How municipalities can issue debt to raise cash under current New York law, and why it could make sense for you.

Short-term Debt

COVID-19 has left many New York municipalities short on cash as they grapple with a triple threat: falling sales tax revenues, holds on state aid, and unexpected expenses due to the pandemic. Short-term borrowing strategies can provide local governments with the funds to stay afloat until property tax payments or other revenues arrive to replenish the coffers.

There are two main reasons a municipal government might issue short-term debt: because of revenue shortfalls, or because there has been an unforeseen expense. During the pandemic, many municipalities have seen both. Despite taking other budget-reduction steps, such as curbing spending, offering retirement or separation incentives, or cutting staff, some governments are still facing shortfalls of tax or fee revenues.

“After exhausting other available options, governing boards may need to consider issuing some form of short-term debt in order to generate sufficient cash flow to meet the operational needs for the remainder of the year,” reads a section in The Office of the State Comptroller’s Financial Toolkit for Local Officials in 2020 and Beyond, which recommends consulting with financial and legal professionals for guidance.

The main avenues for short-term debt issuance to address those issues are tax anticipation notes, revenue anticipation notes and budget notes. In dire cases, a municipality may also use deficit financing, also known as a deficiency note.

Tax anticipation notes, known as TANs, are borrowed in anticipation of the collection of the next year’s property taxes, which are generally due in January for counties, cities and towns; or against assessments. Generally, the OSC says, the funds from TANs may only be used for the purposes for which the tax or assessment funds they’re borrowed against would be used.

Revenue anticipation notes, or RANs, are borrowed to generate cash flow in expectation of receiving certain specific revenue types, such as sales tax payments or a particular grant. RAN proceeds may be used to meet expenses payable from the revenues they are borrowed against, according to the OSC.

Budget notes are generally used to finance an unanticipated expenditure, particularly if the municipality was already experiencing a bad year. Budget notes may be used for “any object or purpose for which a local government is authorized to expend money” according to the OSC, and they provide cash that can be used to finance increased appropriations. Budget notes must be used for the purpose specified by the municipality.

The timing on a budget note affects when it must be paid: Adopt and issue the note before adopting the next year’s budget, and the municipality must pay it next year; issuing a budget note after the budget is adopted buys an additional year.

To pursue a TAN, RAN or budget note, a municipality would solicit rates from banks, much as it would when issuing a bond anticipation note for a capital project. The governing body must authorize issuance of the debt, and the bond or debt resolution must include the interest rate, due date, and other details.

The fourth option, deficit financing, is a last resort when there is a deficiency of funds due to lower-than-anticipated revenues for that year’s budget. Local Finance Law imposes strict requirements on the form of the resolution that a local municipality or school district must adopt to issue a deficiency note. If a renewal is required or if the unit of government must issue another deficiency note the next year, state law triggers monitoring by the Office of the State Comptroller and requirements to file regular reports.

Many municipal governments in New York have found themselves in tight budgetary times due to the strains of the COVID-19 pandemic and shutdown, but careful and creative issuance of short-term debt can help them weather the crisis in a fiscally responsible manner.

Domestic Manufacturing: The Next Big Boom?

Domestic Manufacturing

While the national scramble and subsequent shortage of PPE materials amid the COVID-19 pandemic revealed a critical flaw in our current system, it also serves as a transformative moment for restructuring manufacturing business models. For the past three decades, global macroeconomic trends coupled with U.S. based manufacturing disadvantages contributed to the mass international manufacturing movement. As many discuss the importance of domestic manufacturing, could this moment in history be a catalyst for change? Reshoring provides a reliable ability to avoid supply-chain shocks, but it also involves risks and takes time to execute. So is it right for you? Let’s explore the challenges and opportunities of bringing manufacturing back stateside, and what the future could hold for your business.

It’s important to remember that many of the same issues prompting interest in domestic production – like disruption in supply chain – are not new, but rather are being revisited in light of COVID-19. Inventory carrying costs, travel costs, cyber security risks, and a rising increase of wages in foreign countries are some of the ongoing concerns. The pandemic also illustrated the risk of relying on a geopolitical adversary for 80% of the materials we consider critical. The Wall Street Journal has reported that China is the only maker of key ingredients for certain drugs, including established antibiotics that treat a range of infections such as pneumonia. In a deal aimed at reducing U.S. reliance on China, the federal government announced this summer that it plans to give Eastman Kodak a $765 million loan to start producing the chemical ingredients needed to make pharmaceuticals. The planned investment will generate about 350 jobs at Kodak’s home base in Rochester New York and in St. Paul, Minnesota. According to data gathered by the Reshoring Initiative, this trend is gaining real momentum, as an overwhelming demand to become domestically self-sufficient builds in the market – particularly within medical equipment manufacturing. The company says while this time last year they were helping a handful of businesses make domestic moves, they are currently assisting upwards of 100 businesses in the reshoring process. Big companies like Caterpillar, GE, Intel, and Under Armour to name a few, are getting in the game of being close to their markets.

