Bill Text: NY A07510 | 2011-2012 | General Assembly | Introduced
Bill Title: Prohibits municipalities from forming limited liability companies to finance operations or acquisitions of assets.
Spectrum: Partisan Bill (Democrat 6-0)
Status: (Engrossed - Dead) 2012-06-20 - REFERRED TO RULES [A07510 Detail]
Download: New_York-2011-A07510-Introduced.html
S T A T E O F N E W Y O R K
________________________________________________________________________
7510
2011-2012 Regular Sessions
I N A S S E M B L Y
May 6, 2011
___________
Introduced by M. of A. BRENNAN, MAGNARELLI -- (at request of the State
Comptroller) -- read once and referred to the Committee on Corpo-
rations, Authorities and Commissions
AN ACT to amend the limited liability company law and the not-for-profit
corporation law, in relation to the purposes, powers and duties of
limited liability companies, and local development corporations and
other not-for-profit corporations; to amend the local finance law, in
relation to loans of credit and the exclusivity of such law; and to
amend the general municipal law, in relation to audits by the state
comptroller of certain organizations directly or indirectly controlled
by municipal corporations and certain other government entities
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
1 Section 1. Section 102 of the limited liability company law is amended
2 by adding a new subdivision (r-1) to read as follows:
3 (R-1) "MUNICIPALITY" MEANS A COUNTY, CITY, TOWN, VILLAGE, SCHOOL
4 DISTRICT, BOARD OF COOPERATIVE EDUCATIONAL SERVICES, COMMUNITY COLLEGE,
5 PUBLIC LIBRARY OR LIBRARY DISTRICT, DISTRICT CORPORATION, TOWN OR COUNTY
6 IMPROVEMENT DISTRICT, OR OTHER SPECIAL DISTRICT ESTABLISHED FOR THE
7 PURPOSE OF CARRYING ON, PERFORMING OR FINANCING ONE OR MORE IMPROVEMENTS
8 OR SERVICES FOR BENEFITED PROPERTIES OR PROPERTY OWNERS WITHIN SUCH
9 SPECIAL DISTRICT.
10 S 2. Section 201 of the limited liability company law is amended to
11 read as follows:
12 S 201. Purpose. A limited liability company may be formed under this
13 chapter for any lawful business purpose or purposes except: (A) to do in
14 this state any business for which another statute specifically requires
15 some other business entity or natural person to be formed or used for
16 such business; OR (B) TO FINANCE DIRECTLY OR INDIRECTLY OVER A PERIOD OF
17 TIME A MUNICIPALITY'S OPERATIONS OR THE ACQUISITION OR IMPROVEMENT OF AN
18 ASSET BY OR FOR THE USE OF A MUNICIPALITY.
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD10634-02-1
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1 S 3. The limited liability company law is amended by adding a new
2 section 202-a to read as follows:
