N.Y. Public Authorities Law § 2926: Interest rate exchange or similar agreements for court facilities and combined occupancy structures and health facilities

§ 2926. Interest rate exchange or similar agreements for court

facilities and combined occupancy structures and health facilities. 1.

In connection with the issuance of bonds, notes, or other obligations,

or in connection with such bonds, notes, or other obligations already

outstanding, for court facilities and combined occupancy structures

pursuant to section sixteen hundred eighty-b of this chapter, and health

facilities pursuant to paragraph (b) of subdivision one of section eight

of section one of chapter three hundred ninety-two of the laws of

nineteen hundred seventy-three, the dormitory authority shall have the

power to:

(a) enter into interest rate exchange or similar agreements with any

person under such terms and conditions as the dormitory authority may

determine, including provisions as to default or early termination and

indemnification by the dormitory authority or any other party thereto

for loss of benefits as a result thereof; and

(b) procure insurance, letters of credit or other credit enhancement

with respect to agreements described in paragraph (a) of this

subdivision; and

(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 authorized by

applicable law with respect to security for its bonds, notes or other

obligations; and

(d) modify, amend, replace, or enter into new agreements, for the

purpose of reducing or eliminating a situation of risk or exposure under

an existing agreement, including, but not limited to a counterparty

downgrade, default, or other potential economic loss.

2. Any interest rate exchange or similar agreement entered into

pursuant to subdivision one of this section shall be subject to the

following limitations:

(a) any such agreement shall be in the form of a written contract with

a counterparty to provide for an exchange of payments based upon

interest rates, and shall be for exchanges in currency of the United

States of America only; and

(b) the counterparty thereto shall have credit ratings from at least

two nationally recognized statistical rating agencies that are 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; and

(c) the written contract shall require that, should the rating of the

counterparty, if its payment obligations are not unconditionally

guaranteed by another entity, or should the rating of the entity

unconditionally guaranteeing the payment obligations of the

counterparty, if so secured, fall below the rating required by paragraph

(b) 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

dormitory authority, and such collateral shall be deposited with the

dormitory authority or an agent thereof; and

(d) the total notional amount of such interest rate exchange or

similar agreements entered into by the dormitory authority shall not

exceed an amount equal to twenty per centum of the total amount of

bonds, notes or other obligations outstanding or to be issued on behalf

of a participating municipality pursuant to section sixteen hundred

eighty-b of this chapter; provided, however, that such total notional

amount shall not include the notional amount of interest rate exchange

or similar agreements entered into for the purpose of reducing or

eliminating a situation of risk or exposure under an existing agreement,

including, but not limited to a counterparty downgrade, default, or

other potential economic loss; and

(e) the total notional amount of such interest rate exchange or

similar agreements entered into by the dormitory authority shall not

exceed an amount equal to twenty per centum of the total amount of

bonds, notes or other obligations outstanding or to be issued on behalf

of a participating municipality pursuant to paragraph (b) of subdivision

one of section eight of section one of chapter three hundred ninety-two

of the laws of nineteen hundred seventy-three; provided, however, that

such total notional amount shall not include the notional amount of

interest rate exchange or similar agreements entered into for the

purpose of reducing or eliminating a situation of risk or exposure under

an existing agreement, including, but not limited to a counterparty

downgrade, default, or other potential economic loss.

3. (a) Prior to authorizing the approval of any contract for interest

rate exchange or similar agreement pursuant to subdivision one of this

section, the board of the dormitory authority shall adopt written

guidelines addressing 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) the procurement of credit enhancement, liquidity facilities, or

the setting aside of reserves in connection with such contracts;

(vii) collateralization or other requirements for securing the

financial interest in such contracts;

(viii) the methods to be used to reflect such contracts in the

dormitory authority's financial statements;

(ix) financial monitoring and periodic assessment of such contracts by

the dormitory authority; and

(x) such other matters relating thereto as the board of the dormitory

authority shall deem necessary and proper.

(b) The dormitory authority shall issue a report to the director of

the budget, the chairpersons of the senate finance committee and the

assembly ways and means committee, and the state comptroller, on or

before March first 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. Such report 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 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.

4. The dormitory authority shall not enter into any interest rate

exchange or similar agreement pursuant to this section unless the lease,

sublease, or other agreement between the participating municipality and

the dormitory authority:

(a) expressly authorizes the dormitory authority to enter into such

agreements with respect to bonds, notes or other obligations outstanding

or to be issued in connection with court facilities and combined

occupancy structures or health facilities for that participating

municipality; and

(b) further obligates the participating municipality to pay to the

dormitory authority any and all amounts payable by the authority under,

or as a result of, such interest rate exchange or similar agreement.