The federal stimulus package should lead the New York Environmental Facilities Corp. to issue more debt, but not for two or three years, staff said last week at a special board meeting.
The EFC plans to use its $522 million allocation of waste water and drinking water funds from the American Recovery and Reinvestment Act of 2009 for short-term financing for “shovel-ready” projects. The agency provides short-term loans to municipalities for water projects that are then refinanced with long-term debt from tax-exempt bond proceeds.
“We certainly expect that in the out years, once we see construction commence to the point where we can issue long-term loans, there will be an uptick in bond issuance to take out those short-term loans, but it won’t be seen in this year,” acting EFC president Matthew Millea said.
He said the New York City Municipal Water Finance Authority could get “to a financing stage earlier than the rest of the local governments.” The EFC regularly acts as conduit issuer for the authority.
At least 50% of the funds, $261 million, have to be used for grants or loan forgiveness. On a per-project basis, the EFC plans to provide at least 25% of principal loan forgiveness.
The act also requires that 20% of the funds be used for grants for green infrastructure, which can be included in the 50% of loan forgiveness or can be a grant in its own right.
Last week the EFC board approved a change to the clean water revolving fund that will allow it to give grants. The drinking water fund already had the authorization to give grants.
Using a hypothetical example of a $1.1 million project that qualified for federal funding and included $100,000 of solar panels, Millea said the EFC would lend the municipality stimulus funds and automatically forgive $250,000 of principal and $100,000 for the solar panels.
The municipality would later refinance the remaining $750,000 into a long-term loan using EFC bond proceeds to repay the SRFs that in turn back the bonds.
The stimulus funds that are not used for grants, loan forgiveness, and administrative costs would be recycled, meaning they would be added to the revolving fund to be used for future loans.
In December, Millea said the EFC could issue between $700 million to $900 million of bonds this year on its clean water and drinking water revolving funds and as personal income-tax bonds. The final amount of issuance for the year has not been determined, he said yesterday.
The EFC will be in the market this week with a $361.6 million deal on its second resolution on behalf of the Municipal Water Finance Authority.