3 S 202-A. LIMITATION ON POWERS. NOTWITHSTANDING THE PROVISIONS OF
4 SECTION TWO HUNDRED TWO OF THIS ARTICLE, A LIMITED LIABILITY COMPANY
5 SHALL NOT PARTICIPATE IN ANY TRANSACTION OR SERIES OF RELATED TRANS-
6 ACTIONS INVOLVING THE PAYMENT OF MONEY OVER A PERIOD OF TIME BY OR ON
7 BEHALF OF A MUNICIPALITY LOCATED IN THIS STATE AND HAVING AS A PURPOSE
8 THE DIRECT OR INDIRECT FINANCING OF THE MUNICIPALITY'S OPERATIONS OR THE
9 ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR THE USE OF THE MUNICI-
10 PALITY. PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION SHALL PROHIBIT A
11 LIMITED LIABILITY COMPANY FROM ENTERING INTO A TRUE LEASE WITH A MUNICI-
12 PALITY, ENTERING INTO AN INSTALLMENT PURCHASE CONTRACT PURSUANT TO
13 SECTION ONE HUNDRED NINE-B OF THE GENERAL MUNICIPAL LAW OR PURCHASING
14 BONDS OR NOTES ISSUED PURSUANT TO THE LOCAL FINANCE LAW.
15 S 4. Subdivision 1 of paragraph a of section 101.00 of the local
16 finance law, as amended by chapter 200 of the laws of 1960, is amended
17 to read as follows:
18 1. Give or loan its credit to or in aid of any individual, or public
19 or private corporation or association, or private undertaking, INCLUD-
20 ING, BUT NOT LIMITED TO, GUARANTEEING OR ASSUMING THE INDEBTEDNESS OR
21 OBLIGATIONS OF ANY NOT-FOR-PROFIT CORPORATION OR LIMITED LIABILITY
22 COMPANY FORMED BY, ON BEHALF OF, FOR THE BENEFIT OF, OR UNDER THE
23 CONTROL OF THE MUNICIPALITY, SCHOOL DISTRICT OR DISTRICT CORPORATION, or
24 S 5. Section 176.00 of the local finance law, as amended by chapter
25 837 of the laws of 1945, is amended to read as follows:
26 S 176.00 Local finance law to be the exclusive law. A. Except as
27 otherwise provided in this article, all statutes, local laws, ordi-
28 nances, rules and regulations, insofar as they relate to the matters
29 herein contained, are hereby superseded, it being the legislative intent
30 that this chapter shall constitute the exclusive law on such matters.
31 B. UNLESS EXPRESSLY AND SPECIFICALLY OTHERWISE PROVIDED IN ANY OTHER
32 GENERAL LAW OR IN A SPECIAL LAW, THE PROVISIONS OF THIS CHAPTER SHALL BE
33 THE EXCLUSIVE LAW GOVERNING THE MANNER IN WHICH MUNICIPALITIES, SCHOOL
34 DISTRICTS AND DISTRICT CORPORATIONS FINANCE OVER A PERIOD OF TIME THEIR
35 OPERATIONS AND THE ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR THE
36 USE OF A MUNICIPALITY, SCHOOL DISTRICT OR DISTRICT CORPORATION.
37 S 6. Paragraph (a) of section 102 of the not-for-profit corporation
38 law is amended by adding a new subparagraph 19 to read as follows:
39 (19) "MUNICIPALITY" MEANS A COUNTY, CITY, TOWN, VILLAGE, SCHOOL
40 DISTRICT, BOARD OF COOPERATIVE EDUCATIONAL SERVICES, COMMUNITY COLLEGE,
41 PUBLIC LIBRARY OR LIBRARY DISTRICT, DISTRICT CORPORATION, TOWN OR COUNTY
42 IMPROVEMENT DISTRICT, OR OTHER SPECIAL DISTRICT ESTABLISHED FOR THE
43 PURPOSE OF CARRYING ON, PERFORMING OR FINANCING ONE OR MORE IMPROVEMENTS
44 OR SERVICES FOR BENEFITED PROPERTIES OR PROPERTY OWNERS WITHIN SUCH
45 SPECIAL DISTRICT.
46 S 7. Section 204 of the not-for-profit corporation law is amended to
47 read as follows:
48 S 204. Limitation on activities.
49 Notwithstanding any other provision of this chapter or any other
50 general law, a corporation of any type or kind to which this chapter
51 applies shall: (A) conduct no activities for pecuniary profit or finan-
52 cial gain, whether or not in furtherance of its corporate purposes,
53 except to the extent that such activity supports its other lawful activ-
54 ities then being conducted; AND (B) NOT PARTICIPATE IN ANY TRANSACTION
55 OR SERIES OF RELATED TRANSACTIONS INVOLVING THE PAYMENT OF MONEY OVER A
56 PERIOD OF TIME BY OR ON BEHALF OF A MUNICIPALITY AND HAVING AS A PURPOSE
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1 THE DIRECT OR INDIRECT FINANCING OF THE MUNICIPALITY'S OPERATIONS, OR
