The permanent financing of State-aided projects is achieved through the issue, by the State, of its housing bonds. These bonds represent direct and general obligations of the State of New York, rather than those of the local agency. The local agency is, however, bound by the loan contract not only to repay the sums it has borrowed from the State, with interest, but also to make the payments of principal and interest at such times and in such amounts as will enable the State to meet the charges for interest and amortization on the bond issue. (See Part 1644, Debt Service.) As evidence of its indebtedness for advances made by the State out of the proceeds of a bond issue, the local agency issues its certificate of indebtedness. The timing of the issue of bonds by the State is entirely within the discretion of the State Comptroller, subject to the limitations, described hereafter, of the State Finance Law with respect to the refunding of short-term notes issued by the State, and of Public Housing Law with respect to the refunding of short-term notes issued by the local agency.

The method of temporary financing which will be employed in connection with the development of a given project is, again, entirely within the discretion of the State Comptroller. Short term notes issued by the State in connection with temporary financing may have a maturity not in excess of one year from the date of issue and may be refunded, upon maturity, through the sale of similar short-term notes. The State Finance Law, however, places a limitation of two years, from the respective dates of original issue, on the period during which such refunding operations may be conducted. Eventually, short-term notes issued by the State to raise funds to be advanced to local agencies for project development are refunded out of the proceeds of a housing bond issue by the State, but they may also be refunded, prior to the issue of bonds, out of the proceeds of an issue of short-term notes by the local agency direct to private investors. No refunding or short-term notes may occur after bonds have been issued for same. The evidence of the local agency's indebtedness to the State, when the advances by the State represent the proceeds of an issue of short-term notes by the State, is a certificate of indebtedness, identical in form with the certificate of indebtedness issued for the proceeds of a bond issue.