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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

BONDS AND NOTES -- Improper Uses (prepayment of certain employer retirement contributions which were previously paid)

CITIES -- Powers and Duties (authority to issue bonds to prepay certain employer retirement contributions which were previously prepaid)

PUBLIC OFFICERS AND EMPLOYEES -- Retirement Benefits (authority to issue bonds to prepay certain employer retirement contributions which were previously paid)

WORDS AND PHRASES -- "Outstanding" (for purposes of Local Finance Law, §11.00[a][85])

LOCAL FINANCE LAW, §11.00(a)(85); RETIREMENT AND SOCIAL SECURITY LAW, §§317-a, 323(1)(b): A city which has previously prepaid to the State Policemen's and Firemen's Retirement System the amount to be amortized pursuant to chapter 62 of the Laws of 1989 may not now issue bonds to finance that amount.

You ask whether a city which has previously prepaid to the State Policemen's and Firemen's Retirement System the amount to be amortized pursuant to chapter 62 of the Laws of 1989 from surplus moneys may now issue bonds for this purpose. The proceeds of the bonds would be paid to the Retirement System. The amount previously prepaid would be applied in reduction of the city's current retirement expense.

Chapter 62 of the Laws of 1989 amended section 317 of the Retirement and Social Security Law, and added a new section 317-a to that law, for the purpose of eliminating a lag in retirement contributions by participating employers in the State Policemen's and Firemen's Retirement System. In essence, these provisions permit employer contributions for certain fiscal years to be amortized and paid to the Retirement System, with interest, in annual installments over a prescribed number of years. These provisions also provide employers with the continuing option of prepaying the amount to be amortized (id.).

To facilitate prepayment of the amount to be amortized, chapter 62 also added a new section 11.00(a)(85) to the Local Finance Law. The effect of this provision is to permit participating employers to contract indebtedness for the purpose of financing the "[p]ayment of amortized amounts outstanding pursuant to section . . . [317-a] of the retirement and social security law" (emphasis supplied; see also Local Finance Law, §10.00[a]).

It is a general rule of statutory construction that, absent a showing of legislative intent to the contrary, "words of a statute will be interpreted in their ordinary acceptance and significance and the meaning commonly attributed to them" (Phaneuf v City of Plattsburgh, 84 Misc 2d 70, 74, 376 NYS2d 781, 785, affd 50 AD2d 614, 375 NYS2d 500, lv dismissed 38 NY2d 1004, 384 NYS2d 441; see also McKinney's Statutes, §§94, 232). The word "outstanding" ordinarily means, among other things, "unpaid" (see New York Trust Co. v Portland Ry. Co., 197 App Div 422, 189 NYS 346; see also Zachary v R.H. Macy & Co., Inc, 31 NY2d 443, 340 NYS2d 908). Therefore, in our opinion, when a participating employer has previously prepaid the amount to be amortized pursuant to chapter 62, the amount to be amortized is no longer "outstanding" within the meaning of section 11.00(a)(85). Since the amount to be amortized is no longer "outstanding", the employer lacks authority to issue obligations to finance payment of that amount.

In reaching this conclusion, we are mindful that in 1993 Opns St Comp No. 93-17, p 21 we concluded that a participating employer may issue bonds to finance prepayment of the amount to be amortized pursuant to chapter 62 after the employer has recorded the amount as a "current liability". The conclusion in Opn No. 93-17, supra, however, is inapposite in this instance because that opinion is premised on the fact that no moneys had actually been paid to the Retirement System.

We also note that chapter 210 of the Laws of 1990 changed the funding method for the Retirement System¹ and had the effect of permitting prepayments of amounts to be amortized pursuant to chapter 62 to be applied against current retirement expenses. Insofar as here relevant, chapter 210 drastically reduced or eliminated net employer contributions to the System and added a new section 323(1)(b) to the Retirement and Social Security Law which authorizes the Retirement System to make appropriate adjustments for those employers which had previously prepaid the amount to be amortized pursuant to chapter 62. Section 323(1)(b) also provides that the prepayments must accumulate with interest and be applied against future pension contribution requirements to ensure equitable treatment of all participating employers. Pursuant to this authority, the Retirement System permits prepayments of the amounts to be amortized pursuant to chapter 62 to be applied to current retirement expenses at the discretion of the employer.

When an employer elects to have its prepayment of the amount to be amortized pursuant to chapter 62 applied to its current retirement expense, it can be argued that the amount to be amortized pursuant to chapter 62 is once again "outstanding" and that the employer can then contract indebtedness to prepay the amount to be amortized a second time. In our view, however, the Legislature did not intend to authorize employers to contract indebtedness for this purpose.

Local Finance Law, §11.00(a)(85), which authorizes employers to contract indebtedness for the purpose of prepaying the amount to be amortized pursuant to chapter 62, was enacted in 1989. The enactment of this provision preceded the enactment of Retirement and Social Security Law, §323(1)(b) in the following year and the Retirement System's resulting policy of permitting prepayments of the amounts to be amortized to be applied to current retirement expenses. Therefore, in enacting Local Finance Law, §11.00(a)(85) the Legislature could not have intended to permit employers to contract indebtedness to prepay the amount to be amortized more than once because the statutory authority and administrative policy giving rise to the opportunity for making the prepayment a second time did not then exist .

Further, in enacting Retirement and Social Security Law, §323(1)(b), it is evident that the Legislature intended to address situations where a participating employer had paid to the Retirement System an amount in excess of the amount currently due from the employer. Therefore, it seems clear that the Legislature did not intend section 323(1)(b), or any administrative policy adopted pursuant to that provision, to have the effect of enabling employers to contract indebtedness to make yet an additional prepayment to the System.

Finally, if we were to conclude otherwise, the Retirement System's policy of permitting prepayments of the amount to be amortized pursuant to chapter 62 to be applied to current retirement expenses would have the effect of continuously permitting an employer to contract indebtedness to pay current retirement expenses. The weight of authority in this State, however, suggests that such a procedure would be unconstitutional (see Hurd v City of Buffalo, 41 AD2d 402, 343 NYS2d 950, affd 34 NY2d 628, 355 NYS2d 369; see also Bugeja v City of New York, 24 AD2d 151, 266 NYS2d 80, affirmed 17 NY2d 606, 268 NYS2d 564; cf. Cherey v City of Long Beach, 282 NY 382 at 390).

Accordingly, it is our opinion that a city which has previously prepaid to the State Policemen's and Firemen's Retirement System the amount to be amortized pursuant to chapter 62 of the Laws of 1989 may not now issue bonds to finance that amount.

July 19, 1995
William R. Thomas, Commissioner of Finance
City of Yonkers

¹ The pertinent portions of chapter 210 were declared unconstitutional in McDermottv Regan, 82 NY2d 354, 604 NYS2d 890.