The New York Dormitory Authority is borrowing $370 million this week to repay workers’ compensation claims, the first sale under a regulatory overhaul that Democratic Governor Andrew Cuomo said will save $1.2 billion.
The issue is the first of as much as $900 million in top- rated bonds the authority will sell to settle the liabilities of 23 workers’ compensation insurance buying groups, called trusts, that New York closed from 2007 to 2011 because they were unable to meet obligations.
The sales will help 10,000 businesses that were members of the trusts settle their debts with the state. The revenue bonds are backed by assessments from employers statewide, after the legislature passed a law in the budget this year to overhaul the workers’ compensation system.
“It provides for insurance that will pay the claims of workers injured in the service of these businesses while capping their liability and providing a reasonable and manageable way to pay their obligations,” Rachel McEneny, a spokeswoman for the Workers’ Compensation Board, said by e-mail.
The bonds go on sale Dec. 4 and reach final maturity in 2033.
Among New York’s regulatory changes the Democratic governor said will save employers money are a new formula for collecting annual assessments, protections against fraudulent claims and a quicker path to paying off debt.
New York employers are required to buy workers’ compensation insurance to cover those who might take time off for injuries or accidents. While some companies had joined group trusts that offered low premiums, they failed to maintain enough funds to manage the liabilities, which reached about $850 million.
The Dormitory Authority bonds have the highest grade from the three biggest ratings companies and are federally taxable, though exempt from state levies. Moody’s Investors Service cited “the strength of the assessment base, which includes nearly all of the state’s highly diversified employers” and more than 8 million workers.
New York state and local debt has lost 1.9 percent this year through Nov. 29, compared with a 2.3 percent decline for the $3.7 trillion municipal market, Standard & Poor’s index data show.
U.S. issuers are offering $10.8 billion in debt this week, the most since April. That figure is up from $590 million last week, when the market closed Nov. 28 for the U.S. Thanksgiving holiday.
–Editors: William Glasgall, Justin Blum