§ 69-D — Interest rate exchange or similar agreements

§ 69-d. Interest rate exchange or similar agreements. 1. Authorized\nissuer; powers. In connection with the issuance of State-supported debt,\nor in connection with such State-supported debt already outstanding, an\nauthorized issuer shall have the power to:\n (a) enter into interest rate exchange or similar agreements with any\nperson under such terms and conditions as the authorized issuer may\ndetermine, including provisions as to default or early termination and\nindemnification by the authorized issuer or any other party thereto for\nloss of benefits as a result thereof;\n (b) procure insurance, letters of credit or other credit enhancement\nwith respect to agreements described in paragraph (a) of this\nsubdivision;\n (c) provide security for the payment or performance of its obligations\nwith respect to agreements described in paragraph (a) of this\nsubdivision from such sources and with the same effect as is authorized\nby applicable law with respect to security for its bonds, notes or other\nobligations, provided, however, that any payment or performance of\nobligations with respect to agreements described in paragraph (a) of\nthis subdivision in connection with debt obligations which carry the\nfull faith and credit of the state shall be subject to appropriation;\n (d) the state, acting through the director of the budget or other\nstate officials who are so authorized by applicable law with respect to\nsuch bonds, notes or other obligations, shall also be authorized to\nenter into or amend agreements related to such State-supported debt to\nprovide for payment, subject to appropriation, to such authorized issuer\nof any amounts required to be paid by such authorized issuer under any\nsuch interest rate exchange or similar agreement;\n (e) if such funds are available, provide collateral for its own\nobligations under any such interest rate exchange or similar agreement;\nand\n (f) modify, amend, or replace, such agreements.\n 2. Interest rate exchange; limitations. Any interest rate exchange or\nsimilar agreements entered into pursuant to subdivision one of this\nsection shall be subject to the following limitations:\n (a) the counterparty thereto shall have credit ratings from at least\none nationally recognized statistical rating agency that is within the\ntwo highest investment grade categories and ratings which are obtained\nfrom any other nationally recognized statistical rating agencies shall\nalso be within the three highest investment grade categories, or the\npayment obligations of the counterparty shall be unconditionally\nguaranteed by an entity with such credit ratings;\n (b) the written contract shall require that should the rating: (i) of\nthe counterparty, if its payment obligations are not unconditionally\nguaranteed by another entity, or (ii) of the entity unconditionally\nguaranteeing its payment obligations, if so secured, fall below the\nrating required by paragraph (a) of this subdivision, that the\nobligations of such counterparty shall be fully and continuously\ncollateralized by direct obligations of, or obligations the principal\nand interest on which are guaranteed by, the United States of America,\nwith a net market value of at least one hundred two percent of the net\nmarket value of the contract to the authorized issuer and such\ncollateral shall be deposited with the authorized issuer or an agent\nthereof;\n (c) the total notional amount of all interest rate exchange or similar\nagreements for all authorized issuers to be in effect shall not exceed\nan amount equal to fifteen percent of the total amount of\nstate-supported debt outstanding as of the initial date of entering into\neach new agreement; provided, however, that such total notional amount\nshall not include any excluded agreements.\n (d) no interest rate exchange or similar agreement shall have a\nmaturity exceeding the maturity of the related State-supported debt;\n (e) each interest rate exchange or similar agreement shall be subject\nto an independent finding that its terms and conditions reflect a fair\nmarket value of such agreement as of the date of its execution,\nregardless of whether such agreement was solicited on a competitive or\nnegotiated basis; and\n (f) each interest rate exchange or similar agreement, including the\nmodification or termination thereof, shall be subject to the approval of\nthe director of the budget, the governing board of such authorized\nissuer, and shall not be considered a project for the purposes of\narticle one-A of the public authorities law.\n 3. Guidelines and reports. (a) Prior to authorizing the approval of\nany contract for interest rate exchange or similar agreement pursuant to\nsubdivision one of this section, the authorized issuer's governing board\nshall adopt guidelines for the use of interest rate exchange or similar\nagreements which shall include, but not be limited to the following:\n (i) the conditions under which such contracts can be entered into;\n (ii) the methods by which such contracts are to be solicited and\nprocured;\n (iii) the form and content such contracts shall take;\n (iv) the aspects of risk exposure associated with such contracts;\n (v) standards and procedures for counterparty selection;\n (vi) standards for the procurement of credit enhancement, liquidity\nfacilities, or the setting aside of reserves in connection with such\ncontracts;\n (vii) provisions for collateralization or other requirements for\nsecuring the financial interest in such contracts;\n (viii) the long-term implications associated with entering into such\nagreements, such as costs of borrowing, historical trends, use of\ncapacity for variable rate bonds and related credit enhancements, and\nany potential impact on the future ability to call bonds, including\nopportunities to refund related debt obligations, and similar\nconsiderations;\n (ix) the methods to be used to reflect such contracts in the\nauthorized issuer's financial statements;\n (x) financial monitoring and periodic assessment of such contracts by\nthe authorized issuer; and\n (xi) such other matters relating thereto as the governing board shall\ndeem necessary and proper.\n (b) The guidelines to be adopted pursuant to paragraph (a) of this\nsubdivision shall be developed in consultation with and subject to the\napproval of the director of the budget.\n (c) The authorized issuer shall issue a monthly report to the director\nof the budget, the chairs of the senate finance committee and the\nassembly ways and means committee, and the state comptroller, on or\nbefore the fifteenth day of each month in any state fiscal year in which\nit enters into or continues to be a party to a contract for interest\nrate exchange or similar agreement, which shall list all such contracts\nentered into pursuant to this section, and shall include, but not be\nlimited to, the following information for each such contract, as\napplicable:\n (i) a description of the contract, including a summary of the terms\nand conditions, rates, maturity, the estimated market value of each\nagreement, and other provisions thereof and the method of procurement;\n (ii) any amounts which were required to be paid and received, and any\namounts which actually were paid and received thereunder;\n (iii) any credit enhancement, liquidity facility or reserves\nassociated therewith including an accounting of all costs and expenses\nincurred, whether or not in conjunction with the procurement of credit\nenhancement or liquidity facilities;\n (iv) a description of each counterparty;\n (v) an assessment of the counterparty risk, termination risk, and\nother risks associated therewith; and\n (vi) such report shall include a copy of the guidelines required by\nparagraph (a) of this subdivision in the month after they are adopted or\nsubsequently modified.\n (d) In addition, the director of the budget shall issue and make\npublic on or before October thirtieth of each year an annual performance\nreport for the prior state fiscal year on interest rate exchange and\nsimilar agreements to the chairs of the senate finance committee and the\nassembly ways and means committee, which shall list all such interest\nrate exchange or similar agreements entered into pursuant to this\nsection and in effect, and shall include, but not be limited to their\nannual and cumulative performance, including the net impact of the\nrelated variable rate debt instruments, support and related costs, and,\nfor any excluded agreement entered into during such state fiscal year,\nan independent finding on how it reduced or eliminated a situation of\nrisk or exposure under an existing interest rate exchange or similar\nagreement. The authorized issuers shall be required to provide such\ninformation in a timely manner on their respective interest rate\nexchange and similar agreements as the director of the budget determines\nnecessary for the purpose of producing such annual performance report.\n