(a) Refunding bonds shall be issued only when the comptroller shall have certified that, as a result of the refunding, there will be a debt service savings to the state on a present value basis as a result of the refunding transaction and that either (i) the refunding will benefit state taxpayers over the life of the refunding bonds by achieving an actual debt service savings each year or state fiscal year during the term to maturity of the refunding bonds when debt service on the refunding bonds is expected to be paid from legislative appropriations or (ii) debt service on the refunding bonds shall be payable in annual installments of principal and interest which result in substantially level or declining debt service payments pursuant to paragraph (b) of subdivision two of section fifty-seven of this article. Such certification by the comptroller shall be conclusive as to matters contained therein after the refunding bonds have been issued. For purposes of determining whether there is a debt service savings on a present value basis the present value of the total payments of both principal and interest to become due on the refunding bonds, after deducting any accrued interest or premium received by the state and not used to pay the principal of or interest on the bonds to be refunded or costs of issuance of the refunding bonds, excluding all such principal and interest payments to be made from income received as a result of the investment of the proceeds from the sale of the refunding bonds, shall be less than the present value of the principal and interest payments to become due at their stated maturities on the principal amount of bonds to be refunded which are outstanding as of the date of the issue of the refunding bonds after deducting therefrom all costs and expenses incidental to the issuance of the refunding bonds, including the development of the refunding plan, and of executing and performing the terms and conditions of the escrow contract and all fees and charges of the escrow holder, but only to the extent such costs and expenses are not paid from the proceeds of the refunding bonds. The present value of debt service payments pursuant to the foregoing provisions of this subdivision shall be computed by discounting the principal and interest payments on both the refunding bonds and the bonds to be refunded from the respective maturities thereof to the date of issue of the refunding bonds at a rate equal to the effective interest cost of the refunding bonds. The effective interest cost of the refunding bonds shall be that rate which is arrived at by doubling the semi-annual interest rate (compounded semi-annually) necessary to discount the debt service payments on the refunding bonds from the maturity dates thereof to the date of issue of the refunding bonds and to the bona fide initial public offering price including estimated accrued interest, or, if there is no public offering, to the price bid including estimated accrued interest.

(b) The proceeds of refunding bonds, including any premium received on the sale thereof, and any amounts that may be appropriated by the legislature for the purposes thereof, shall be deposited directly in an escrow fund created pursuant to this section, and amounts in such escrow fund, and income earned thereon, shall be used only (i) to redeem the bonds to be refunded, (ii) to pay debt service on the refunding bonds or on the bonds to be refunded, (iii) to pay the costs of administering such fund, (iv) to pay any direct or indirect costs of issuing the refunding bonds and (v) to make any other payments required to be made with respect to the refunding transaction.

(c) Amounts deposited in each escrow fund, with the income earned thereon, when invested as directed by this subdivision, shall be sufficient to pay (i) all costs of issuance of the refunding bonds, (ii) all debt service on the refunding bonds or on the bonds to be refunded until and including the date that the bonds to be refunded are to be redeemed, except, at the option of the state comptroller, debt service scheduled to be paid from appropriations in effect on the date of issuance of the refunding bonds, (iii) all costs of administering the escrow fund, if any, (iv) the principal of and any premium due on the bonds to be refunded on the date they are to be redeemed, and (v) any other payments required to be made in connection with the refunding transaction.

(d) The comptroller is authorized to establish an escrow fund in connection with each issue of refunding bonds that he may sell from time to time, and he shall hold such funds outside the state treasury for the purposes enumerated in this section.

(e) All money in each escrow fund shall be held as cash or shall be invested in direct obligations of the federal government, direct obligations the principal and interest of which are guaranteed by the federal government, or obligations the interest on which is exempt from federal income taxation and which are fully secured by direct obligations of the federal government, having such maturities and interest payment dates as required to make all payments to be made from the escrow fund as they come due. The earnings on such obligations shall remain in the escrow fund until required to be used to pay debt service on the refunding bonds, to pay debt service on the bonds to be refunded or to make other payments authorized to be made from the escrow fund. Any money or investments remaining in any escrow fund after all refunded bonds are redeemed and after all expenses related to the refunding transaction have been paid shall be deposited in the general fund.

(f) No appropriation shall be required for disbursement of moneys from any escrow fund created pursuant to this section, or the earnings thereon, for the purposes enumerated above, and the comptroller may covenant, on behalf of the state, with holders of the refunding bonds and the bonds to be refunded that such disbursements will be made. The comptroller is also authorized to enter into such other agreements with other persons as he deems necessary or appropriate in connection with any refunding transaction.

(g) Any refunding bonds issued pursuant to this section shall be paid in annual installments which shall, so long as any refunding bonds are outstanding, be made in each year or state fiscal year in which installments were due on the bonds to be refunded and shall be in an amount which shall result in annual debt service payments which shall be less in each year or state fiscal year than the annual debt service payments on the bonds to be refunded unless debt service on the refunding bonds is payable in annual installments of principal and interest which will result in substantially level or declining debt service payments pursuant to paragraph (b) of subdivision two of section fifty-seven of this article. 3. The state comptroller shall have custody of the securities and other assets in the escrow funds created pursuant to this section; provided, however, that, subject to the rights of the owners of the bonds, the state comptroller may contract with a bank or trust company for the maintenance, management and custody of the escrow funds. Such bank or trust company shall have an office and be authorized to do business in the state and shall maintain a combined capital and surplus of not less than seventy-five million dollars. 4. Except where inconsistent with the provisions of this section, the provisions of section fifty-seven of this chapter governing the original issuance of debt shall apply to the sale of refunding debt pursuant to this section. 5. Notwithstanding any other law, rule or regulation to the contrary, within thirty days of the delivery of any fixed rate, fixed term state obligations issued pursuant to sections fifty-five and fifty-seven of this article, the state comptroller shall determine and certify to the director of the budget, the chairs of the senate finance committee and the assembly ways and means committee, the allowable bond yield on such obligations as such allowable bond yield is determined pursuant to the provisions of the internal revenue code of 1986, as amended. With respect to any short-term series notes, flexible notes, or other notes on which interest rates may vary from time to time, the state comptroller shall determine and certify to the director of the budget and the chairs of the senate finance committee and the assembly ways and means committee as soon as is practicable after the maturity of such notes on any state obligations issued pursuant to section fifty-five of this article the allowable bond yield on such obligations as such allowable bond yield is determined pursuant to the provisions of the internal revenue code of 1986, as amended. Prior to making of a payment of any rebate to the federal government, the state comptroller shall certify to the director of the budget and the chairs of the senate finance committee and the assembly ways and means committee the amount of the rebate required to be paid and the date prior to which such rebate must be paid in order to maintain the exemption from federal income taxation of the interest paid on the obligations for which the rebates are being made. 6. Notwithstanding any other law, rule or regulation to the contrary, no monies shall be expended for the purpose of redeeming serial bonds to maintain the exemption from federal taxation of the interest paid to holders of state obligations issued pursuant to sections fifty-five and fifty-seven of this article, issued by the state of New York until the state comptroller has certified to the director of the budget and the chairs of the senate finance committee and the assembly ways and means committee their determination, the amount of such bonds to be redeemed and the date upon which such bonds are to be redeemed.