Capital projects are by their nature difficult to plan and budget, but effective bond counseling can provide flexibility and ease the pain.
Recently an issuer approached us with a problem: the issuer had cost overruns on one bond-financed project and cost savings on another. Although the two projects were within the same “class of objects or purposes” as defined in New York’s Local Finance Law, the issuer’s bond resolution had approved them as “specific objects or purposes.” This placed the issuer in an unfortunate bind, since the difference in verbiage meant that the issuer could not reallocate the cost savings from one project to the other in order to fund the cost overruns.
Bond counsel attorneys from Hancock Estabrook assisted the issuer in solving the problem by passing a new resolution authorizing a pay down of the principal amount of the bonds on the project with cost savings, and issuing additional bonds in an amount, corresponding to the pay down, on the project with cost overruns. As a result, the cost overruns were funded, and the principal amount of the issuer’s outstanding debt remained the same for purposes of its debt policies and its constitutional debt limit. We also provided guidance to the issuer on the importance of drafting bond resolutions for maximum flexibility, within the bounds of the New York State Constitution, the New York State Local Finance Law, and the Internal Revenue Code.
Learn more about how our Municipal and Public Finance attorneys can help assist with your capital projects and developments.