New York law severely restricts the power of local governments to issue debt under the State Constitution. All local government debt must be “full faith and credit” debt supported by a pledge of real property taxes. This legal restriction has prevented local governments from authorizing revenue bonds without going to the State Legislature for special legislation. But that is changing, not by the enactment of new laws, but rather by custom and use of local development corporations (LDCs), a special purpose not-for-profit corporation established to "reduce the burdens of government."
Over the past 15 years the long arm of "reform" of public authorities has swept LDCs into the status of de facto local government revenue bond agencies. The State Comptroller, the regulator of local government finance under the State Constitution, once actively opposed to the proliferation of LDC powers now views these agencies in a kinder vein. That said, a coherent statutory regime for local government revenue bond powers is preferable but unlikely as the State Legislature's collective focus remains avoiding jail time.
Originally published in NYSBA Municipal Lawyer Fall 2015. Reprinted with permission.