DEPARTMENT AL
EXECUTIVE DEPARTMENT
N.Y. STATE DIVISION OF HOUSING BILL / ( / December 7, 1960
MEMORANDUM
TO: COUNSEL TO TH GOVERNCR
FROM: Division of Housing
SUBJECT: Legislative Proposal #5
1. Purpose of bill:
The purpose of this bill is to permit the consolidation or merger
of limited-profit housing companies, their dissolution under circumstances
and conditions not covered at present by the provisions of the Limited-
Profit Housing Companies Law, and to provide for rearrangement of their
mortgages and the use of excess funds, if any, of one project to pay off
the mortgage of any other project which has been merged or consolidated.
ee Summary of provisions of bill:
Section 319 of the Public Housing Law, which details the extent of
the supervision and regulation of State-aided and municipally~aided
limited-profit housing companies by either the Commissioner of Housing or
the municipal comptroller, as the case may be, would be amended by adding
a new subdivision 5 so as to empower the aforementioned officials to
permit the consolidation or merger of two or more approved projects, the
extension or amendment thereof or the consolidation or merger of any ap-
proved project with a proposed project, followed thereafter by the
immediate dissolution of any limited-profit housing company upon such
terms anc conditions as may be approved by the supervising authorities.
Sections 309 and 315 would be amended to permit the financial structure
of the merged or consolidated companies to be arranged so that all of the
income from all of the projects which have been merged or consolidated
can be used to pay off all of the mortgages, bonds, notes or debentures
issued by all of the companies which have been merged.
3. dgustification:
This bill is necessary to correct a statutory omission relating
to the merger or consolidation of limited-profit housing companies. Section
185 of the Public dousing Law presently provides for the merger and con-
solidation of limited dividend housing companies, but Article 12 of the
Public Housing Luz is silent as to the consolidation or merger of limited-
protit housing co:penies.
Although the provisions of the General Corporation Law and Stock
Corporation Law can be invoked to sanction the merger or consolidation
of limited-profit housing companies, the corporate shells of the sub-
sidiary merged corporations must be retained for twenty or thirty-five
years before they can be dissolved pursuant to Section 322 of the Public
Housing Law.
It is therefore deemed advisable to amend Section 319 of the
Public Housing Law so as to empower the Commissioner of Housing to permit
the merger and consolidation of such projects and immediate dissolution of
the companies whose corporate existence is no longer necessary, upon the
terms and conditions naturally inherent in the merger and consolidation of
the projects.
It is also deemed advisable to permit the rearrangement of the
financial structures of merged and consolidated housing companies and the
consolidation of their mortgages.
‘-
DEPARTMENTAL
BILL ///
AN ACT to amend the public housing law, in relation to consolidation
or merger of limited-profit housing company projects and
dissolution of limited-profit housing companies.
The People of the State of New York, represented in Senate and
Assembly, do enact as follows:
section 1. Subdivision two of section three hundred nine of
the public housing law, as amended by chapter eight hundred seventy-
seven of the laws of nineteen hundred fifty-six, is hereby amended
to read as follows:
2, Each mortgage or issue of bonds or notes of a company
Shall relate only to a single specified project and shall be secured
by mortgage upon all of the real property of which such project
consists and upon all fixtures and articles of personal property
attached to or used in connection with the operation of the project.
However, in the event of the consolidation or merger of two or
more approved projects, the extension or amendment thereof, or the
consolidation or merger of any approved project with a proposed
project, the commissioner, in the case of state-aided projects, or
the municipal comptroller, in the case of municipally-aided projects,
may authorize the company to modify its mortgage or mortgages or
issue of bonds or notes so that they will relate to one or more
Specified projects which shall be secured by a mortgage or
ae a he BE Becured by a mortgage or
mortgages, which mortgages in the aggregate shall be upon all of
SEB EE SESITESAVE SHlatt DE upon ait OL
the real property of which such project or projects consist and
EE OF progects consist = ana
upon all of the fixtures and articles of personal property attached
ee en arivtctes of personai property attached
to or used in connection with the operation of the project or
re nnn ne OPE LaGLLON OL the proyect or
projects. Such bonds or notes and mortgages may contain such other
clauses and provisions as shall be approved by the commissioner
in the case of [ a ] one or more state-aided [ project ] projects,
or the municipal comptroller, in the case of [ a ] one or more
municipally-aided [ project ] projects, including the right to
assignment of rents and entry into possession in case of default;
but the operation of the housing project or projects in the event
of such entry by mertgagee or receiver shall be subject to regu-
lations promulgated by the commissioner in the case of [ a ] one
or more state-aided [ project ] projects, or the municipal
comptroller, in the case of [ a ] one or more municipally-aided
[ project ] projects, Provisions for the amortization of the
bonded indebtedness of companies formed under this article shall
be subject to the approval of the commission in the case of [ a ]
one or more state-aided [ project ] projects or the municipal
comptroller, in the case of [ a ] one or more municipally-aided
{ project ] projects.
