Today Legislator Ken Jenkins released a letter urging U.S. Senator, and newly-elected Minority Leader, Charles Schumer to support the Consumer Financial Choice and Capital Markets Protection Act (S.1802) as a way to protect economic development and infrastructure development in Westchester and across New York.

“This critical legislation has bipartisan support in the House and Senate, a testament to the importance of this legislation in protecting economic development, infrastructure investment and job creation,” Jenkins stated.  

Specifically, S.1802 corrects a significant deficiency in a recent Securities and Exchange Commission rule regarding money market funds. Since the rule’s enactment in October, billions of dollars have already left the money market sector, and if the deficiency is not corrected, it will result in even further divestment.

The deficiency requires money market funds to change their method of accounting from a stable net asset value to a floating net asset value. This change has already resulted in a large scale exodus of investment in these essential funds. These funds represent the largest purchasers of tax-exempt bonds issued by municipalities, non-profit institutions and economic development entities. A reduction in investment in money market funds will result in a decrease in investment in tax-exempt debt, which will in turn result in an increase in the cost of issuing tax-exempt debt. If costs increase for tax-exempt debt issuers, it will directly lead to the reduction in the size and scope of projects, or to projects being cancelled entirely. Most importantly, this means less economic development and fewer jobs.

Examples of economic development and infrastructure projects in Westchester that are financed by tax-exempt bonds and which will see their borrowing costs rise include projects undertaken by the Westchester County Industrial Development Agency, the Yonkers Industrial Development Agency, the New Rochelle Industrial Development Agency, the Metropolitan Transportation Authority which runs the Metro-North Railroad, and the New York State Dormitory Authority which finances the construction and redevelopment of facilities across the state, including Northern Westchester Hospital. Coupon rates for projects undertaken by these entities have increased between 164% and 5,100% since November 2015, resulting in a large increase in borrowing costs for the issuers.

The migration of liquidity out of money market funds, reducing the supply of available capital, has directly led to bond issuers across Westchester and all of New York paying more to fund their projects, endangering their scope, size and success and hampering economic development and infrastructure investment.

“Opening up economic development streams like this has to be a priority for the County and I hope the County Executive will join me in advocating through his relationships in Washington,” Jenkins concluded. 

Click here for a copy of Jenkins’ letter to Senator Schumer.