Assemblyman Fred W. Thiele, Jr. (I, D, WF-Sag Harbor) this week reported that the Assembly Budget Proposal adopted by the State Assembly on March 12 would restrict LIPA from extending the term of its debt should it proceed to issue securitized restructuring bonds.

In 2013, the LIPA Reform Act authorized issuance of securitized restructuring bonds in an effort to lower the cost of LIPA’s debt. In December 2013, $2 billion of LIPA’s more than $7.5 billion in debt was restructured. There continues to be an additional $2.5 billion that could be restructured by 2016. The Executive Budget proposal contains language that would permit such a bond restructuring. However, the Executive proposal does not explicitly preclude LIPA from extending the term of the debt.

The Assembly Budget Proposal would insure that any LIPA debt that is issued as part of a plan to reduce debt costs could not extend the term of that debt.

Thiele stated, “LIPA should have the authority to refinance its debt in order to reduce the cost to its ratepayers. However, extending the period of the debt as a means of reducing annual costs should not be an option. Extending the debt only puts LIPA ratepayers on the hook for a longer period of time and ultimately would result in a higher overall interest costs. Debt has been one of the biggest contributors to high rates. It is imperative that this debt be paid off as soon as possible and not be extended any further.”

The State Budget will now be the subject of conference committees to reach consensus on a final budget by April 1. Thiele expressed optimism that the Assembly language would be included in the final budget.