§2. Section three hundred fifteen of such law, such section
having been amended by chapter eight hundred seventy-seven of the
laws of nineteen hundred fifty-six and subdivision one thereof
having been last amended by chapter six hundred fifty-six of the
laws of nineteen hundred fifty-eight, is hereby amended to read
as follows:
§315 Payments from earnings. 1. There shall be paid
annually out of the earnings of the company, after providing for
all taxes, assessments and expenses, a sum for interest on and
amortization of the mortgage indebtedness, depreciation charges
and reserves if, when and to the extent deemed necessary by the
commissioner, in the case of [ a ] one or more state-aided
{ project ] projects, or the municipal comptroller, in the case
of [ a ] one or more municipally-aided [ project ] projects, plus
a dividend of six per centum on outstanding stock and interest
not exceeding six per centum on the outstanding income debentures
of the company; the obligation in respect of such payments shall
be cumulative, and any deficiency in interest, amortization,
depreciation, reserves, if any, and dividends in any year shall be
paid either from any cash surplus derived from earnings remaining
in the treasury of the company in excess of the amount necessary
to provide such cumulative annual sums or from the first available
earnings in subsequent years. If, at the end of any three year
period, the gross receipts should exceed the payments or charges
necessary for the purposes of the project or projects and are not
needed for a sinking fund, reserves or other purposes, the
balance may be paid In further reduction of any indebtedness to
the extent and upon terms and conditions approved by the commissioner,
and the state comptroller in the case of [ a ] one or more state-
aided [ project ] projects, or by the municipal comptroller, in the
case of [ a ] one or more municipally-aided [ project ] projects.
A sinking fund may be authorized by the commissioner, in the case
of [ a ] one or more state-aided [ project ] projects or the
municipal comptroller, in the case of [ a ] one or more municipally-
aided [ project ] projects, to purchase and retire bonds, income
debentures or stock of the company at a price approved by the
commissioner, in the case of [ a ] one or more state-aided
[ project ] projects, or the municipal comptroller in the case
of [ a ] one or more municipally-aided [ project ] projects, not
exceeding par value thereof with accrued or unpaid dividends or
interest or if it be not practical to purchase such stock or income
debentures at a price so approved, the money in such sinking fund
may be added to the surplus of such company. Any stock or income
debentures purchased out of such sinking fund shall be cancelled
and shall not be reissued.
e. No director or officer of a company shall receive,
directly or indirectly, any salary, compensation or emolument from
Such company, as such director or officer or in any other cenvacity,
unless authorized by the commissioner in the case of [ a ] one or
more state-aided [ project ] projects, or the municipal comptroller,
in the case of [ a ] one or more municipally-aided [ project ]
projects,
$3. Section three hundred nineteen of such law, is hereby
amended by adding thereto a new subdivision, to be subdivision five,
to read as follows:
5. Permit the consolidation or merger of two or more
approved projects, the extension or amendment thereof, or the
consolidation or merger of any approved project with a proposed
project. The commissioner or the municipal comptroller, as the
case may be, may thereupon permit the immediate dissolution of
EE LS SM Lave ALssoiution of
any company involved in any such consolidation or merger, under
such terms and conditions as may be specified by the commissioner
or the municipal comptroller.
§4, This act shall take effect immediately.
Explanation: Matter underlined is new; matter in brackets [ ] is
Old law to be omitted.