2 THE ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR THE USE OF THE
3 MUNICIPALITY, PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION SHALL
4 PROHIBIT SUCH A CORPORATION FROM ENTERING INTO A TRUE LEASE WITH A MUNI-
5 CIPALITY OR PURCHASING BONDS OR NOTES ISSUED PURSUANT TO THE LOCAL
6 FINANCE LAW.
7 S 8. Paragraphs (a), (c), (d) and (i) of section 1411 of the not-for-
8 profit corporation law, paragraph (a) as amended by chapter 847 of the
9 laws of 1970, are amended and a new paragraph (d-1) is added to read as
10 follows:
11 (a) Purposes.
12 This section shall provide an additional and alternate method of
13 incorporation or reincorporation of not-for-profit corporations for any
14 of the purposes set forth in this paragraph [and shall not be deemed to
15 alter, impair or diminish the purposes, rights, powers or privileges of
16 any corporation heretofore or hereafter incorporated under this section
17 or under the stock or business corporation laws]. Corporations may be
18 incorporated or reincorporated under this section as not-for-profit
19 local development corporations operated for the exclusively charitable
20 or public purposes of relieving and reducing unemployment, promoting and
21 providing for additional and maximum employment, bettering and maintain-
22 ing job opportunities, instructing or training individuals to improve or
23 develop their capabilities for such jobs, carrying on scientific
24 research for the purpose of aiding a community or geographical area by
25 attracting new industry to the community or area or by encouraging the
26 development of, or retention of, an industry in the community or area[,
27 and lessening the burdens of government and acting in the public inter-
28 est, and any]. ANY one or more counties, cities, towns or villages of
29 the state, or any combination thereof, or the New York job development
30 authority in exercising its power under the public authorities law to
31 encourage the organization of local development corporations, may cause
32 such corporations to be incorporated by public officers or private indi-
33 viduals or reincorporated upon compliance with the requirements of this
34 section, and it is hereby found, determined and declared that in carry-
35 ing out said purposes and in exercising the powers conferred by para-
36 graph (b) such corporations will be ACTING IN THE PUBLIC INTEREST AND
37 performing an essential governmental function.
38 (c) Powers.
39 In furtherance of its purposes set forth in paragraph (a) but not for
40 any other purposes, a local development corporation incorporated or
41 reincorporated under this section shall have the following powers: to
42 construct, acquire, rehabilitate and improve for use by others indus-
43 trial or manufacturing plants in the territory in which its operations
44 are principally to be conducted, to assist financially in such
45 construction, acquisition, rehabilitation and improvement, to maintain
46 such plants for others in such territory, to disseminate information and
47 furnish advice, technical assistance and liaison with federal, state and
48 local authorities with respect thereto, to acquire by purchase, lease,
49 gift, bequest, devise or otherwise real or personal property or inter-
50 ests therein, to borrow money and to issue negotiable bonds, notes and
51 other obligations therefor, and notwithstanding section 510 (Disposition
52 of all or substantially all assets) without leave of the court, to sell,
53 lease, mortgage or otherwise dispose of or encumber any such plants or
54 any of its real or personal property or any interest therein upon such
55 terms as it may determine and, in connection with loans from the New
56 York job development authority, to enter into covenants and agreements