Despite the fact that China has become a less attractive manufacturing venue, ultimately the costs for domestic manufacturing are significantly higher than costs for international manufacturing. Outsourcing allows companies to run their factories with high efficiency. So, what needs to happen to make this a viable option for a manufacturing plant owned by a New Yorker? Both the U.S. government and U.S. manufacturers need to spend more on manufacturing research and development. Many industry experts also believe federal and state government needs to incentivize manufacturers with expanded tax credits, subsidized production facilities, and new cash flow. Legislative plans are also in the works to help manufacturing become more practical in regions like the northeast. Just last week, New York Senate Democratic Leader Chuck Schumer helped introduce The America Labor, Economic competitiveness, Alliances, Democracy and Security (America LEADS) Act. The America LEADS Act would provide over $350 billion in new funding to synchronize all aspects of U.S. national power and give manufacturers the skills and support needed to out-compete China by expanding the Manufacturing USA Network.

The reasons a company might choose to reshore vary greatly. Everyone has a different motivating factor driving their decision to stay the course, merge, or move their manufacturing site. Realistically, building new U.S. facilities is a long term commitment, typically spanning five to eight years. Your location choice should be focused on the structures (or lack thereof) that local, state, and federal government have placed on activities. Diligently monitoring upcoming incentives, subsidies, and regulations for businesses like yours is crucial to your future success. A survey by Site Selectors Guild, an association of professional site selection consultants, predicted an uptick in onshoring to the U.S., but also to Canada and Mexico — particularly in the pharma and life sciences industries. The reality is, filling workforce once a company does decide to diversify operations presents its own set of challenges. Deciding if this is a move that is right for you and your business comes down to reimagining your business plan and examining your TCO or, Total Cost of Ownership. One thing is certain: how industry leaders react to the shifting landscape at this critical moment will shape the future of manufacturing for generations.

All NY Employers Must Give Sick Leave To Workers: Here’s what to Know

All NY Employers Must Give Sick Leave To Workers: Here’s what to Know

Why is it so important to learn about The New York Paid Sick Leave (NYSPSL) law that was passed back in April, right now? Because in just two short weeks, accruals of NYSPSL must begin, so that means employers need to be ready. For the first time in New York State’s history, this sick leave requirement ensures that the vast majority of workers in the state have the right to paid sick time for a variety of reasons that we will outline below. It also prohibits employers from firing or retaliating against workers for taking sick time. This new law is applicable to all private employers regardless of size. Employers with between 5 and 99 employees (and employers with 4 or fewer employees and a net income of greater than $1 million in the prior tax year) must provide each employee with up to 40 hours of paid sick leave per year. Employer with 100 or more employees must provide up to 56 hours of paid sick leave per year. Employers with less than four employees and a net income under $1 million still need to provide five unpaid sick days. Who qualifies? Full-time, part-time, temporary, seasonal, and per diem employees.

Do I still need to pay attention if I already give my team sick leave?

If you’re an employer reading this and thinking, well I already provide paid sick leave for my employees so this update doesn’t pertain to me, stop moving your mouse towards the close out button, and keep reading. It’s crucial that you’re aware of the new changes in place so your policy and procedures, as well as your employee handbook, plainly outline the new guidance. If you fail to clearly communicate these changes to your employees, you could be walking into a litigation nightmare. For example, in most PTO policies do not start at date of hire, nor do they start allowing for accruals to start immediately, and they don’t typically include a 40 hour annual roll over. Well, that’s all about to change. Supervisors and managers need to be well versed in these updates to avoid potential risk for retaliation, discrimination and litigation. Keeping yourself and your team in the loop with all of these changes is important to protect your business, so be diligent!

When can employees start using NYPSL?

