N.Y. Const. art. VII, § 12: State debts generally; how paid; restrictions on use of bond proceeds

§ 12. Except the debts or refunding debts specified in sections 9, 10

and 13 of this article, all debts contracted by the state and each

portion of any such debt from time to time so contracted shall be

subject to the following rules:

1. The principal of each debt or any portion thereof shall either be

paid in equal annual installments or in installments that result in

substantially level or declining debt service payments such as shall be

authorized by law, or, in the alternative, contributions of principal in

the amount that would otherwise be required to be paid annually shall be

made to a sinking fund.

2. When some portions of the same debt are payable annually while

other portions require contributions to a sinking fund, the entire debt

shall be structured so that the combined amount of annual installments

of principal paid and/or annual contributions of principal made in each

year shall be equal to the amount that would be required to be paid if

the entire debt were payable in annual installments.

3. When interest on state obligations is not paid at least annually,

there shall also be contributed to a sinking fund at least annually, the

amount necessary to bring the balance thereof, including income earned

on contributions, to the accreted value of the obligations to be paid

therefrom on the date such contribution is made, less the sum of all

required future contributions of principal, in the case of sinking fund

obligations, or payments of principal, in the case of serial

obligations. Notwithstanding the foregoing, nothing contained in this

subdivision shall be deemed to require contributions for interest to

sinking funds if total debt service due on the debt or portion thereof

in the year such interest is due will be substantially the same as the

total debt service due on such debt or portion thereof in each other

year or if the total amount of debt service due in each subsequent year

on such debt or portion thereof shall be less than the total debt

service due in each prior year.

4. The first annual installment on such debt shall be paid, or the

first annual contribution shall be made to a sinking fund, not more than

one year, and the last installment shall be paid, or contribution made

not more than forty years, after such debt or portion thereof shall have

been contracted, provided, however, that in contracting any such debt

the privilege of paying all or any part of such debt prior to the date

on which the same shall be due may be reserved to the state in such

manner as may be provided by law.

5. No such debt shall be contracted for a period longer than that of

the probable life of the work or purpose for which the debt is to be

contracted, or in the alternative, the weighted average period of

probable life of the works or purposes for which such indebtedness is to

be contracted. The probable lives of such works or purposes shall be

determined by general laws, which determination shall be conclusive.

6. The money arising from any loan creating such debt or liability

shall be applied only to the work or purpose specified in the act

authorizing such debt or liability, or for the payment of such debt or

liability, including any notes or obligations issued in anticipation of

the sale of bonds evidencing such debt or liability.

7. Any sinking funds created pursuant to this section shall be

maintained and managed by the state comptroller or an agent or trustee

designated by the state comptroller, and amounts in sinking funds

created pursuant to this section, and earnings thereon, shall be used

solely for the purpose of retiring the obligations secured thereby

except that amounts in excess of the required balance on any

contribution date and amounts remaining in such funds after all of the

obligations secured thereby have been retired shall be deposited in the

general fund.

8. No appropriation shall be required for disbursement of money, or

income earned thereon, from any sinking fund created pursuant to this

section for the purpose of paying principal of and interest on the

obligations for which such fund was created, except that interest shall

be paid from any such fund only if, and to the extent that, it is not

payable annually and contributions on account of such interest were made

thereto.

9. The provisions of section 15 of this article shall not apply to

sinking funds created pursuant to this section.

10. When state obligations are sold at a discount, the debt incurred

for purposes of determining the amount of debt issued or outstanding

pursuant to a voter approved bond referendum or other limitation on the

amount of debt that may be issued or outstanding for a work or purpose

shall be deemed to include only the amount of money actually received by

the state notwithstanding the face amount of such obligations.