  rate and receives payments based on a variable rate
  that shall be found by the finance board of such city to  be  equivalent
  over  time to the variable rate paid on the related variable rate bonds,
  shall be calculated assuming that the rate of interest on such  variable
  rate  bonds is the fixed rate payable by such city on such interest rate
  exchange or similar agreement for the scheduled term of such  agreement;
  (ii) the effective interest rate and debt service on variable rate bonds
  in  connection  with which, and to the extent that, the city of New York
  has not entered into such an interest rate exchange or similar agreement
  shall be calculated assuming that interest  on  such  variable  interest
  rate  bonds  is  payable  at  a  rate  or rates as shall be found by the
  finance board of such city; (iii) the effective interest rate  and  debt
  service  on  any  bonds subject to optional or mandatory tender shall be
  calculated assuming that such bonds are remarketed  following  any  such
  tender  at a rate or rates as shall be found by the finance board of the
  city of New York; and (iv) otherwise, the effective  interest  rate  and
  debt  service  on  any  bonds  shall  be  calculated  at a rate or rates
  determined by the finance board of the city of New York. Notwithstanding
  any other provision of law to the contrary, in the case of the  city  of
  New  York,  for  calculating  the  present  value  of  debt  service and
  calculating savings in connection with the issuance of refunding  bonds,
  the  refunding  of variable rate debt instruments with new variable rate
  debt instruments shall be excluded from any  such  requirements,  if  so
  determined by the finance board of such city.
    * NB Effective until July 15, 2010
    * (a)  Refunding  bonds  shall  be  issued  only in the event that the
  present value of the total payments of both principal  and  interest  to
  become due on the refunding bonds, and deducting any accrued interest or
  premium  received  by the issuer 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 financial 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.
    * NB Effective July 15, 2010
    (b)  Notwithstanding  the  provisions  of  subparagraph  (a)  of  this
  subdivision,  the city of New York may also issue refunding bonds (i) if
  the bond to be refunded contains a covenant referring to  the  existence
  of  the New York state emergency financial control board for the city of
  New York or any other covenant relating to matters other than the prompt
  payment of principal and interest on the obligation when  due,  and  the
  refunding  bond  omits or modifies any such covenant or (ii) if the bond
  to be refunded is guaranteed by the federal government.
    (c)  Notwithstanding  the  provisions  of  subparagraph  (a)  of  this
  subdivision,  in  the case of refunding bonds sold to the New York state
  environmental facilities corporation and purchased for  deposit  in  the
  water  pollution  control revolving fund established pursuant to section
  twelve hundred eighty-five-j of the public authorities law and for which
  an allocation has been established pursuant to section  17-1909  of  the
  environmental conservation law, the present value of the projected total
  allocation  payable to the issuer of the refunding bonds or available to
  make principal and interest payments on the  refunding  bonds  shall  be
  subtracted from the present value of the total payments of the principal
  and  interest  to  become  due on the refunding bonds in determining the
  present value savings attributable to the  issuance  of  such  refunding
  bonds pursuant to subparagraph (a) of this subdivision.
    (d)  Notwithstanding  the  provisions  of  subparagraph  (a)  of  this
  subdivision, in the case of refunding bonds sold to the New  York  state
  environmental  facilities  corporation  and purchased for deposit in the
  drinking water revolving fund established  pursuant  to  section  twelve
  hundred  eighty-five-m  of  the  public authorities law and for which an
  allocation has been  established  pursuant  to  section  eleven  hundred
  sixty-two  of  the public health law, the present value of the projected
  total allocation payable  to  the  issuer  of  the  refunding  bonds  or
  available to make principal and interest payments on the refunding bonds
  shall  be subtracted from the present value of the total payments of the
  principal  and  interest  to  become  due  on  the  refunding  bonds  in
  determining  the  present  value savings attributable to the issuance of
  such refunding bonds pursuant to subparagraph (a) of this subdivision.
    (e)  Notwithstanding  the  provisions  of  subparagraph  (a)  of  this
  subdivision,  a school district may also issue refunding bonds to refund
  bonds if the bonds were issued by a school district  prior  to  December
  first two thousand one, or prior to thirty days after the effective date
  of  this  subdivision,  whichever is later, for the purpose of financing

  facilities that were eligible for building aid pursuant  to  subdivision
  six  of  section  thirty-six  hundred  two of the education law, and for
  which the  aid  apportionment  payable  in  the  two  thousand  two--two
  thousand  three  and  two thousand three--two thousand four school years
  for approved expenditures for debt service are subsequently reduced as a
  result of the application of assumed amortization  to  unpaid  principal
  outstanding as of July first, two thousand two.
