FOR RELEASE:

State Comptroller Thomas P. DiNapoli’s review of three recent public authority bond issuances will save taxpayers and Long Island utility customers $457 million on a cash flow basis, or $176 million on a present value basis, over the life of the bonds, DiNapoli announced today at a news conference on Long Island to release a report on public authority debt structure.  The bonds were initially structured with balloon payments at the end of the repayment period, but as a result of DiNapoli’s review, the bonds’ structures were modified.

“Public authorities are driving up debt service costs and forcing taxpayers and ratepayers to fork out millions of dollars in additional interest costs,” DiNapoli said. “Balloon payments are typically a bad idea for homeowners, and they’re a bad idea for taxpayers.  We looked at three bond issuances and saved taxpayers $450 million. Our report highlights why public authorities have to stop back-loading principal costs.”  

DiNapoli noted his office will not approve debt issues that substantially defer principal payments or back-load debt in the absence of compelling circumstances to do so. DiNapoli’s report also urges public authorities to adopt policies that require debt issues to be structured with a substantially level or declining debt service repayment schedule.

Earlier this year, DiNapoli’s office reviewed debt issues by three public authorities and advised the authorities to restructure their issuances so the majority of the payments would not be made in the final years of the issuance period. In doing so, DiNapoli’s office saved taxpayers and ratepayers $456.9 million on a cash flow basis over the life of the debt, which is $175.9 million when adjusted for inflation on a net present value basis.

Under state law, the state and local governments are required to have debt structures that have a generally level or declining repayment schedule. Public authorities do not have this statutory requirement, but DiNapoli does have approval authority over the issuance of certain authority bonds.

Metropolitan Transportation Authority
The Metropolitan Transportation Authority sought approval from DiNapoli’s office to issue $503 million in bonds in March 2010. The debt structure proposed by the MTA would have required payment of 100 percent of the principal in the final six years of the 30-year structure period.