Section 1285-M. Drinking water revolving fund

1. (a) The corporation shall
  undertake and provide assistance in  support  of  the  program  to  make
  financial  assistance  available  to recipients to encourage and support
  the planning, development and construction of water supply facilities in
  accordance with the provisions of this section and title four of article
  eleven of the public health law.
    (b) There is hereby established in the custody of  the  corporation  a
  special fund to be known as the drinking water revolving fund. Except as
  otherwise  provided  by  this  paragraph,  moneys  in the drinking water
  revolving fund shall be segregated from all other funds  of  or  in  the
  custody  of  the  corporation  subject  to  any  rights  of  holders  of
  corporation bonds or notes issued for  the  purposes  of  this  section.
  Moneys  in  the  drinking  water  revolving  fund  shall only be used in
  accordance with the provisions of this section and title four of article
  eleven of the public health law; provided  that,  in  addition,  to  the
  extent  permitted  by federal or state law, moneys in the drinking water
  revolving  fund  may  be  transferred  to  and  used  for  the  purposes
  authorized for the water pollution control revolving fund, and moneys in
  the  water  pollution  control  revolving fund may be transferred to and
  used for the purposes authorized for the drinking water revolving  fund.
  The  moneys  in the drinking water revolving fund shall be applied to or
  paid out for  authorized  purposes  of  such  fund  in  accordance  with
  subdivision four of this section and title four of article eleven of the
  public  health law. To the extent approved by the commissioner of health
  and the commissioner of environmental conservation  and  notwithstanding
  the  provisions  of  paragraph  (a)  of  this subdivision, moneys in the
  drinking water  revolving  fund  and  in  the  water  pollution  control
  revolving  fund  may be held together; provided that all such moneys are
  segregated from all other funds of or in the custody of the  corporation
  subject  to  any  rights of holders of corporation bonds or notes issued
  for the purposes of this section; provided further, that the corporation
  shall establish and maintain  or  cause  there  to  be  established  and
  maintained  a  system  of tracking the application of such moneys to the
  purposes of this section.  The  corporation  may  establish  within  the
  drinking  water  revolving  fund  additional accounts or subaccounts and
  specify any conditions applicable to the transfer of moneys between such
  accounts or subaccounts. With respect  to  each  eligible  project,  the
  corporation  shall  establish  and  maintain  a record of the allocation
  provided for the benefit of such project in accordance with the terms of
  the applicable financing agreement.
    2. As used in this section, the  terms  "allocation",  "construction",
  "eligible  project",  "fund"  and  "financing  agreement" shall have the
  meanings set forth in section eleven hundred sixty of the public  health
  law.
    3. Such fund shall consist of all of the following:
    (a) the proceeds of bonds or notes issued by the state pursuant to the
  Clean  Water/Clean Air Bond Act of 1996; provided that up to two hundred
  sixty-five million dollars ($265,000,000)  of  such  proceeds  shall  be
  available  to  finance state assistance payments in the manner set forth
  in paragraphs (a), (d), (e), (f) and (g) of  subdivision  four  of  this
  section,  and  up  to  ninety  million  dollars  ($90,000,000)  shall be
  available to finance state assistance payments in the manner  set  forth
  in paragraphs (d), (f) and (h) of subdivision four of this section;
    (b)   federal  capitalization  grants  and  awards  or  other  federal
  assistance provided pursuant to the federal safe drinking water act  for
  purposes  of  deposit  in  the  fund  and  appropriated by the state for
  deposit therein;

    (c) moneys appropriated by the state legislature for  the  purpose  of
  such  fund  or otherwise transferred by the state for deposit therein by
  the comptroller as required by law;
    (d)  payments of principal and interest made by recipients pursuant to
  loan or other financing agreements entered into pursuant to subdivisions
  eight  and  nine  of  this  section;  provided,  however,  if  financial
  assistance  made  pursuant  to financing agreements were financed by the
  issuance of bonds or notes of the corporation, deposit of such  payments
  into  the  fund  shall  be  subject to the rights of the holders of such
  bonds or notes to receive such moneys;
    (e) investment earnings on amounts in such fund; and
    (f) the proceeds of bonds or  notes  issued  by  the  corporation  for
  purposes of providing financial assistance to recipients.
