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NYS Comptroller

THOMAS P. DiNAPOLI

Local Government and School Accountability

Previous Accounting Releases

August 1999: New York State Environmental Facilities Corporation State Revolving Loan Funds


Issued To: County, City, Town and Village Chief Fiscal Officers


Since 1990 the New York State Environmental Facilities Corporation (EFC), through its revolving loan fund, has provided over 330 local governments and public authorities nearly $5 billion in long and short term loans to finance eligible clean water and drinking water projects.

The following describes the types of loans that are currently available from the revolving fund  (long term leverage loans, short term direct loans, and long term direct loans) and the proper accounting treatment for each loan type:

Long Term Leverage Loans

(Approximately 95% of the loans)

Purpose:
To finance eligible clean water and drinking water projects.

Source of Funds:
Proceeds of revenue bonds issued by EFC

Distribution of Funds:
The local government in applying for the loan from EFC must pass a resolution authorizing the issuance of serial bonds in the full amount of the application to EFC. At the time of the closing the local government issues serial bonds which are held by EFC as security for the revenue bonds. Proceeds of the revenue bonds are held by EFC in a trustee bank and wired to the local government's bank upon submission to EFC of documentation of incurred expenditures.

As part of this program, EFC establishes a debt service reserve fund for each borrower from capitalization grant moneys and state matching funds (usually 1/3 to 1/2 of the loan amount for clean water and 1/3 of the loan amount for drinking water). The debt reserve fund is held in an interest bearing account. Interest earned by the reserve fund is used to subsidize the borrower's interest expense on the serial bonds, producing a lower effective rate of interest.

Short Term Direct Loans

(limited term, interest free financing, clean water project only)

Purpose:
To provide short term financing for clean water projects.

Source of Funds:
Funding comes from Capitalization Grant moneys from the Federal Government which is matched with 20% State moneys.

Distribution of Funds:
After approval of a local government's application, EFC authorizes a maximum amount that may be loaned from the state revolving loan fund.

To evidence these loans a Grid Note is issued by the borrower to EFC. Debt is incurred by the borrower as advances are made without the need to close a new loan every time proceeds are advanced. The borrower's legal indebtedness is limited to the cumulative amount of the advances.

Funds are wired to the borrower by the trustee bank after EFC approves the borrower's request for funds based on a review of the authorized incurred costs submitted by the borrower.

Long Term Direct Loans

Source of Funds:
Funding comes from Capitalization Grant moneys from the Federal Government which is matched with 20% State moneys.

Distribution of Funds:
After approval of application, EFC authorizes a maximum amount that may be loaned from the state revolving loan fund.

To evidence this loan transaction, the borrower issues Serial Bonds to EFC for the entire amount of the authorized loan. At the time of the closing, the entire issue is considered legal indebtedness of the borrower.

Moneys are deposited in a trustee bank in the name of the borrower.

Funds are advanced and wired to the borrower by the trustee bank after EFC approves the borrower's request for funds based on a review of authorized incurred costs submitted by the borrower to EFC.

Information Made Available To Borrowers By EFC

  • A statement of sources and uses of funds, a debt service schedule and an estimated net debt service schedule is provided at closing.
  • Semi annual billings for principal and interest on loans. These billings also provide information on the amount of interest earnings which have been applied to reduce the current bill.
  • Copies of all approved requisitions for disbursements (advances). These requisitions contain the balance on hand in the borrower's construction fund.

Accounting Requirements

Each of these programs provides financing for major capital improvements, consequently projects financed through EFC should be accounted for in either the capital projects or enterprise funds. Proceeds of borrowings are recorded in the same manner as bonds or bond anticipation note issued directly by the local government. Debt service payments are budgeted and recognized as expenditures in the funds responsible for servicing the debt. If desired local governments may record interest on EFC loans on a net rather than gross basis. Cash assets from proceeds of debt that are being held by the trustee bank should be recorded on the balance sheet as Cash with Fiscal Agent.