Our firm recently assisted a public library in the acquisition of a building and financing the reconstruction of the building into a state of the art library facility.
In this instance, the library had the New York State legislature adopt a law authorizing the Dormitory Authority of the State of New York (hereinafter “DASNY”) to participate in the construction and financing of the new building. Using DASNY had several major benefits for the library.
The New York law which created the public library required that any borrowing for the library be authorized by the adoption of a bond resolution by each of the Town Boards of the three towns served by the library. The adoption of bond resolutions by New York municipalities is governed by the Local Finance Law which provides that the length of the financing term may not exceed the “period of probable usefulness” of the project.
In this case, the Local Finance Law specified that the financing of the “reconstructed” building could not exceed fifteen years. Since the project cost exceeded $5,000,000, this would result very high annual payments to pay off the bonds.
However, the Local Finance Law does not apply to DASNY projects and, therefore, the library: a. did not need the three Town Boards to adopt bond resolutions; and b. The maturity of the bonds could exceed fifteen years, thus lowering annual costs.
The library board also contracted with DASNY to be the construction manager for the project, which had two major benefits.
First, the library board, which is very good at operating a library, but has little construction management experience, is able to rely on the extensive experience of the DASNY construction management team to bring the project to completion on time and within the budget.
Second, General Municipal Law §101, known as the Wicks Law, does not apply to DASNY projects. The Wicks Law provides that local government public building construction projects in most of upstate New York costing more than $500,000 are required to let separate contracts for a) plumbing, b) heating, ventilation and air conditioning, and c) electrical work. Private developers in New York and local governments in nearly every other state use a single contract where the responsibility to coordinate all aspects of the project belongs to a single general contractor. By using DASNY, the library expects to avoid the delay, cost over-runs and frequent expensive litigation that occurs in projects subject to the Wicks Law.
We have had extensive experience assisting clients with construction projects and we would be pleased to share that knowledge with prospective project developers.
David B. Gubits is a Senior Partner on the Real Estate and Municipal Finance Teams. He can be reached by phone at 845-778-2121 toll free or 845-778-2121 and by email.