Employees will begin accruing NYPSL on September 30, 2020 however, employees may only begin using NYPSL on January 1, 2021. New employees hired after January 1, 2021 may use NYPSL immediately upon accrual. Employees accrue 1 hour for every 30 hours they work. Employers have the option to frontload the 40 hours on January 1st or start accruing on Sept 30th. If you’re operating in an industry that has a workforce base with a lot of part-time workers, a consistently high turnover rate, or seasonal temps working multiple shifts, it makes more financial sense to go on an accrual basis. Frontloading is recommended for industries with low turnover and more fulltime/exempt employees, because these businesses will find less fluctuation in calculations.

So how can an employee use their NYPSL?

Employees can use it for a variety of reasons. Beyond using NYPSL for an employee’s own mental or physical illness, or injury, the expanded list includes use for a family member illness or for victims of sexual and domestic violence. Employers may set a reasonable increment for the use of NYPSL, the maximum for which may not exceed four hours.

Should I be keeping a record of sick leave usage?

Short answer: Yes! You’re now required to keep track of accrual and use records, and you need to make this information available within three days of an employee’s request. If your business isn’t already using an electronic system to organize your payroll or time tracking, you’ll quickly realize how very cumbersome and tedious this new tracking system can be. If this change is exposing a glaring issue in your business structure, it could be time to modernize your system to create more fluidity in your workflow.

What steps should my business take in light of this new law?

Employers should start reviewing existing leave policies, including attendance and incentive programs to determine whether they meet the new requirements and should update employee handbooks as necessary. New York employers will have to implement paid sick leave policies if they do not currently have leave available to employees, which may require a review or overhaul of other leave or PTO policies. Employers can adjust an existing policy but the language needs to include use, accrual and carry over according to the Department of Labor guidelines.

We are still waiting on further guidance from New York State regarding some outstanding questions related to the PSL legislation. We will continue to make you aware of updates and information from the state as the law continues to take shape. If you need immediate assistance implementing this new law, feel free to contact Visions Human Resource Services, LLC by emailing for more information.

Municipalities borrowing from municipalities in New York State: Is it right for you?

Municipalities borrowing from municipalities in New York State: Is it right for you?

As New York local governments cast about for strategies to manage funds and generate revenue to weather the economic hardships of the COVID-19 pandemic, some could benefit from a little-known provision of New York law that allows municipalities to borrow from one another.

Because municipalities in different parts of the state or the region may be experiencing widely varied effects of the virus and shutdown, this somewhat esoteric strategy presents another option in the face of state holdbacks of aid to cities, towns, villages and school districts. When properly executed, the lender and the borrower may get better-than-market-rate returns and terms.

Because local government must keep taxpayer funds safe and liquid so they may be used for public benefit, municipalities are limited in the types of investments they may make. These include time or deposit accounts in banks or trust companies located in New York and authorized to do business in the state; certificate of deposit accounts issued by those banks; and obligations such as bonds, notes or other forms of indebtedness issued by certain entities, according to the Office of the State Comptroller. Obligations of U.S. and New York State governments, and “in certain cases, New York State local governments are permissible investments,” according to the OSC’s Local Government Management Guide for Investing and Protecting Public Funds.

According to New York’s Local Finance Law, “Bond anticipation notes may be issued by any municipality, school district or district corporation in anticipation of the sale of bonds. Such notes may be issued whenever bonds have been authorized and the proceeds of such notes shall be expended only for the same object or purpose, or class thereof for which the proceeds of such bonds may be expended.”

The strategy involves short-term debt obligations, most commonly bond anticipation notes. Bond anticipation notes are often used as temporary funding to initiate large capital projects. Once those projects have begun, the municipality will typically issue serial bonds to fund the project over a period of 20 to 30 years. Bond anticipation note terms can be extended beyond one year within the restrictions of Local Finance Law and are generally limited to a maximum of five years.

How does a municipality go about starting the process?

One way would be to solicit a request for proposal (“RFP”). For example, if a town in Orange County finds itself with excess cash, it could circulate an RFP to other municipalities that are looking to borrow, letting them know the original town will offer terms better than market rate for the investment. Generally, this would be done through bond anticipation notes, with one-year maturity and a fixed rate.

The borrowing municipality would get the better rate as well as fewer fees, while the lender also gets a better rate of return than it might have gotten in the marketplace.

Of course, it behooves the borrowing municipality to make sure it is comfortable with the lending government, and the transactions must be approved by the respective boards. The lending municipality must also determine that it has plenty of excess cash available during the entire loan period, and therefore plenty of money to lend.

This little-known practice of municipalities borrowing from other municipalities can provide solutions and benefits for both sides of the equation while allowing local governments to exercise prudent and responsible stewardship of taxpayer funds.