2023 New York Laws › STF - State Finance › Article 5-D - Variable Rate Debt Instruments › 69-D - Interest Rate Exchange or Similar Agreements.

§  69-d.  Interest  rate exchange or similar agreements. 1. Authorized
issuer; powers. In connection with the issuance of State-supported debt,
or in connection with such State-supported debt already outstanding,  an
authorized issuer shall have the power to:
(a)  enter  into interest rate exchange or similar agreements with any
person under such terms and conditions  as  the  authorized  issuer  may
determine,  including  provisions as to default or early termination and
indemnification by the authorized issuer or any other party thereto  for
loss of benefits as a result thereof;
(b)  procure  insurance, letters of credit or other credit enhancement
with  respect  to  agreements  described  in  paragraph  (a)   of   this
subdivision;
(c) provide security for the payment or performance of its obligations
with   respect   to  agreements  described  in  paragraph  (a)  of  this
subdivision from such sources and with the same effect as is  authorized
by applicable law with respect to security for its bonds, notes or other
obligations,  provided,  however,  that  any  payment  or performance of
obligations with respect to agreements described  in  paragraph  (a)  of
this  subdivision  in  connection  with debt obligations which carry the
full faith and credit of the state shall be subject to appropriation;
(d) the state, acting through the director  of  the  budget  or  other
state  officials who are so authorized by applicable law with respect to
such bonds, notes or other obligations,  shall  also  be  authorized  to
enter  into  or amend agreements related to such State-supported debt to
provide for payment, subject to appropriation, to such authorized issuer
of any amounts required to be paid by such authorized issuer  under  any
such interest rate exchange or similar agreement;
(e)  if  such  funds  are  available,  provide  collateral for its own
obligations under any such interest rate exchange or similar  agreement;
and
(f) modify, amend, or replace, such agreements.
2.  Interest rate exchange; limitations. Any interest rate exchange or
similar agreements entered into pursuant  to  subdivision  one  of  this
section shall be subject to the following limitations:
(a)  the  counterparty thereto shall have credit ratings from at least
one nationally recognized statistical rating agency that is  within  the
two  highest  investment grade categories and ratings which are obtained
from any other nationally recognized statistical rating  agencies  shall
also  be  within  the  three highest investment grade categories, or the
payment  obligations  of  the  counterparty  shall  be   unconditionally
guaranteed by an entity with such credit ratings;
(b)  the written contract shall require that should the rating: (i) of
the counterparty, if its payment  obligations  are  not  unconditionally
guaranteed  by  another  entity,  or  (ii) of the entity unconditionally
guaranteeing its payment obligations, if  so  secured,  fall  below  the
rating   required  by  paragraph  (a)  of  this  subdivision,  that  the
obligations  of  such  counterparty  shall  be  fully  and  continuously
collateralized  by  direct  obligations of, or obligations the principal
and interest on which are guaranteed by, the United States  of  America,
with  a  net market value of at least one hundred two percent of the net
market  value  of  the  contract  to  the  authorized  issuer  and  such
collateral  shall  be  deposited  with the authorized issuer or an agent
thereof;
(c) the total notional amount of all interest rate exchange or similar
agreements for all authorized issuers to be in effect shall  not  exceed
an   amount   equal   to   fifteen   percent  of  the  total  amount  of
state-supported debt outstanding as of the initial date of entering into

each new agreement; provided, however, that such total  notional  amount
shall not include any excluded agreements.
(d)  no  interest  rate  exchange  or  similar  agreement shall have a
maturity exceeding the maturity of the related State-supported debt;
(e) each interest rate exchange or similar agreement shall be  subject
to  an  independent finding that its terms and conditions reflect a fair
market value of  such  agreement  as  of  the  date  of  its  execution,
regardless  of  whether such agreement was solicited on a competitive or
negotiated basis; and
(f) each interest rate exchange or similar  agreement,  including  the
modification or termination thereof, shall be subject to the approval of
the  director  of  the  budget,  the  governing board of such authorized
issuer, and shall not be  considered  a  project  for  the  purposes  of
article one-A of the public authorities law.