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1 and to comply with all the terms, conditions and provisions thereof, and
2 otherwise to carry out its corporate purposes and to foster and encour-
3 age the location or expansion of industrial or manufacturing plants in
4 the territory in which the operations of such corporation are principal-
5 ly to be conducted, provided, however, that no such corporation shall:
6 (1) attempt to influence legislation by propaganda or otherwise, or
7 participate or intervene, directly or indirectly, in any political
8 campaign on behalf of or in opposition to any candidate for public
9 office; (2) PARTICIPATE IN ANY TRANSACTION OR SERIES OF RELATED TRANS-
10 ACTIONS INVOLVING THE PAYMENT OF MONEY OVER A PERIOD OF TIME BY OR ON
11 BEHALF OF A MUNICIPALITY AND HAVING AS A PURPOSE THE DIRECT OR INDIRECT
12 FINANCING OF THE MUNICIPALITY'S OPERATIONS, OR THE ACQUISITION OR
13 IMPROVEMENT OF AN ASSET BY OR FOR THE USE OF THE MUNICIPALITY, PROVIDED,
14 HOWEVER, THAT NOTHING IN THIS SECTION SHALL PROHIBIT A LOCAL DEVELOPMENT
15 CORPORATION FROM ENTERING INTO A TRUE LEASE WITH A MUNICIPALITY OR
16 PURCHASING BONDS OR NOTES ISSUED PURSUANT TO THE LOCAL FINANCE LAW; AND
17 (3) IN THE CASE OF A LOCAL DEVELOPMENT CORPORATION, THE INCORPORATION OF
18 WHICH WAS CAUSED BY A COUNTY, CITY, TOWN OR VILLAGE, PROVIDE COMPEN-
19 SATION TO A PERSON WHO SERVES AS A DIRECTOR, OFFICER OR EMPLOYEE OF SUCH
20 CORPORATION WHEN THE PERSON SERVES OR HAS SERVED WITHIN THE PREVIOUS TWO
21 YEARS AS AN OFFICER OR EMPLOYEE OF SUCH COUNTY, CITY, TOWN OR VILLAGE.
22 (d) Purchase or lease of real property owned by a county, city, town
23 or village.
24 (1) The local legislative body of a county, city, town or village
25 [or, if there is a board of estimate in a city, then the board of esti-
26 mate,] may by resolution determine that specifically described real
27 property owned by the county, city, town or village is not required for
28 use by such county, city, town or village and authorize the county,
29 city, town or village to sell or lease such real property to a local
30 development corporation incorporated or reincorporated under this arti-
31 cle; provided, however, that: (I) title to such land be not declared
32 inalienable as a forest preserve or a parkland; AND (II) THAT NO SUCH
33 SALE OR LEASE SHALL HAVE AS A PURPOSE THE DIRECT OR INDIRECT FINANCING
34 OVER A PERIOD OF TIME OF THE OPERATIONS OF THE COUNTY, CITY, TOWN OR
35 VILLAGE, OR THE ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR THE USE
36 OF THE COUNTY, CITY, TOWN OR VILLAGE.
37 (2) Notwithstanding the provisions of any general, special or local
38 law, charter or ordinance to the contrary, such sale or lease may be
39 made without appraisal, public notice, (except as provided in subpara-
40 graph (4)) or public bidding for [such price or rental] FAIR AND
41 ADEQUATE CONSIDERATION and upon such OTHER terms as may be agreed upon
42 between the county, city, town or village and said local development
43 corporation; provided, however, that in case of a lease the term may not
44 exceed [ninety-nine] FIVE years, SUBJECT TO ONE OR MORE RENEWALS FOR A
45 TERM NOT EXCEEDING FIVE YEARS UPON MUTUAL CONSENT OF THE PARTIES, and
46 provided, further, that in cities having a population of one million or
47 more, no such sale or lease shall be made without the approval of a
48 majority of the members of the borough [improvement] board of the
49 borough in which such real property is located.
50 (3) Before any sale or lease to a local development corporation
51 incorporated or reincorporated under this article shall be authorized, a
52 public hearing shall be held by the local legislative body[, or by the
53 board of estimate, as the case may be,] to consider the proposed sale or
54 lease.
