N.Y. Transportation Corporations Law § 119: Guaranties

§ 119. Guaranties. 1. The local governing body shall require the

posting of a performance bond for the completion of the construction of

the sewage-works system, and may require the posting of an additional

bond or other guaranty for the payment of labor and material furnished

in the course of such construction, and for the cost of retained

engineering services to the local governing body or sewer agency.

2. The local governing body shall require a reasonable guaranty from

the corporation that said corporation will continue to maintain and

operate the system for a period of at least five years, in the form of a

bond or other security acceptable to the local governing body in the

amount of the estimated cost of the operation and maintenance of the

sewage-works project, less the estimated revenues which are received

from properties served, and to be utilized to defray such operation and

maintenance costs, as reported by the licensed professional engineer or

consulting engineering firm to the local governing body. The local

governing body may, and on petition of the corporation shall, at any

time review the adequacy of such bond or other security, to ascertain

whether it should be modified on the basis of fiscal performance or

other conditions.

3. (a) In addition to the guaranty, the stock of the corporation shall

be placed in escrow and title thereto shall pass to the local governing

body in the event of failure to complete the construction thereof, or in

the event of abandonment or discontinuance of the maintenance and

operation of the system by the corporation.

(b) In the county of Suffolk said stock placed in escrow may pass,

with the consent of the local governing body and the board of

supervisors to a county sewer agency in the event of failure to complete

the construction of said sewer system, or in the event of abandonment or

discontinuance of the maintenance and operation of said system by the

corporation.

4. In the event of such abandonment or discontinuance of the

maintenance and operation of the system, the local governing body shall

have the right to continue the maintenance and operation of the system

at the established rates, with the costs assessed against the users, and

it may levy taxes, or sewer rents for such purposes in the same manner

as if such facilities were owned by a city, town or village, as the case

may be. The local governing body shall have such powers until such time

as another corporation or agency may undertake to maintain and operate

the sewer system, or until such time as it becomes a part of a municipal

or sewer district system.

5. In Suffolk county in the event of an abandonment or discontinuance

of the maintenance and operation of the sewer system, the county agency

shall have the right to undertake to maintain and operate such sewer

system, and it shall do so at the established rates, or such other rates

as it may deem necessary, with the costs, including delinquent accounts,

assessed against all of the users until such time as the sewer system is

included in a sewer district which shall maintain and operate the sewer

system.