3.  Guidelines  and  reports. (a) Prior to authorizing the approval of
any contract for interest rate exchange or similar agreement pursuant to
subdivision one of this section, the authorized issuer's governing board
shall adopt guidelines for the use of interest rate exchange or  similar
agreements which shall include, but not be limited to the following:
(i) the conditions under which such contracts can be entered into;
(ii)  the  methods  by  which  such  contracts are to be solicited and
procured;
(iii) the form and content such contracts shall take;
(iv) the aspects of risk exposure associated with such contracts;
(v) standards and procedures for counterparty selection;
(vi) standards for the procurement of  credit  enhancement,  liquidity
facilities,  or  the  setting  aside of reserves in connection with such
contracts;
(vii) provisions  for  collateralization  or  other  requirements  for
securing the financial interest in such contracts;
(viii)  the  long-term implications associated with entering into such
agreements, such as  costs  of  borrowing,  historical  trends,  use  of
capacity  for  variable  rate bonds and related credit enhancements, and
any potential impact on the future  ability  to  call  bonds,  including
opportunities   to   refund   related   debt  obligations,  and  similar
considerations;
(ix) the  methods  to  be  used  to  reflect  such  contracts  in  the
authorized issuer's financial statements;
(x)  financial monitoring and periodic assessment of such contracts by
the authorized issuer; and
(xi) such other matters relating thereto as the governing board  shall
deem necessary and proper.
(b)  The  guidelines  to  be adopted pursuant to paragraph (a) of this
subdivision shall be developed in consultation with and subject  to  the
approval of the director of the budget.
(c) The authorized issuer shall issue a monthly report to the director
of  the  budget,  the  chairs  of  the  senate finance committee and the
assembly ways and means committee, and  the  state  comptroller,  on  or
before the fifteenth day of each month in any state fiscal year in which
it  enters  into  or  continues to be a party to a contract for interest
rate exchange or similar agreement, which shall list all such  contracts
entered  into  pursuant  to  this section, and shall include, but not be
limited to,  the  following  information  for  each  such  contract,  as
applicable:
(i)  a  description  of the contract, including a summary of the terms
and conditions, rates, maturity, the  estimated  market  value  of  each
agreement, and other provisions thereof and the method of procurement;
(ii)  any amounts which were required to be paid and received, and any
amounts which actually were paid and received thereunder;
(iii)   any   credit   enhancement,  liquidity  facility  or  reserves
associated therewith including an accounting of all costs  and  expenses
incurred,  whether  or not in conjunction with the procurement of credit
enhancement or liquidity facilities;
(iv) a description of each counterparty;
(v) an assessment of the  counterparty  risk,  termination  risk,  and
other risks associated therewith; and
(vi)  such  report  shall include a copy of the guidelines required by
paragraph (a) of this subdivision in the month after they are adopted or
subsequently modified.
(d) In addition, the director of  the  budget  shall  issue  and  make
public on or before October thirtieth of each year an annual performance
report  for  the  prior  state fiscal year on interest rate exchange and
similar agreements to the chairs of the senate finance committee and the
assembly ways and means committee, which shall list  all  such  interest
rate  exchange  or  similar  agreements  entered  into  pursuant to this
section and in effect, and shall include, but not be  limited  to  their
annual  and  cumulative  performance,  including  the  net impact of the
related variable rate debt instruments, support and related costs,  and,
for  any  excluded agreement entered into during such state fiscal year,
an independent finding on how it reduced or eliminated  a  situation  of
risk  or  exposure  under  an existing interest rate exchange or similar
agreement. The authorized issuers shall  be  required  to  provide  such
information  in  a  timely  manner  on  their  respective  interest rate
exchange and similar agreements as the director of the budget determines
necessary for the purpose of producing such annual performance report.