New York–Bond Guarantee Fund in Executive Budget

One of New York Governor Cuomo’s priorities again this year is assisting small and emerging contractors obtain state construction contracts.  In his State of the State speech and related press reports, the Governor said that New York has not hit its target of using minority and women-owned businesses for 20% of state contracts.  Some form of a state bond guarantee fund was cited as necessary to back small and emerging contractors.  In the written text of the Governor’s State of the State address, however, the availability of credit and lack of capital was cited as the problem, and a $200 million state program to extend credit to small and minority contractors was said to be in the works.

 This week, the Governor’s Executive Budget was released and it contains only a $3.5 million re-appropriation for an existing program within the NYS Job Development Authority, which is part of the Empire State Development Corporation (ESDC), for a program called the Bonding Guarantee Assistance Program that SFAA has been working on with ESDC.  This Program is designed to provide collateral-based letters of credit to surety companies on behalf of contractors who do not have the means to supply such collateral on their own.  The other $10 million funding for this program is part of a $50 million grant that the State of New York received from the U.S. Department of the Treasury in 2011 for capital access programs for small businesses.  The Governor still may be considering new legislation on this issue later in the session, but for now there is nothing new in play.

 SFAA continues to work with various agencies in New York.  The  New York City Department of Small Business Services will be launching a Bonding Readiness Program soon as part of a new package of initiatives that Mayor Michael R. Bloomberg announced last May.  That program also is based on SFAA’s MCDP®.

 

FYI – AIA’s Gary Henning reports that Governor Cuomo has stated that he wants the state to hit its target of using MWBEs for 20% of the contracts that the state lets out.  He also said that a major reason the state was not hitting this target is because many MWBEs have trouble getting bonded.  Therefore, Governor Cuomo is proposing that the state set up some sort guaranty fund for the backing of bonds purchased by MWBEs.  The details of this proposal will come out with the release of the Executive Budget in a couple of weeks. 

 

You may recall that a similar issue arose during the Spitzer Administration about 4-5 years ago.  At that time the proposal was to assess all commercial lines carriers to develop a pool of money for the State Fund to bond contractors that could not get bonds.  Through the hard work of the SFAA and AIA this proposal instead resulted in the development of the SFAA’s New York Bonding Initiative.  Governor Spitzer and the Insurance Department all recognized how successful this program was.  In fact, at a recent meeting with the Department of Financial Services (Dec. 7th, 2011)  the Department noted that they thought the bonding program in New York was working very well.  So, it is important to note that this proposal to create a guaranty fund is not a done deal and that the SFAA and AIA will continue to work with the Governor’s office and Department of Financial Services to achieve a favorable outcome for all involved. 

 

We will keep you posted of any new information, but in the meantime please let us know if you have any questions. 

 

Regards,

 

Angela Gleason

Associate Counsel

American Insurance Association

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New York–Bond Guarantee Fund in Executive Budget

One of New York Governor Cuomo’s priorities again this year is assisting small and emerging contractors obtain state construction contracts.  In his State of the State speech and related press reports, the Governor said that New York has not hit its target of using minority and women-owned businesses for 20% […]

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