N.Y. Local Finance Law § 168.00: Agreements for credit enhancement

§ 168.00 Agreements for credit enhancement. a. The finance board of

any municipality, school district or district corporation (herein a

"public body") is hereby authorized and empowered to enter into such

agreements as it deems reasonable and appropriate, with any department

or agency of the United States of America, the state, or any other

financially responsible party, to facilitate the issuance, sale, resale

and payment of bonds, notes, or other evidences of indebtedness of such

public body, including, but not limited to letters of credit, lines of

credit, revolving credit, bond insurance or other credit enhancements.

Such agreements may provide for (i) the advance or advances of funds on

behalf of such public body to pay the interest on and principal and

premium of bonds, notes or other evidences of indebtedness of such

public body on their date or dates of maturity or redemption or when

interest is otherwise due, and (ii) the reimbursement of such advance or

advances by such public body.

b. Such agreements may be executed on or before the date of issuance

of the obligations to be paid pursuant thereto, provided, however, that

any reimbursement obligation of such public body arising from such

agreements shall be deemed indebtedness of such public body (i) only as

of the date that the corresponding advance is made pursuant to paragraph

a of this section, and (ii) only in the amount of the advance made

pursuant to such paragraph. Such agreements may include a pledge by such

public body of its faith and credit for the payment of principal of and

interest on any indebtedness deemed to be contracted as set forth in

this paragraph, and may provide that any such indebtedness arising from

a reimbursement obligation contracted pursuant to this section shall be

paid in accordance with the terms of such agreement. Such indebtedness

shall be excluded in ascertaining the power of such public body to

contract indebtedness pursuant to title eight and title nine of this

article. Such agreements shall also include such terms and conditions as

the finance board shall deem appropriate, including provisions for the

payment of reasonable fees and expenses by such public body in return

for a commitment to advance funds pursuant to such agreement. Such fees

and expenses shall be deemed part of the cost of the object or purpose

in connection with which they are incurred.

c. Prior to procurement of any credit or liquidity enhancements, such

public body shall, to the extent practicable:

(1) consider the ability of the credit or liquidity enhancement

provider to make required payments as and when due under the terms of

the appropriate governing instruments;

(2) consider the business reputation of the credit or liquidity

enhancement provider;

(3) consider the maximum term of the credit or liquidity enhancement

relative to the maturity of the bonds, notes or other obligations being

credit or liquidity enhanced;

(4) provide for the right of substitution for the credit or liquidity

enhancement provider in all agreements, including a provision permitting

such substitution when the rating of the credit or liquidity enhancement

provider falls below the probable credit rating of the issue without

considering the credit or liquidity enhancer; and

(5) consider the cost of the credit or liquidity enhancement relative

to the savings or other benefit likely to be achieved through the

utilization of the credit or liquidity enhancement.

d. Where the credit or liquidity enhancement procured is an

irrevocable letter of credit or an acquisition arrangement with a

banking organization, such instrument shall be:

(1) issued or confirmed by a bank holding company or its direct

subsidiaries, a federally chartered bank or its subsidiaries, or a state

chartered bank or its subsidiaries, licensed or authorized to do

business in this state or

(2) issued or confirmed by an agency or branch of a foreign banking

institution licensed to do business in this state with total worldwide

assets in excess of five billion dollars.

e. Any such issuing banking organization referred to in paragraph d of

this section shall meet the regulatory guidelines for capital adequacy

as promulgated by the appropriate federal banking agency as defined in

the Federal Deposit Insurance Act, 12 U.S.C. 1813(q).

f. (1) Where the credit or liquidity enhancement procured is provided

by an insurance company, such insurer shall be licensed to write

financial guarantee insurance in this state.

(2) Where the credit or liquidity enhancement procured is from other

than an entity described in paragraph d of this section or subdivision

one of this paragraph, the provider shall be a financially responsible

party, incorporated or authorized to do business in this state and

having total assets in excess of ten billion dollars.

g. The failure of a public body to comply with paragraphs c through f

of this section shall not invalidate or impair any credit or liquidity

enhancement contract or instrument.

h. The finance board may, by resolution, delegate its authority under

this section to the chief fiscal officer of such public body in which

event the chief fiscal officer shall exercise such power until the

finance board, by resolution, shall elect to reassume the same.