Not-for-profit minority and women-owned business enterprises learned how they too can access the municipal bond market at a special program hosted by New York City Comptroller Scott Stringer at the Dinkins Building in Manhattan on Thursday.
Attendees at the comptroller’s “MWBE University: Capital, Bonds and Tax Breaks for Businesses Impacting NYC,” were introduced to the Build NYC Resource Corp. The bond program helps MWBE 501(c)(3) organizations and other non-profits get capital through tax-exempt and taxable municipal debt financing.
Under the Internal Revenue code, organizations that can qualify include airport facilities, dock and wharf facilities, solid waste disposal facilities, recycling facilities and transportation-related infrastructure.
Brian Cook, assistant comptroller for economic development, explained some of the benefits of using Build NYC tax-exempt loan financing.
He said some of these include lower interest rates than conventional debt options, the ability to refinance any existing debt, and a full waiver of the 2.8% mortgage recording tax. The Build NYC debt doesn’t require a bond rating and can be structured with variable or fixed rates.
“Borrowers work with an underwriter or placement agent and, in some cases, a financial adviser to determine the structure of the bond offering. A variety of factors specific to the borrower and its proposed project, including debt service coverage, will determine the specific interest rate,” the program says in a release. “Bond amounts below $5 million may not make financial sense for some borrowers; Build NYC is a discretionary program and together with the borrower’s adviser, underwriter and/or placement agent, will help evaluate whether bond financing is appropriate.”
When he came into office in 2014, Stringer created a diversity role to look at how city government was addressing diversity in the workforce and in business.
“My position … is really tasked to be the watchdog on diversity across city government,” said Chief Diversity Officer Wendy Garcia. “Our focus is on ensuring that the city uses its financial power – from contracts to investments – to give diverse businesses a real fair shot.”
Stringer detailed the progress his office has made in aiding MWBE firms in NYC, including hiring the city’s first chief diversity officer, grading the city on its diversity efforts and creating an emerging managers program for the city’s public pension funds.
The comptroller is the custodian of the pension funds, whose value is estimated at around $194 billion. The city's five main funds are the New York City Employees' Retirement System (NYCERS); the Teachers' Retirement System of the City of New York (TRS); the New York City Police Pension Fund Subchapter 2; New York City Fire Department Pension Fund Subchapter Two; and the New York City Board of Education Retirement System (BERS).
Stringer spoke about the new Early Stage Manager Fund, a program for all early stage managers. Early stage managers are a subset of emerging managers and is inclusive of managers of all races and genders.
The comptroller’s public markets emerging managers program charges the emerging managers with picking a portfolio of sub-managers, monitoring them on a regular basis, and providing performance measurement and analysis on at least a quarterly basis. Successful sub-managers may be graduated to direct mandates with the systems subject to procurement rules, according to the comptroller’s office.
To support this effort, Stringer said his office was looking for ways to make its emerging manager programs more effective with the goal of finding emerging managers in all asset classes.
The comptroller said he will go before the Trustees with a formal proposal to hire Emerging Manager of Managers for early stage funds, to include first time funds. He said he expects this will benefit successful MWBEs that otherwise would not have been evaluated.
“Our new strategy will ensure that every promising new investment firm gets a hearing,” Stringer said. “The strategy also offers our pension funds the best talent out there.”
Stringer also announced he is creating a new position entitled director of diversity and inclusion for the pension investments bureau. This is the first time, Stringer said, that the bureau is going to have a person fully dedicated to diversity.
The city has $37.6 billion of general obligation debt outstanding as of March 31. Moody’s Investors Service rates the city’s general obligation bonds Aa2, while S&P Global Ratings and Fitch Ratings rate them AA. All three assign stable outlooks.
Updated May 25, 2018 at 12:37PM: Clarifies how emerging managers program works.