§ 6-L — Mandatory reserve fund for municipal corporations, fire districts and school districts

§ 6-l. Mandatory reserve fund for municipal corporations, fire\ndistricts and school districts. 1. As used in this section, the term\n"governing board," in so far as it is used in reference to a municipal\ncorporation, shall mean the "legislative body" thereof, as that term is\ndefined in section two of the municipal home rule law, as amended from\ntime to time; in so far as it is used in reference to a fire district,\nshall mean the board of fire commissioners thereof; in so far as it is\nused in reference to a school district, shall mean the board of trustees\nthereof.\n 2. Notwithstanding any other provision of this chapter, upon the cash\nsale by a municipal corporation, fire district or school district of a\ncapital improvement, as defined in section six-c of this chapter, for\nthe cost of which obligations were issued pursuant to the local finance\nlaw, and when all or part of such indebtedness is outstanding at the\ntime of such sale, a mandatory reserve fund shall be established for the\npurpose of retiring such obligations, or, as an additional alternative,\npaying principal of, or redemption premiums in connection with such\nobligations or other obligations of at least equal weighted average\nlife; provided however, that, if the proceeds of the sale are used or\nset aside to be used (i) to pay or provide for the construction,\nreconstruction, acquisition or installation of capital improvements or\nequipment, as defined in section six-c of this chapter, or (ii) for the\npayment of principal of, or redemption premiums in connection with, any\noutstanding obligations issued by the municipal corporation, fire\ndistrict or school district to finance such capital improvements or\nequipment, in an amount not less than the lesser of such proceeds or the\nprincipal amount of the indebtedness outstanding on the capital\nimprovement sold, then such fund need not be established; provided,\nhowever, that if such amount to be so used, together with any other\namounts so used pursuant to this sentence in the same fiscal year of\nsuch municipal corporation, fire district or school district, would\nexceed one percent of the limit prescribed by section 104.00 of the\nlocal finance law, then such fund shall nevertheless be established; and\nprovided further, that a municipal corporation, fire district or school\ndistrict shall within thirty days after the use of such proceeds\npursuant to clause (i) herein, file a report with the state comptroller\nidentifying: (a) the asset sold, (b) the amount of net proceeds from\nsuch sale, (c) the amount to be paid or provided pursuant to such clause\n(i), and (d) the capital improvements or equipment to be so paid for or\nprovided. When a municipal corporation, fire district or school district\nhas outstanding indebtedness incurred to finance the cost of such a\ncapital improvement, federal and state aid received on account of such\nimprovement, to the extent that it is not applied directly to the\npayment of a part of the cost of such improvement or to retire\nindebtedness issued in anticipation of such aid, shall likewise be\ndeposited in a reserve fund for the purpose of retiring either such\nobligations or, as an additional alternative, other obligations of at\nleast equal weighted average life. The entire proceeds of the sale or\nsuch state or federal aid received, as the case may be, shall be\ndeposited to the credit of such fund, provided however, that if the\naggregate amount thereof shall exceed the principal of such indebtedness\ndue or to become due, or if, when all such outstanding obligations have\nbeen retired, any moneys remain unexpended in the reserve fund, such\nexcess moneys may be used for any lawful municipal or district purpose,\nas the case may be. The provisions of this section shall not apply in a\ncase where a provision of any other law requires that the proceeds of\nthe sale of a capital improvement shall be deposited in a reserve fund\nestablished for the purpose of retiring outstanding obligations.\n 2-a. The provisions of this section shall apply to capital\nimprovements of town and county improvement districts. For the purpose\nof implementing the provisions of this section in regard to such\ndistricts, the term "governing board" shall mean the governing board of\nthe town or county, as the case may be, in which such district is\nlocated, and the term "chief fiscal officer" shall mean the chief fiscal\nofficer of such town or county.\n 3. Appropriations from such fund shall be made only for the payment or\npayments of all or part of the said outstanding indebtedness. However,\nany balance remaining in said fund upon the payment of all outstanding\nprincipal and interest may be expended for any lawful purpose of the\nmunicipal corporation, fire district or school district.\n 4. The chief fiscal officer shall keep a separate account for each of\nsuch funds established. Such account shall show:\n a. The date of creation of the fund and the amount credited thereto.\n b. The interest earned by such fund.\n c. The capital gains or losses resulting from the sale of investments\nof the fund.\n d. The interest or capital gains which have accrued to the fund.\n e. The amount and date of each withdrawal from the fund.\n f. The assets of the fund, indicating the cash balance therein and a\nschedule of the amounts invested. The chief fiscal officer at the\ntermination of each fiscal year shall render a detailed report of the\noperation and condition of each of such funds to the governing board.\n 5. The members of the governing board are hereby declared trustees of\nsuch funds and shall be subject to all the duties and responsibilities\nimposed by law on trustees, and such duties and responsibilities may be\nenforced by the municipal corporation, fire district or school district,\nas the case may be, or by any board, commission, agency, office or\ntaxpayer thereof. An expenditure from such mandatory reserve fund may be\nmade only by appropriation pursuant to a resolution of the governing\nboard.\n 6. The moneys in each such fund shall be deposited and secured in the\nmanner provided by section ten of this article. The governing board or\nthe chief fiscal officer of such municipal corporation, fire district or\nschool district, if the governing board shall delegate such duty to him,\nmay invest the moneys in each such fund in the manner provided in\nsection eleven of this article. Any interest earned or capital gains\nrealized on the moneys so deposited or invested shall accrue to and\nbecome a part of each such fund. The separate identity of each such fund\nshall be maintained whether its assets consist of cash, investments, or\nboth.\n 7. The members of the governing board shall be guilty of a misdemeanor\nif they:\n a. Authorize a withdrawal from any such mandatory reserve fund for any\npurpose other than as provided in this section.\n b. Expend any money withdrawn from any such mandatory reserve fund for\na purpose other than as provided in this section.\n