    4. Moneys in the drinking water revolving fund shall be applied by the
  corporation  in  accordance  with this section and title four of article
  eleven of the public health  law  to  provide  financial  assistance  to
  recipients  for construction of eligible projects and, upon consultation
  with the director of the division of the budget, for such other purposes
  permitted by the federal safe drinking water act,  as  amended,  and  to
  provide  for  the  administrative  and  management costs of the program,
  provided however, that proceeds of bonds issued pursuant  to  the  Clean
  Water/Clean  Air  Bond Act of 1996, other than proceeds of bonds used to
  finance the state  match  for  federal  capitalization  grants  for  the
  drinking  water revolving fund, shall not be used for administrative and
  management costs; and provided further, that proceeds  of  bonds  issued
  pursuant  to  the  Clean  Water/Clean  Air  Bond Act of 1996, other than
  proceeds of  bonds  issued  to  finance  the  state  match  for  federal
  capitalization  grants  for the drinking water revolving fund, shall not
  be used to finance costs with respect to the Croton filtration  project.
  As  used  in this section "financial assistance to recipients" means any
  one or more of the following:
    (a) making loans to recipients for construction of  eligible  projects
  on  such  terms  as  the  corporation  may  determine,  subject  to  any
  applicable provisions of federal or state law;
    (b) buying or refinancing debt obligations of recipients at market  or
  below  market  rates, subject to any applicable provisions of federal or
  state law;
    (c) guarantying, or purchasing insurance or other  credit  enhancement
  for  municipal obligations where such action would improve credit market
  access for or reduce interest rates on such municipal obligations;
    (d) providing a source of revenue or security for payment of principal
  and interest on bonds or notes issued by the corporation if the proceeds
  of the sale of such bonds or notes will be deposited in the fund;
    (e) providing interest rate subsidy allocations to subsidize loans  to
  recipients made from the proceeds of the corporation's bonds or notes;
    (f)  paying,  pursuant to subdivision seven of this section, the costs
  of the corporation and the department of  health  of  administering  and
  managing the program described in this section and title four of article
  eleven  of the public health law and paying the costs of the corporation
  and the department of health  of  providing  technical  assistance  with
  respect  to  such  program;  provided,  however,  that proceeds of bonds
  issued pursuant to the Clean Water/Clean Air Bond  Act  of  1996,  other
  than  proceeds  of  bonds  used  to  finance the state match for federal
  capitalization grants for the drinking water revolving fund,  shall  not
  be used for such costs;
    (g)  paying  up to seventy-five percent of the principal on loans made
  to recipients under financing agreements if the  corporation  determines
  that  the  recipient  would  be unable to carry out the eligible project

  financed with such loan without creating a financial hardship on  system
  users  and  without  the  subsidy afforded by such payment of principal,
  provided that (i) the amounts applied to such purpose shall be paid from
  interest  earned  on  funds  deposited  in  the  fund  and from interest
  received on other loans made from the fund, (ii) the amounts so  applied
  shall  not  exceed,  in the aggregate, the interest earnings received by
  the fund on fifty percent of the amounts  deposited  to  the  fund,  and
  (iii)   in   accordance  with  regulations  to  be  promulgated  by  the
  corporation, preference shall be given to small and rural communities in
  providing such principal subsidies; or
    (h) making state assistance payments for the state share of  the  cost
  of  an  eligible project from up to ninety million dollars ($90,000,000)
  of the proceeds of state bonds and notes issued pursuant  to  the  Clean
  Water/Clean  Air  Bond  Act  of  1996; provided that, in accordance with
  regulations to be promulgated by the corporation,  preference  shall  be
  given  to  recipients  which  would be unable to carry out such eligible
  projects in the  absence  of  such  state  assistance  payments  without
  creating a financial hardship on system users.