    3.  Refunding  bonds  may  be  issued  at  any  time subsequent to the
  issuance of the bonds to be refunded.
    c. 1. The last installment of each separate series of refunding serial
  bonds, and the maturity date of any refunding sinking fund bonds,  shall
  occur  not  later  than the expiration of the maximum period of probable
  usefulness permitted by law at the time of the issuance of the refunding
  bonds or the bonds to be refunded for the object or  purpose  for  which
  such  bonds  to  be  refunded  were  issued,  or in the alternative, the
  weighted average remaining period of probable usefulness of the  objects
  or  purposes  (or  classes  of  objects  or purposes) financed with each
  series of bonds to be refunded or the weighted average remaining  period
  of probable usefulness of all objects or purposes (or classes of objects
  or  purposes) financed with all of the bonds to be refunded. Such period
  shall be computed from the date of issuance of such bonds to be refunded
  or from  the  date  of  the  first  bond  anticipation  note  issued  in
  anticipation thereof, whichever date is the earlier.
    2.  The  first  installment of each separate series of refunding bonds
  shall mature not later than the date of the first stated maturity of the
  bonds to be refunded next following the date of issue of  the  refunding
  bonds.   When  the  finance  board  has  determined  to  provide  for  a
  substantially level or declining annual debt service  schedule  for  the
  refunding bonds, as provided in subdivision three of this paragraph, the
  determination  of  whether annual debt service is substantially level or
  declining shall not take into account the year which includes the  first
  principal  installment  of  the refunding bonds, provided that the first
  principal installment, when added to  the  amount  of  interest  payable
  within one year of its accrual that would accrue on the entire refunding
  debt or series of refunding bonds in one calendar year, shall be no more
  than  five  percent  less  than  the  greatest  aggregate amount of debt
  service due in any other year.
    3. No annual installment of each separate series  of  refunding  bonds
  shall  be  more  than  fifty  per centum in excess of the smallest prior
  installment  unless  the  finance  board  of  the  municipality,  school
  district or district corporation issuing the bonds has determined to use
  a  substantially level or declining annual debt service schedule for the
  refunding bonds. The amounts of annual  installments  of  the  refunding
  bonds  may  be  determined without reference to the stated maturities of
  the bonds to be refunded.
    4. In the event the bonds to be refunded  were  separately  authorized
  for  different  objects  or  purposes, which separately authorized bonds
  were consolidated for purposes of  sale  and  sold  as  a  single  issue
  pursuant to paragraph c of section 57.00 of this chapter, each component
  issue  included  in  such  consolidated  issue  shall be considered as a
  separate issue for the purposes of the provisions of  subdivisions  one,
  two and four of this paragraph, notwithstanding that the refunding bonds
  are sold as a single issue.
    5. Refunding bonds may be issued as two or more separate series.
    d.  Bond anticipation notes shall not be issued in anticipation of the
  sale of refunding bonds.

    e. The issuance of refunding bonds shall be authorized by a "refunding
  bond resolution". Such a resolution  shall  contain,  in  substance,  at
  least the following:
    1.  The  maximum  amount  of  refunding  bonds authorized to be issued
  pursuant thereto.
    2. A  determination  that  such  maximum  amount  of  refunding  bonds
  authorized  to  be  issued  does  not  exceed  the limitation imposed by
  subdivision one of paragraph b of this section.
    3. The amount and  a  description  of  the  outstanding  bonds  to  be
  refunded.
    4. A statement of the maximum period or periods of probable usefulness
  permitted by law at the time of the issuance of the bonds to be refunded
  for the object or purpose or objects or purposes for which such bonds to
  be refunded were issued.
    5.  The financial plan for the refunding proposed, showing the sources
  and amounts of all moneys required to  accomplish  such  refunding,  and
  except  where  such  refunding  bonds are issued by the city of New York
  pursuant to subparagraph (b) of subdivision two of paragraph b  of  this
  section  an  estimate  of  the  present  value of the total debt service
  savings anticipated, computed in accordance  with  subparagraph  (a)  of
  subdivision two of paragraph b of this section.
    f.   1.   Any  refunding  bonds  issued  to  refund  bonds  which  are
  additionally secured by a pledge of any specific moneys pursuant to  any
  general  or  special  law,  at  the  option of the finance board, may be
  additionally secured to the same extent and in the same  manner  as  the
  bonds  to be refunded effective upon the date of issue of such refunding
  bonds, subject only to any rights of the holders of  such  bonds  to  be
  refunded.