55 (4) Notice of such hearing shall be published at least ten days
56 before the date set for the hearing in such publication and in such
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1 manner as may be designated by the local legislative body[, or the board
2 of estimate as the case may be]. SUCH NOTICE SHALL INCLUDE A DESCRIPTION
3 OF THE REAL PROPERTY PROPOSED TO BE SOLD OR LEASED, AND A STATEMENT OF
4 (I) THE ESTIMATED FAIR MARKET VALUE OF THE REAL PROPERTY PROPOSED TO BE
5 SOLD OR LEASED, (II) THE CONSIDERATION TO BE RECEIVED BY THE COUNTY,
6 CITY, TOWN OR VILLAGE ON ACCOUNT OF SUCH SALE OR LEASE, AND (III) A
7 STATEMENT OF THE INTENDED USE OR DISPOSITION OF SUCH REAL PROPERTY BY
8 THE LOCAL DEVELOPMENT CORPORATION.
9 (5) A local development corporation, incorporated or reincorporated
10 under this section, which purchases or leases real property from a coun-
11 ty, city, town or village, shall not, without the written approval of
12 the county, city, town or village, use such real property for any
13 purpose except the purposes set forth in the certificate of incorpo-
14 ration or reincorporation of said local development corporation. In the
15 event such real property is used in violation of the restrictions of
16 this paragraph, the attorney-general may bring an action or special
17 proceeding to enjoin the unauthorized use.
18 (D-1) CONTRACTS WITH MUNICIPALITIES.
19 ANY CONTRACT OR OTHER AGREEMENT BETWEEN A LOCAL DEVELOPMENT CORPO-
20 RATION AND A MUNICIPALITY SHALL: (I) PROVIDE FOR THE MUNICIPALITY TO
21 RECEIVE FAIR AND ADEQUATE CONSIDERATION, (II) BE SUBJECT TO THE REQUIRE-
22 MENTS OF ARTICLE FIVE-A OF THE GENERAL MUNICIPAL LAW, (III) HAVE A TERM
23 NOT TO EXCEED FIVE YEARS, SUBJECT TO ONE OR MORE RENEWALS FOR A TERM NOT
24 TO EXCEED FIVE YEARS UPON THE MUTUAL CONSENT OF THE PARTIES, AND (IV) BE
25 MADE FOR A PROPER MUNICIPAL PURPOSE, WHICH SHALL NOT INCLUDE THE DIRECT
26 OR INDIRECT FINANCING OVER A PERIOD OF TIME OF THE MUNICIPALITY'S OPER-
27 ATIONS OR THE ACQUISITION OR IMPROVEMENT OF AN ASSET BY OR FOR THE USE
28 OF THE MUNICIPALITY.
29 (i) Effect of section.
30 Corporations incorporated or reincorporated under this section shall
31 be organized and operated exclusively for the purposes set forth in
32 paragraph (a), shall have, in addition to the powers otherwise conferred
33 by law, the powers conferred by paragraph (c) and shall be subject to
34 all the restrictions and limitations imposed by [paragraph] PARAGRAPHS
35 (C), (D), (D-1), (e) and [paragraph] (g). In so far as the provisions
36 of this section are inconsistent with the provisions of any other law,
37 general or special, the provisions of this section shall be controlling
38 as to corporations incorporated or reincorporated hereunder.