    5.  The  corporation may make payments to the state in accordance with
  subdivision  seven  of  this  section  to  reimburse   the   state   for
  expenditures  made  pursuant  to  appropriation  to  pay the cost of the
  corporation and the department of health for administering and  managing
  the  drinking  water  revolving  fund  program,  including  provision of
  technical assistance. Such reimbursement may be made from:
    (a) available investment earnings on all amounts in the drinking water
  revolving fund excluding all amounts in the fund which are  the  subject
  of allocations or other financial assistance to a recipient;
    (b) payments received from a recipient for such purpose; and
    (c)   the   proceeds  of  federal  capitalization  grants,  awards  or
  assistance available for administration and management of such program.
    Notwithstanding the foregoing, if the sources of revenues described in
  paragraphs (a), (b)  and  (c)  of  this  subdivision  are  at  any  time
  insufficient  to  make  a  reimbursement  to  the state pursuant to this
  subdivision when due, the corporation may make such  reimbursement  from
  any  other  available  amounts  in  the  drinking  water revolving fund,
  excluding all amounts that are the  subject  of  allocations,  provided,
  that  the  amounts  paid from fund sources other than those described in
  paragraphs (a), (b) and (c) of this subdivision shall be reimbursed upon
  a determination by the director  of  the  budget  that  future  revenues
  obtained  from  sources described in paragraphs (a), (b) and (c) of this
  subdivision are in excess of  the  amounts  reasonably  needed  to  make
  future reimbursements pursuant to this subdivision.
    * 6.  Moneys  in  the drinking water revolving fund may be invested as
  provided in subdivision four of section twelve  hundred  eighty-four  of
  this title and may be further invested:
    (a)  in investment agreements continuously secured by obligations with
  any insurance company or  reinsurance  company  or  corporate  affiliate
  thereof rated by a nationally recognized rating agency in one of its two
  highest  categories,  any  bank,  trust  company or broker or dealer, as
  defined by the securities exchange act of 1934, which  is  a  dealer  in
  government  bonds,  which reports to, trades with and is recognized as a
  primary dealer by a  federal  reserve  bank  and  is  a  member  of  the
  securities   investors   protection   corporation,  if  such  investment
  agreement provides that:
    (i)  such  obligations  securing  such   investment   agreements   are
  obligations as set forth in section ten of the general municipal law;
    (ii) such obligations are to be delivered to a trustee for the benefit
  of the corporation or, with respect to moneys pledged under an indenture

  of  trust  or  trust  agreement  relating  to  bonds  or  notes  of  the
  corporation, to the trustee under such indenture or trust agreement,  or
  are  supported  by  a  safe  keeping  receipt  issued  by  a  depository
  satisfactory  to  the  corporation  as  applicable,  provided  that such
  investment agreements must provide that  the  value  of  the  underlying
  obligations shall be maintained at a current market value, calculated no
  less  frequently  than  monthly,  of  not less than the amount deposited
  thereunder;
    (iii) a prior perfected security interest in the obligations which are
  securing such agreement  has  been  granted  to  the  corporation,  such
  trustee or such depository as applicable; and
    (iv)  such  obligations  are  free  and  clear  of adverse third party
  claims; or
    (b) in obligations  as  set  forth  in  section  ten  of  the  general
  municipal law that are rated by a nationally recognized rating agency in
  one of its two highest rating categories.
    * NB Effective until September 30, 2011
    * 6.  Moneys  in  the drinking water revolving fund may be invested as
  provided in subdivision four of section twelve  hundred  eighty-four  of
  this title and may be further invested:
    (a)  in investment agreements continuously secured by obligations with
  any insurance company or  reinsurance  company  or  corporate  affiliate
  thereof rated by a nationally recognized rating agency in one of its two
  highest  categories,  any  bank,  trust  company or broker or dealer, as
  defined by the securities exchange act of 1934, which  is  a  dealer  in
  government  bonds,  which reports to, trades with and is recognized as a
  primary dealer by a  federal  reserve  bank  and  is  a  member  of  the
  securities   investors   protection   corporation,  if  such  investment
  agreement provides that:
    (i)  such  obligations  securing  such   investment   agreements   are
  obligations as set forth in section ten of the general municipal law;
    (ii) such obligations are to be delivered to a trustee for the benefit
  of the corporation or, with respect to moneys pledged under an indenture
  of  trust  or  trust  agreement  relating  to  bonds  or  notes  of  the
  corporation, to the trustee under such indenture or trust agreement,  or
  are  supported  by  a  safe  keeping  receipt  issued  by  a  depository
  satisfactory to  the  corporation  as  applicable,  provided  that  such
  investment  agreements  must  provide  that  the value of the underlying
  obligations shall be maintained at a current market value, calculated no
  less frequently than monthly, of not  less  than  the  amount  deposited
  thereunder;
    (iii) a prior perfected security interest in the obligations which are
  securing  such  agreement  has  been  granted  to  the corporation, such
  trustee or such depository as applicable; and
    (iv) such obligations are  free  and  clear  of  adverse  third  party
  claims; or
    (b)  in  obligations  the  interest  on which is excludable from gross
  income under section one hundred three of  the  internal  revenue  code,
  provided  that  such  obligations  are  rated by a nationally recognized
  rating agency in one of its two highest rating categories.