    2.  Refunding  bonds may be sold at either public or private sale, but
  they shall not be  sold  on  option  or  on  a  deferred  payment  plan,
  provided,  however,  that  if  such  bonds are sold at private sale, the
  terms and conditions of  such  sale  shall  be  approved  by  the  state
  comptroller. Refunding bonds sold at private sale shall bear interest at
  such  rate  or  rates,  not exceeding the maximum rate, if any, fixed by
  paragraph b of section 57.00 of this chapter, as may  be  determined  by
  the  finance  board.  Refunding  bonds  may be sold at private sale at a
  discount in the same manner as authorized  by  paragraph  e  of  section
  57.00  of  this  chapter. The cost of such discount, together with other
  costs of the issuance of obligations, shall be deemed a part of the cost
  of the objects or purposes for which such obligations are issued.
    g. Except where such refunding bonds are issued by  the  city  of  New
  York  pursuant  to subparagraph (b) of subdivision two of paragraph b of
  this section, no refunding  bonds  shall  be  issued  pursuant  to  this
  section  unless  the chief fiscal officer of the issuer shall have first
  filed with the finance  board  a  certificate,  approved  by  the  state
  comptroller,  which  shall  be  final  and  conclusive upon all parties,
  setting forth the present value of the total debt service savings to the
  issuer resulting from the issuance of the refunding  bonds  computed  in
  accordance with the provisions of subparagraph (a) of subdivision two of
  paragraph  b of this section, except that the actual amount, rather than
  an estimate, of the amount of accrued interest to be paid on such  bonds
  shall  be  used  in determining the effective interest cost thereof. The
  certificate shall be in the form and shall contain such  information  as
  shall  be prescribed by the state comptroller. The certificate shall not
  be approved until ten days after the filing of such certificate  in  the
  office of the state comptroller.
    h.  1.  Prior  to  the  issuance of refunding bonds, the finance board
  shall adopt a resolution electing to call in and redeem such portion  of

  the  bonds  to  be  refunded as is to be called for payment prior to the
  date of their maturity in accordance with the refunding financial  plan.
  The  resolution  adopted  pursuant to this paragraph shall authorize and
  direct  the escrow holder to cause notice of such call for redemption to
  be given in the name of the issuer of such refunding bonds in the manner
  and within the times provided by paragraph a of section  53.00  of  this
  chapter.  If the issuer has no official newspaper, such resolution shall
  designate  a   newspaper   having   general   circulation   within   the
  municipality, school district or district corporation for the purpose of
  giving such notice.
    2.  Upon  the issuance of the refunding bonds, the election to call in
  and redeem the bonds to be refunded and  the  direction  to  the  escrow
  holder  to  cause notice thereof to be given contained in the resolution
  adopted pursuant to subdivision one  of  this  paragraph,  shall  become
  irrevocable,  and  the  provisions of such resolution shall constitute a
  covenant with the holders of such refunding bonds,  provided  that  such
  resolution may be amended from time to time as may be necessary in order
  to  comply  with  the publication requirements of paragraph a of section
  53.00 of this chapter.
    i. 1. The finance board, or the chief fiscal officer  if  the  finance
  board  shall  delegate  such  duty  to  him,  prior  to  the issuance of
  refunding bonds, shall contract on behalf of the issuer with a  bank  or
  trust  company  located  and authorized to do business in this state for
  the purpose of having such bank or  trust  company  act  as  the  escrow
  holder  of the proceeds, inclusive of any premium, from the sale of such
  refunding bonds, together with all income derived from the investment of
  such proceeds, and any other moneys to be provided  by  such  issuer  to
  effectuate  the  refunding  financial  plan.  Each escrow contract shall
  contain such terms and conditions as shall  be  necessary  in  order  to
  accomplish the refunding financial plan, including, without limiting the
  generality  of  the  foregoing, provisions for the escrow holder without
  further authorization or direction from  the  issuer  of  the  refunding
  bonds,  except  as  otherwise provided therein, (a) to make all required
  payments  of  principal,  interest  and  redemption  premiums   to   the
  appropriate paying agent with respect to either the bonds to be refunded
  or  the refunding bonds, (b) to pay costs and expenses incidental to the
  issuance of the  refunding  bonds,  including  the  development  of  the
  refunding  financial plan, and of executing and performing the terms and
  conditions of the escrow contract and all of its fees and charges as the
  escrow holder, (c) at the appropriate time or times to cause to be given
  on behalf of such issuer the notice of redemption authorized to be given
  pursuant to paragraph h of this section, and (d) to  invest  the  moneys
  held  by  it  consistent  with the provisions of the refunding financial
  plan. Each escrow contract shall be irrevocable and shall  constitute  a
  covenant with the holders of the refunding bonds to which it relates.