39 S 9. Section 34 of the general municipal law, as amended by chapter
40 233 of the laws of 2006, is amended to read as follows:
41 S 34. Powers and duties of examiners. 1. The comptroller and each
42 examiner of municipal affairs shall have power to examine into the
43 financial affairs of every such municipal corporation, industrial devel-
44 opment agency, district, [fire company as defined in section two hundred
45 four-a of this chapter,] agency and activity [and], ANY FIRE COMPANY AS
46 DEFINED IN SECTION TWO HUNDRED FOUR-A OF THIS CHAPTER, AND ANY OTHER
47 ORGANIZATION, EXCEPT A STATEWIDE ASSOCIATION OF LOCAL GOVERNMENTS OR
48 LOCAL GOVERNMENT OFFICIALS, THAT IS DIRECTLY OR INDIRECTLY CONTROLLED BY
49 ONE OR MORE OF ANY SUCH MUNICIPAL CORPORATIONS, INDUSTRIAL DEVELOPMENT
50 AGENCIES, DISTRICTS OR AGENCIES. AN ORGANIZATION SHALL BE DEEMED UNDER
51 THE CONTROL OF ONE OR MORE MUNICIPAL CORPORATIONS, INDUSTRIAL DEVELOP-
52 MENT AGENCIES, DISTRICTS OR AGENCIES WHEN, AMONG OTHER CIRCUMSTANCES,
53 ONE OR MORE INDIVIDUALS WHO SERVE AS OFFICERS OR EMPLOYEES OF ANY SUCH
54 MUNICIPAL CORPORATION, INDUSTRIAL DEVELOPMENT AGENCY, DISTRICT OR AGEN-
55 CY: (A) SELECT EITHER A MAJORITY OF A QUORUM OF THE ORGANIZATION'S HIGH-
56 EST POLICY-MAKING BODY OR THE ORGANIZATION'S CHIEF EXECUTIVE OFFICER;
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1 (B) CONSTITUTE A MAJORITY OF THE VOTING STRENGTH THAT SELECTS EITHER A
2 MAJORITY OF A QUORUM OF THE ORGANIZATION'S HIGHEST POLICY-MAKING BODY OR
3 THE ORGANIZATION'S CHIEF EXECUTIVE OFFICER; OR (C) SERVE AS EITHER: (I)
4 A MAJORITY OF A QUORUM OF THE ORGANIZATION'S HIGHEST POLICY-MAKING BODY;
5 (II) THE ORGANIZATION'S CHIEF EXECUTIVE OFFICER; OR (III) A PARTNER IN
6 THE ORGANIZATION. AN ORGANIZATION UNDER THE CONTROL OF ONE OR MORE
7 MUNICIPAL CORPORATIONS, INDUSTRIAL DEVELOPMENT AGENCIES, DISTRICTS OR
8 AGENCIES SHALL ALSO INCLUDE ANY OTHER ORGANIZATION THAT IS CONTROLLED BY
9 SUCH ORGANIZATION.
10 2. IN CONNECTION WITH ANY EXAMINATION AUTHORIZED BY SUBDIVISION ONE OF
11 THIS SECTION, THE COMPTROLLER AND EACH EXAMINER OF MUNICIPAL AFFAIRS
12 SHALL HAVE POWER to administer an oath to any person whose testimony may
13 be required, and to compel the appearance and attendance of such person
14 for the purpose of any such examination and investigation, and the
15 production of books and papers. In the case of a municipal corporation,
16 industrial development agency, or school district, no such person shall
17 be compelled to appear or be examined elsewhere than within such munici-
18 pal corporation, industrial development agency, or school district. In
19 the case of any district other than a school district, no such person
20 may be compelled to appear or be examined elsewhere than within the town
21 or one of the towns in which such district or portion thereof is
22 located. In the case of an urban renewal agency, no such person shall be
23 compelled to appear or be examined outside the municipal corporation
24 wherein such agency is established. In the case of a fire company, no
25 such person shall be compelled to appear or be examined outside the area
26 served by the company. In the case of an activity, no such person shall
27 be compelled to appear outside the area served by the activity. IN THE
28 CASE OF AN ORGANIZATION UNDER THE CONTROL OF ONE OR MORE MUNICIPAL
29 CORPORATIONS, INDUSTRIAL DEVELOPMENT AGENCIES, DISTRICTS OR AGENCIES, NO
30 SUCH PERSON SHALL BE COMPELLED TO APPEAR OR TO BE EXAMINED OUTSIDE THE
31 COUNTY IN WHICH THE ORGANIZATION HAS ITS PRINCIPAL HEADQUARTERS. Willful
32 false swearing in such examination shall be perjury and shall be punish-
33 able as such.
34 S 10. This act shall take effect immediately and shall apply to any
35 transaction occurring on or after such effective date.
