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1992 Ops. St. Comp. 1 (1992)

handle is hein.nyscompop/nyscomo1992 and id is 1 raw text is: Opinion 92-1 Opinion 92-1 This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion. PUBLIC CONTRACTS -- Retained Percentages (collection of interest on securities deposited in lieu of); (mandatory nature of withdrawal provisions); (procedure for withdrawal upon deposit of appropriate securities); (submission of securities in excess of amount to be withdrawn); (substitution of certificates of participation for); (types of securities which may be substituted for) GENERAL MUNICIPAL LAW, §§106, 109-b: (1) A municipality does not have discretion to refuse to permit the withdrawal of retained percentages when proper securities of sufficient market value are submitted. (2) In addition to the securities enumerated in General Municipal Law, §106, the securities of certain public benefit corporations also may be deposited for the withdrawal of retained percentages. (3) Certificates of participation (COPs) in connection with installment purchase contracts entered into by political subdivisions are securities which may be deposited for the withdrawal of retained percentages. (4) The fiscal officer of the municipality, or a designated bank or trust company, is required to collect all interest on the securities deposited and pay it to the contractor. A reasonable fee may be imposed on the contractor for receiving, handling and disbursing the obligations, funds and coupons. (5) Municipal officials should periodically monitor the market value of the deposited securities to make sure that the market value at all times is substantially equal to the amount of retainage withdrawn. (6) Before registered obligations are accepted in substitution for retained percentages, ownership of the obligations should be transferred to the municipality, or the obligations, together with an assignment in blank, should be delivered to the municipality or its custodial bank. You ask the following questions concerning the responsibility of municipal officials in connection with withdrawal of amounts retained from payments to contractors: (a) does a municipality have the option to refuse to permit the withdrawal of retained percentages when proper securities of sufficient value are submitted?; (b) what securities may be deposited?; (c) is a municipality required to collect interest on the deposited securities, and if so, can the municipality charge the contractor a service fee?; (d) what happens if the market value of the securities increases or decreases after withdrawal of the retainage?; and (e) what steps should be taken to ensure that the securities pledged can be readily converted into cash? Section 106 of the General Municipal Law provides that contractors, from time to time, may withdraw, at their option, the whole or any portion of the amount retained from payments to the contractor pursuant to the terms of the contract, upon depositing with the fiscal officer of the municipality certain enumerated securities having a market value equal to the amount so withdrawn. The statute also provides that the fiscal officer may require the contractor to deposit the securities with a designated bank or trust company having an agreement with the fiscal officer. A municipality does not have discretion to refuse to permit the withdrawal of retained percentages when proper securities of sufficient market value are submitted (1985 Opns St Comp No. 85-64, p 93; 19 Opns St Comp, 1963, p 354). Therefore, since many of the eligible securities are issued as book entry only securities, it will probably be necessary for the fiscal officer to designate a bank or trust company to accept certain securities deposited by contractors in lieu of retainage. As is explained below, the municipality is permitted to charge the contractor for the cost of receiving, handling and Opinion 92-1

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