    2.  The proceeds, inclusive of any premium, from the sale of refunding
  bonds, immediately upon receipt, shall be placed in escrow by the issuer
  with the escrow holder in  accordance  with  the  escrow  contract.  All
  moneys  held  by  the  escrow  holder  shall  be invested only in direct
  obligations of the United  States  of  America  or  in  obligations  the
  principal of and interest on which are unconditionally guaranteed by the
  United  States  of America, which obligations shall mature or be subject
  to redemption at the option of the holder thereof  not  later  than  the
  respective  dates  when such moneys will be required to make payments in
  accordance with the refunding financial plan. Any such moneys  remaining
  in  the  custody  of  the  escrow holder after the full execution of the
  escrow contract shall be returned to the issuer of the  refunding  bonds
  and  shall  be applied by such issuer to the payment of the principal of

  or interest on the refunding bonds then outstanding, to the  payment  of
  any  amounts  required  to  be  paid  to the United States of America in
  connection with the refunding or to the payment of or reimbursement  for
  the  costs  of  issuance  or  other  administrative  costs  incurred  in
  connection with the issuance of the refunding bonds.
    3. That portion of such proceeds from the  sale  of  refunding  bonds,
  together  with  interest  earned  thereon and any moneys on deposit in a
  sinking fund established for the refunded bonds which is applied to  the
  payment  of the principal and interest on the refunded bonds pursuant to
  subdivision one of paragraph b of this section, which shall be  required
  for  the  payment  of  the  principal of and interest on the bonds to be
  refunded, including any redemption  premiums,  in  accordance  with  the
  refunding  financial plan, shall be irrevocably committed and pledged to
  such purpose and the holders of such bonds to be refunded shall  have  a
  lien  upon  such  moneys  and the investments thereof held by the escrow
  holder. All interest earned from  the  investment  of  such  moneys  not
  required  for  such  payments  on  the  bonds  to  be refunded, shall be
  irrevocably committed and pledged to the payment of the principal of and
  interest on the refunding bonds, or such portion or  series  thereof  as
  shall  be  required  by the refunding financial plan, and the holders of
  such refunding bonds shall have a lien upon  such  moneys  held  by  the
  escrow  holder.  The  pledges and liens provided for in this subdivision
  shall become valid and binding upon the issuance of the refunding  bonds
  and  the  moneys  and  investments  held  by  the  escrow  holder  shall
  immediately be subject thereto without any further act. Such pledges and
  liens shall be valid and binding as against all parties having claims of
  any kind in tort, contract  or  otherwise  against  the  issuer  of  the
  refunding  bonds  irrespective  of  whether  such  parties  have  notice
  thereof. Neither the refunding bond resolution, the escrow contract, nor
  any other instrument relating to such pledges and liens, need  be  filed
  or recorded.
    j.  The  powers granted by this section to issue refunding bonds shall
  be deemed to be in addition to the provisions of section 90.00  of  this
  chapter,  but none of the provisions of section 90.00 shall apply to any
  refunding bonds issued pursuant to this section. All other provisions of
  this chapter, not  inconsistent  with  this  section,  relating  to  the
  authorization,  estoppel  from  contesting  validity, form and contents,
  execution and issuance of bonds, other than refunding bonds, shall apply
  to refunding bonds, except that:
    1. The provisions of section 107.00 of this chapter shall not apply to
  the issuance of refunding bonds.
    2. The authorization of the issuance of refunding bonds shall  not  be
  subject to a mandatory or permissive referendum.
    3.  Outstanding bonds may, with the consent of the holders thereof, be
  exchanged for refunding bonds (i) if the refunding  bonds  are  to  bear
  interest  at a rate equal to or lower than that borne by the bonds to be
  refunded, or (ii) if, in the case of the city of New  York,  the  annual
  payment  required  for  principal  and interest on the refunding bond is
  less than the annual payment required for principal and interest on  the
  bond  to be refunded, in each case such annual payments to be determined
  by dividing the total principal  and  interest  payments  due  over  the
  remaining  life  of  the  bond by the number of years to maturity of the
  bond, or (iii) if, in the case of the city of New York, the bond  to  be
  refunded  contains a covenant referring to the existence of the New York
  state emergency financial control board for the city of New York or  any
  other  covenant  relating  to  matters  other than the prompt payment of
  principal and interest on the obligation when  due,  and  the  refunding
  bond omits or modifies any such covenant, or (iv) if, in the case of the

  city  of  New York, the bond to be refunded is guaranteed by the federal
  government.
    4.  All  refunding  bonds shall contain a recital that they are issued
  pursuant to this chapter, which recital shall be conclusive evidence  of
  their validity and of the regularity of their issuance.
    k. The authority herein granted to authorize the issuance of refunding
  bonds  shall  in  no  way  be  affected  by  the  invalidity  of  or any
  irregularity in any proceedings authorizing the issuance of the bonds to
  be refunded, except that refunding bonds shall not be issued  to  refund
  bonds  adjudged  invalid  by  the final judgment of a court of competent
  jurisdiction.