Relates to the delivery of the good faith deposit following award of the bonds to the successful bidder; provides that a municipality, school district or district corporation may require that such deposit be made as a condition precedent to the consideration of a bid for the bonds.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9534
SPONSOR: Solages TITLE OF BILL:
An act to amend the local finance law, in relation to the delivery of
the good faith deposit following award of the bonds to the successful
bidder
PURPOSE::
This legislation would allow local governments to collect good faith
deposits only after determining the successful bidder of a bond offer
instead of including them as integral part of the bid for bonds in order
to reduce costs and administrative burdens on municipalities, school
districts and district corporations.
SUMMARY OF PROVISIONS::
Section 1. Amends Section 58.00(c)(3) of the local finance law by remov-
ing the requirement that each bidder shall deposit a certified or cash-
ier's check when participating in a bid for bond issued by a local
government. Instead, only successful bidders, as determined by the Muni-
cipality, school district or district corporation, would be requested to
do so.
Section 2. Sets forth the effective date.
JUSTIFICATION::
There are substantial administrative burdens and costs associated with
returning multiple good faith deposits received in connection with the
public sale of bonds by municipalities, school districts and district
corporations.
Pursuant to Section 58.00(c)(3) of the New York State Local Finance Law
the good faith deposit must be not less than one-half of one per centum
of the amount of bonds to be bid for. For example, for a bond issue with
a par amount of $10,000,000, the required good faith deposit must be at
least $50,000. The good faith deposit is applied as part payment for the
bonds or retained by the municipality, school district or district
corporation selling said bonds as liquidated damages in case the
successful bidder does not take up and pay for the bonds in accordance
with the terms of the notice of sale.
Typically, depending on the size, there can be as many as five to ten or
more, bids received for a single bond issue. Each bid must be accompa-
nied by a good faith deposit. If a municipality, school district or
district corporation is selling more than one series of bonds on the
same date, the number of deposits received increases substantially. For
convenience, most bidders send their good faith deposit to the munici-
pality, school district or district corporation selling the bonds in the
form of cash by wire transfer to an account designated by said munici-
pality, school district of district corporation. A few bidders may send
a certified or cashier's check in lieu of a wire.
The law also provides that the deposit may be made in the form of a
surety bond; however, there are presently no insurance companies in New
York State that• meet the rating criteria set forth in Section
58.00(c)(3) of the New York State Local Finance Law for providing a
surety bond. In addition, deposits are also received from banks and,
underwriting firms that do not ultimately submit a bid for the bonds.
Following the award of the bonds, the municipality, school district or
district corporation must return all of the deposits submitted by the
unsuccessful bidders. This task can take several hours or more to
complete and typically requires the time and attention of several staff
members of the municipality, school district or district corporation.
For each deposit to be returned, the municipality, school district or
district corporation must obtain and/or confirm wire instructions from
the unsuccessful bidder, undertake the multi-layer approval process for
sending outgoing wires, pay any costs associated with sending a wire
imposed by their banking institution and also account for or document
the receipt and return of the wires as part of the internal bookkeeping
and/or reconciliation process of said municipality, school district or
district corporation.
Due to the large number of wires that must be sent, there is an
increased likelihood of errors or mistakes, which would require addi-
tional time spent by the staff of the municipality, school district or
district corporation to address. Deposits are sometimes not returned
until the day following the sale. A reduction in the number of wires
being sent by a municipality, school district or district corporation
will lessen opportunities for wire fraud or related threats.
Amending this practice will reduce these administrative burdens and
costs following a bond sale by allowing the delivery of a good faith
deposit by the successful bidder following award of the bonds to said
successful bidder by the sale officer.
LEGISLATIVE HISTORY::
04/19/22 referred to local governments
01/17/23 referred to local governments
03/22/23 amend and recommit to local governments
03/22/23 print number 1461a
01/03/24 referred to local governments
FISCAL IMPLICATIONS::
To be determined.
EFFECTIVE DATE::
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
9534
IN ASSEMBLY
January 14, 2026
___________
Introduced by M. of A. SOLAGES -- read once and referred to the Commit-
tee on Local Governments
AN ACT to amend the local finance law, in relation to the delivery of
the good faith deposit following award of the bonds to the successful
bidder
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision 3 of paragraph c of section 58.00 of the local
2 finance law, as amended by chapter 416 of the laws of 2012, is amended
3 to read as follows:
4 3. A requirement that [as a condition precedent to the consideration
5 of his or her bid, each] the successful bidder shall deposit with such
6 official as the agency in charge of the sale may designate, a certified
7 or cashier's check drawn upon an incorporated bank or trust company to
8 the order of the municipality, school district or district corporation
9 or such official, for the amount specified in the notice, but in no
10 event less than one-half of one per centum of the amount of bonds
11 to be bid for. Notwithstanding the provisions of this subdivision, a
12 municipality, school district or district corporation may require that
13 such deposit be made as a condition precedent to the consideration of a
14 bid for the bonds. Such notice may also provide that, in lieu of a
15 certified or cashier's check, [bidders may furnish as security] the
16 deposit may also be in the form of cash in such amount remitted by wire
17 transfer to an account specified in the notice or an eligible surety
18 bond or an eligible letter of credit, approved by such official as to
19 form, sufficiency, and manner of execution. For purposes of this
20 section, "eligible surety bond" shall mean a bond executed by an insur-
21 ance company authorized to do business in this state, the claims-paying
22 ability of which is rated in one of the three highest rating categories
23 by at least one nationally recognized statistical rating organization;
24 and "eligible letter of credit" shall mean an irrevocable letter of
25 credit issued in favor of the municipality, school district or district
26 corporation, for a term not to exceed ninety days by a bank, as that
27 term is defined in section two of the banking law, whose commercial
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD00869-01-5
A. 9534 2
1 paper and other unsecured short-term debt obligations (or, in the case
2 of a bank which is the principal subsidiary of a holding company, whose
3 holding company's commercial paper and other unsecured short-term debt
4 obligations) are rated in one of the three highest rating categories
5 (based on the credit of such bank or holding company) by at least one
6 nationally recognized statistical rating organization or by a bank that
7 is in compliance with applicable federal minimum risk-based capital
8 requirements.
9 § 2. This act shall take effect immediately.
