N.Y. Comp. Codes R. & Regs. Tit. 9 §§ 1643-2.5

Current through Register Vol. 46, No. 53, December 31, 2024

Section 1643-2.5 - Temporary financing-funds borrowed from private investors; refinancing

(a) Refinancing out of proceeds of issue of new temporary loan notes. Where authorized or directed by the division, temporary loan notes issued to private investors may be refinanced, upon maturity, by a new issue of temporary loan notes. The new temporary loan notes must be authorized by separate and appropriate resolutions of the local agency. These resolutions authorize the execution of new requisition agreement, the execution and deposit, in escrow, of a new advance loan note, the cancellation, upon payment of the maturing issue of the temporary loan notes out of the proceeds of the issue of the new temporary loan notes, of the old requisition agreement and old advance loan note, and the execution and issue of the new temporary loan notes. The resolutions authorizing the contracting of indebtedness (§ 1643-2.2, subd. [b]) and the execution and issue of certificate of indebtedness and of advance loan notes in the aggregate maximum principal amount of the loan contract cover refinancing as well as the initial financing and so are not required to be passed each time refinancing is undertaken.

(b) Flow of funds. Depending on the progress made and anticipated in the development of the project, the new temporary loan notes issued to refinance a maturing issue of temporary loan notes may be for a larger principal amount than the old notes, or for the same amount, or for a lesser amount. Generally speaking, only the difference, if any, between the principal amounts of the old and new temporary loan notes will be received or disbursed by the local agency and so pass through the project's development fund. The proceeds of the new issue of temporary loan notes will first be applied by the bank designated as paying agent for the old temporary loan notes directly to the payment of the principal of and interest on the old notes and this portion of such proceeds will not, ordinarily, pass through the project's development fund.

(c) New temporary loan notes issued for larger amount. Assume that an initial issue of $500,000 of temporary loan notes, secured by an advance loan note for $505,000 is to be refinanced by a temporary loan note issue of $600,000, secured by an advance loan note of $606,000 and that the aggregate maximum principal amount of the loan contract is $2,200,000. Before the refinancing, the general ledger balances of the affected accounts would be as follows:

Account 2120, Temporary Loan Notes Payable $500,000 Cr.

Entry (4): Through the Cash Receipts Register, upon receipt of the check for the difference between the principal amounts of the new and old Temporary Loan Notes:

Debit: Account 1111, Development Fund $100,000

Credit: Account 2120, Temporary Loan Notes Payable $100,000

Note:No accounting entry is made to reflect passage of the resolution authorizing the execution of the new requisition agreement and the advance loan note in the sum of $606,000 and the cancellation of the old requisition agreement and advance loan note. The new advance loan note is shown as a footnote to the balance sheet as described in subdivision (b) of section 1643- 2.4.

(d) New temporary loan notes issued for same amount. Where the new temporary loan notes are to be issued in the same amount as the maturing notes, no funds will ordinarily flow through the project's development fund.

Note:No accounting entry is made to reflect the passage of the resolution authorizing the execution and issue of the new temporary loan notes or the execution and deposit, in escrow, of the new requisition agreement and advance loan note, the latter being the subject of a balance sheet footnote, as previously described.

(e) New temporary loan notes issued for lesser amount. Where the new temporary loan notes are to be issued in a lesser amount than the maturing notes, the difference between the principal amounts of the new and old notes will, ordinarily, be disbursed by the local agency out of development funds on hand. The accounting entries are as follows:

Entry (5): Through the Cash Disbursements Voucher Register:

Debit: Account 2120, Temporary Loan Notes Payable $100,000

Credit: Account 1111, Development Fund $100,000

(f) Payment of interest on maturing temporary loan notes. Interest on temporary loan notes outstanding is accrued quarterly as described in Part 1644, Debt Service.

(1) Where the new issue of temporary loan notes is for a larger amount than the maturing issue, the paying agent will, ordinarily, apply the proceeds of the new issue to the interest on the maturing notes, as well as to payment of the principal. In such event, the balance of the proceeds of the new issue passing through the project's development fund will be less (by the amount of the interest) than the difference between the principal amounts of the new and old notes. Entry (4) above, made through the cash receipts register upon receipt of the check for the proceeds, will then be modified to read as follows:

Entry (6):

Debit: Account 1111, Development Fund $95,000

Debit: Account 2132.2, Accrued Interest Payable--Temporary

Loan Notes 5,000

Credit: Account 2120, Temporary Loan Notes Payable 100,000

(2) Where the new temporary loan note issue is for the same, or a lesser, amount than the maturing notes, the local agency will, ordinarily, disburse the interest thereon out of funds on hand. The entry will be made through the cash disbursements-voucher register as follows:

Entry (7):

Debit: Account 2132.2, Accrued Interest Payable--Temporary

Loan Notes $5,000

Credit: Account 1111, Development Fund $5,000

(g) Refinancing out of proceeds of issue of short-term notes by the State.

(1) The entries to be made where maturing temporary loan notes are refinanced out of the proceeds of short- term borrowing by the State will depend on whether the proceeds of such borrowing passes through the project's development fund. Ordinarily, the Comptroller will send the proceeds of its short-term borrowing to the division for transmittal to the local agency, for deposit in the project's development fund. The local agency will then draw its own checks in payment of the principal of and interest on the maturing notes. If the transaction is handled in this manner, the entries are as follows:

Entry (8): Through the Cash Receipts Register, upon receipt of the

State's check:

Debit: Account 1111, Development Fund $505,000

Credit: Account 2312, Certificates of Indebtedness Unissued $505,000

Entry (9): Through the Cash Disbursements-Voucher Register:

Debit: Account 2120, Temporary Loan Notes Payable $500,000

Debit: Account 2132.2 Accrued Interest Payable--

Temporary Loan Notes 5,000

Credit: Account 1111, Development Fund $505,000

Note:Upon payment of the temporary loan notes, the escrow agent will return the requisition agreement and the advance loan note to the local agency, marked "cancelled". The local agency should hold the latter in its files.

(2) Under certain circumstances, particularly where time is of the essence, a representative of the division will deliver the State's check, in the amount of the advance loan note, directly to the paying agent for the maturing issue of temporary loan notes. In this event, the proceeds of the State's short-term borrowing will not pass through the project's development fund and the entries will be made, by journal voucher, as follows:

Entry (10):

Debit: Account 2120, Temporary Loan Notes Payable $500,000

Debit: Account 2132.2, Accrued Interest Payable--

Temporary Loan Notes 5,000

Credit: Account 2312, Certificates of Indebtedness Unissued $505,000

Explanation:To record the payment and cancellation of temporary loan notes nos., out of the proceeds of short-term borrowing by the State, and the execution and issue of certificate of indebtedness no. ____________.

(3) If the closing occurs in this manner, the advance loan note will be delivered to the division, which will hold it against the receipt of the local agency's certificate of indebtedness, the advance loan note being thereupon cancelled and returned to the local agency for its files.

N.Y. Comp. Codes R. & Regs. Tit. 9 §§ 1643-2.5