    * NB Effective September 30, 2011
    7. The corporation shall transfer to the state on such schedule as the
  corporation and the department of health shall agree  amounts  from  the
  fund  to  reimburse  the  state  in  accordance  with  the provisions of
  subdivision five of this section.
    8. In addition to the powers of the corporation granted  elsewhere  in
  this  chapter,  the  corporation shall have the power to enter into loan
  and other financing agreements  authorized  by  title  four  of  article

  eleven  of  the public health law. Notwithstanding the powers granted to
  the corporation elsewhere in this  title,  the  corporation's  power  to
  finance  eligible projects from the fund is limited to eligible projects
  for which financing agreements have been executed pursuant to title four
  of article eleven of the public health law.
    9.  In  addition to the powers granted to the corporation elsewhere in
  this  chapter,  the  corporation  may  make  loans  or  other  financial
  assistance to recipients for purposes of financing eligible projects for
  which  the  fund  may be used, subject to the limitations of subdivision
  eight of this section, may accept the obligations of  any  recipient  as
  security  for  the repayment of a loan to such recipient, and may assign
  and pledge such recipient obligations and financing agreements  for  the
  benefit  of the holders of obligations of the corporation. Loan proceeds
  or other financial assistance may be disbursed to a  recipient  only  in
  connection  with facilities that have been certified by the commissioner
  of health as constituting an eligible project  and  in  accordance  with
  other  restrictions  as  may  be imposed in connection with such loan or
  obligations of the corporation from the proceeds of which such  loan  is
  made.
    10. The corporation is authorized to arrange, in consultation with the
  department  of health, for any audits required by law for the purpose of
  issuing  its  bonds  or  notes  to  provide  financial   assistance   to
  recipients,  and  provide  for  the  implementation of any independently
  conducted reviews or audits arranged  pursuant  to  subdivision  two  of
  section eleven hundred sixty-six of the public health law.
    11.  In  the  event a municipality participating in the drinking water
  revolving  fund  program  shall  fail  to  make  any  payment  due   the
  corporation  pursuant  to any financing agreement or other obligation of
  the municipality sold to the corporation or issued as security  for  the
  undertaking  of  the  municipality  thereunder,  the  corporation  shall
  certify to the comptroller,  and  notify  the  chairman  of  the  senate
  finance   committee,  the  chairman  of  the  assembly  ways  and  means
  committee, the director of the division of the budget and the  governing
  body  of the municipality that such municipality has failed to make such
  payment. Such certificate shall be in such form as may be determined  by
  the corporation provided such certificate shall specify the exact amount
  of  debt  service and surcharge, if applicable, required to satisfy such
  municipality's unpaid obligation. The comptroller, upon receipt of  such
  certificate  from  the  corporation,  is authorized to and shall, to the
  extent not  otherwise  prohibited  by  law  and  subject  to  any  other
  provision   of   law  providing  for  withholding  of  payments  to  the
  municipality which takes precedence over this subdivision, withhold from
  such municipality the next succeeding payments of  state  aid  or  local
  assistance  otherwise  payable to it to the extent necessary to meet the
  certified amount of debt service and surcharge, if applicable,  due  the
  corporation  and shall immediately pay over to the corporation as a debt
  service payment on behalf of such municipality the amount so withheld.